Crypto markets are stuck in a holding pattern as geopolitical tensions in the Middle East overshadow an otherwise improving macro backdrop, according to crypto asset manager Grayscale.
“The war in Iran overshadowed virtually all other market developments in March,” the Grayscale research team said in a Wednesday report.
Before the conflict escalated, global growth appeared to be strengthening and central banks were leaning towards interest rate cuts. That outlook has been disrupted by a sharp rise in oil prices, which has fueled inflation worries and pushed interest rate expectations higher, weighing on risk assets and keeping investors on the sidelines, the report said.
Since the outbreak of the Middle East conflict, crypto markets have been volatile but broadly defined, with sharp headline-driven swings linked to oil prices and changing risk sentiment. Bitcoin fell in the early to mid $60,000s at the first escalation, then returned towards the low $70,000s before slipping back again as the conflict dragged on and macro conditions tightened.
Recently, a renewed escalation has pushed bitcoin down about 10% from its March highs, along with declines in ether (ETH) and other tokens as investors retreated from risk assets. Despite the turbulence, performance has held up better than some traditional markets, with bitcoin roughly flat since the start of the war and even outperforming stocks at times, underscoring both its sensitivity to macro shocks and its relative resilience.
For now, Grayscale expects many market participants to wait for greater clarity. If the conflict subsides and energy prices retreat, markets could quickly change course towards a more supportive macro environment. If not, persistently high oil prices could continue to depress growth and delay a broader recovery.
Still, crypto has shown remarkable resilience. Prices have remained relatively stable throughout the volatility, suggesting that a more durable bottom may be forming. The research team also pointed to continued inflows into spot crypto investment products and an increase in futures positioning as signs that risk appetite is stabilizing below the surface.
Looking ahead, the report argued that the main catalyst for a sustained recovery will be a reduction in macro uncertainty. But it 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 rising from around $20 billion in 2020 to more than $300 billion in 2025, standing at around $315 billion according to industry data.
The sector added around $100 billion by 2025 alone, reflecting renewed growth after a brief decline as demand for dollar-pegged digital assets increased across trade, payments and onchain finance.
Periods of heightened uncertainty such as the current one have historically presented attractive opportunities for long-term investors positioning themselves for the next phase of growth, the report adds.
Read more: Bitcoin Holds Ground as Gold, Silver Slips on ETF Outflows and Liquidity Strains: JPMorgan
