Crypto markets are stuck in a holding pattern as geopolitical tensions in the Middle East cloud an otherwise improving macroeconomic backdrop, according to crypto asset manager Grayscale.
“The war in Iran overshadowed virtually all other market developments in March,” Grayscale’s research team said in a report Wednesday.
Before the conflict escalated, global growth appeared to be strengthening and central banks were leaning toward rate cuts. That outlook was disrupted by a sharp rise in oil prices, which fueled inflation fears and pushed interest rate expectations higher, weighing on risky assets and keeping investors on the sidelines, the report said.
Since the outbreak of conflict in the Middle East, crypto markets have been volatile but largely range-bound, with sharp swings linked to oil prices and a shift in risk sentiment. Bitcoin first fell to the mid-$60,000s during the first escalation, then rebounded towards $70,000 before falling again as the conflict dragged on and macroeconomic conditions tightened.
Most recently, further escalation saw bitcoin fall around 10% from March highs, alongside a decline in ether (ETH) and other tokens, as investors pulled out of risky assets. Despite the turbulence, performance has held up better than some traditional markets, with bitcoin being roughly stable since the start of the war and even outperforming stocks at times, highlighting both its sensitivity to macroeconomic shocks and its relative resilience.
For now, Grayscale expects many market participants to wait for more clarity. If the conflict subsides and energy prices decline, markets could quickly revise their prices towards a more favorable macroeconomic environment. Otherwise, persistently high oil prices could continue to weigh on growth and delay a broader recovery.
Despite this, crypto has shown notable resilience. Prices have remained relatively stable despite the volatility, suggesting a more durable bottom may be forming. The research team also pointed to continued inflows into spot crypto investment products and a resumption of futures positioning as signs that risk appetite is stabilizing beneath the surface.
Looking ahead, the report says the main catalyst for a sustainable rebound will be a reduction in macroeconomic uncertainty. But he maintains that the long-term drivers of the asset class, including the growing adoption of stablecoins and tokenized assets, remain intact.
The stablecoin market has grown rapidly in recent years, with total supply growing from around $20 billion in 2020 to over $300 billion by 2025, and standing at around $315 billion, according to industry data.
The sector added around $100 billion in 2025 alone, reflecting renewed growth after a brief contraction, as demand for dollar-pegged digital assets increased in on-chain commerce, payments and finance.
Periods of heightened uncertainty like the current one have historically presented attractive opportunities for long-term investors positioning themselves for the next phase of growth, the report adds.
Learn more: Bitcoin holds strong as gold, silver slide amid ETF outflows and liquidity strains: JPMorgan
