Oil-driven inflation fears and Iran conflict stall crypto participation, says Grayscale

Crypto markets have entered a period of consolidation as rising geopolitical tensions in the Middle East dampen sentiment, offsetting what had been an improving macroeconomic backdrop, according to digital asset manager Grayscale.

In a recent report, the firm said the conflict involving Iran has become the dominant driver of market behavior, eclipsing earlier optimism around global growth and a potential shift by central banks toward interest rate cuts. That outlook has since been upended by a surge in oil prices, which has reignited inflation concerns and pushed rate expectations higher—pressuring risk assets and keeping investors cautious.

Since the escalation began, crypto assets have experienced heightened volatility but have largely remained within a defined range. Price action has been heavily influenced by headlines, particularly those tied to energy markets and shifting risk sentiment. Bitcoin initially dropped into the mid-$60,000s following the first wave of tensions, then rebounded toward the low-$70,000s before losing momentum again as the situation persisted.

More recently, renewed escalation has pulled bitcoin roughly 10% lower from its March highs, with ether and other tokens also retreating as investors scaled back risk exposure. Despite these declines, crypto markets have shown relative resilience. Bitcoin has remained broadly flat since the onset of the conflict and has, at times, outperformed equities, underscoring both its sensitivity to macro developments and its underlying strength.

Grayscale expects investors to remain on the sidelines in the near term, awaiting clearer direction on geopolitical risks and energy prices. A de-escalation and subsequent decline in oil could quickly restore a more favorable macro environment, while sustained high energy costs may continue to weigh on growth and delay a broader recovery.

Even amid the uncertainty, crypto valuations have held up comparatively well, hinting that a more durable bottom may be forming. The firm also highlighted steady inflows into spot crypto investment products and increased activity in derivatives markets as early signs that risk appetite is beginning to stabilize.

Looking forward, Grayscale believes that a reduction in macro uncertainty will be critical for the next sustained rally. Still, it maintains that the long-term fundamentals of the asset class remain intact, particularly the continued expansion of stablecoins and tokenized assets.

The stablecoin sector has grown rapidly in recent years, with total supply increasing from around $20 billion in 2020 to more than $300 billion by 2025, and currently sitting near $315 billion. Approximately $100 billion of that growth came in 2025 alone, reflecting renewed momentum after a brief slowdown and highlighting strong demand for dollar-pegged digital assets across trading, payments, and on-chain finance.

The report concludes that periods of elevated uncertainty, like the current environment, have historically presented compelling opportunities for long-term investors preparing for the next phase of growth in the crypto market.