Bitcoin (BTC) gave back a large portion of its recent gains on Thursday, now trading at $66,700 having lost 2.4% of its value since midnight UTC.

Ether (ETH) performed even worse, tumbling by 4.4% as the broader crypto market struggles to deal with continued risk-off sentiment.

The latest plunge was spurred by U.S. president Donald Trump, who said on Wednesday evening that the war in Iran would continue with extensive strikes on Iran.

“Over the next two to three weeks, we’re going to bring them back to the stone ages where they belong,” he said.

The comments led to an immediate spike in oil prices, with brent crude rising by around 10% to $108 per barrel as U.S. equities diverged.

Nasdaq 100 and S&P 500 futures lost 1.5% and 1.1% respectively while the U.S. dollar increased by 0.5% to above 100 points.

Derivatives positioning

BTC's price has dropped over 2% since midnight UTC hours alongside a slightly uptick in open interest in major USD- and USDT-denominated futures. Plus, perpetual funding rates have dropped to their most negative since March 12. This combination suggests that traders are bearish and shorting the falling market. In ether's case, funding rates are most negative since October last year, a sign of strong bias for bearish bets. Meanwhile, bearishness in solana (SOL) is surprisingly more measured despite the overnight hack. Privacy-focused zcash (ZEC) and cardano (ADA) have seen a notable decline in open interest (OI) in 24 hours, a sign of capital outflows. Nearly $400 million in futures positions have been liquidated due to margin shortfalls. That's a 17% increase in losses compared to the previous day. Despite renewed risk-off tone, bitcoin and ether's 30-day implied volatility indices remain flat in recent ranges. It points to orderly selling in the spot market rather than panic. There is little scope for panic because traders are already positioned for market swoon. They have been consistently chasing bitcoin and ether put options (downside hedges) since the start of the year. As of writing, bitcoin and ether puts remained pricier than calls across all tenors on Deribit. Block flows featured demand for ether straddles, a volatility strategy, and put spreads and bitcoin call spreads.

Token talk

The worst performing benchmark on Thursday was CoinDesk's DeFi Select Index (DFX), which lost 5.9% since midnight UTC, closely followed by the CoinDesk Computing Select Index (CPUS) that tumbled by 5%.Ethena (ENA) led the downside move as it fell by more than 10% on Thursday, there was also a heavy drawdown among DeFi ( DEFT ) tokens UNI, LDO, SKY and AAVE - all shedding between 4.2% and 6.5% during Asian and European hours on Thursday.Algorand (ALGO) bucked the bearish market trend, rising by around 0.8% on Thursday as it continues its rich vein of form having rallied by 22% in the past week.CoinMarketCap's "altcoin season" index is down from 50/100 to 42/100 since March 30, highlighting relative weakness across the sector.