Crypto markets remain in a holding pattern as Middle East tensions cloud sentiment, offsetting what had been a gradually improving macro backdrop, according to digital asset manager Grayscale.
In its latest report, the firm said the Iran conflict has taken center stage, overshadowing earlier optimism around firmer global growth and a potential shift by central banks toward rate cuts. That outlook has been disrupted by a spike in oil prices, which has revived inflation concerns and pushed interest rate expectations higher, weighing on risk assets and sidelining investors.
Since the escalation began, crypto markets have been volatile but largely range-bound, with price action closely tied to headlines around energy markets and broader risk sentiment. Bitcoin initially dropped into the mid-$60,000s during the first phase of the conflict, then rebounded toward the low-$70,000s before retreating again as tensions dragged on and financial conditions tightened.
More recently, renewed escalation has pulled bitcoin roughly 10% below its March highs, with ether and other tokens also declining as investors reduced exposure to risk. Despite the pullback, crypto assets have shown relative resilience. Bitcoin has remained broadly flat since the conflict began and has, at times, outperformed equities, highlighting both its sensitivity to macro developments and its underlying strength.
Grayscale expects investors to stay cautious in the near term, waiting for clearer direction on geopolitical risks and oil prices. A de-escalation, along with a decline in energy costs, could quickly restore a more supportive macro environment. Conversely, persistently elevated oil prices may continue to pressure growth and delay a broader recovery.
Even amid uncertainty, crypto valuations have held up relatively well, suggesting a more durable bottom could be forming. The firm also pointed to steady inflows into spot crypto investment products and increased derivatives activity as early signs that risk appetite is stabilizing beneath the surface.
Looking ahead, Grayscale believes a reduction in macro uncertainty will be key to unlocking the next sustained rally. Still, it emphasizes that the long-term drivers of the asset class remain intact, particularly the continued expansion of stablecoins and tokenized assets.
The stablecoin market has grown rapidly, expanding from around $20 billion in 2020 to more than $300 billion by 2025, and currently stands near $315 billion. Roughly $100 billion of that growth came in 2025 alone, reflecting renewed momentum after a brief contraction and strong demand for dollar-pegged digital assets across trading, payments, and on-chain finance.
The report concludes that periods of heightened uncertainty, like the current environment, have historically provided attractive opportunities for long-term investors positioning for the next phase of growth in crypto markets.
