Crypto Market Outlook: Will Risk-On Rotation Endure?

The cryptocurrency market enters the new week on uncertain ground following a rally on Friday. The initial announcement to reopen the Strait of Hormuz led to a decrease in oil prices and an increase in risk assets, including bitcoin and the broader crypto market. However, the situation took a turn when Iran targeted ships attempting to pass through the strait on Saturday, and the U.S. seized an Iranian tanker on Sunday. As the ceasefire is set to expire mid-week, market participants will be closely watching whether the recent risk-on sentiment can withstand potential renewed energy market volatility. A crucial technical level to monitor is bitcoin's ability to hold its ETF cost basis around $74,000, according to Luke Nolan, a senior research associate at CoinShares. Nolan stated, "The follow-through now depends on bitcoin decisively holding above its ETF cost basis (~$74k), confirming the risk-on rotation visible in flows." For the rotation to be confirmed, bitcoin must hold above $74,000 as the ceasefire deadline approaches, coupled with a fourth consecutive day of positive ETF inflows. Failure to do so could lead to increased volatility in the sector.