Oil price fluctuations and the threat of conflict in Iran deter cryptocurrency investors, according to Grayscale.

The cryptocurrency asset management firm indicated that investor activity is hampered by tensions in the Middle East, yet resilient valuations and ongoing adoption trends may pave the way for the next upward movement.

Oil shock, Iran war risk keep crypto investors on sidelines: Grayscale. (Unsplash)

What to know:

• Grayscale noted that geopolitical risks and a significant oil shock are postponing expectations for rate cuts and making investors more cautious.
• Cryptocurrency has remained stable despite the wider market strain, with slight inflows and increased derivatives activity indicating resilience.
• Grayscale anticipates potential gains once the uncertainty dissipates, suggesting the current situation could be a favorable entry point for long-term investors.

According to Grayscale, cryptocurrency markets are experiencing a pause as geopolitical tensions in the Middle East obscure an otherwise improving macroeconomic landscape.

"The conflict in Iran has overshadowed nearly all other market developments in March," stated the Grayscale research team in a report released on Wednesday.

Prior to the escalation of the conflict, global growth seemed to be gaining momentum, and central banks were leaning towards implementing rate cuts. This perspective has been interrupted by a sharp increase in oil prices, raising inflation concerns and elevating interest rate expectations, which has placed pressure on risk assets and kept investors on the sidelines, the report indicated.

Following the onset of the Middle East conflict, cryptocurrency markets have experienced volatility but remained largely range-bound, with significant fluctuations driven by oil prices and changing risk sentiment. Bitcoin BTC $66,336.84 initially fell into the mid-$60,000 range during the first escalation, then recovered towards the low-$70,000 range, only to retreat again as the conflict continued and macroeconomic conditions tightened.

Recently, further escalation has caused bitcoin to decline by approximately 10% from March peaks, alongside drops in ether (ETH) and other cryptocurrencies, as investors withdrew from risk assets. Despite the volatility, performance has been more stable compared to some traditional markets, with bitcoin remaining roughly unchanged since the beginning of the conflict and even surpassing equities at times, highlighting both its susceptibility to macroeconomic shocks and its relative strength.

Currently, Grayscale expects many investors to await more clarity. Should the conflict subside and energy prices fall, markets could rapidly adjust toward a more favorable macroeconomic environment. Conversely, persistently high oil prices may continue to hinder growth and delay a broader recovery.

Nonetheless, cryptocurrency has demonstrated considerable resilience. Prices have remained relatively stable amidst the volatility, indicating that a more solid bottom may be forming. The research team also noted ongoing inflows into spot cryptocurrency investment products and an increase in futures positioning as evidence that risk appetite is stabilizing beneath the surface.

Looking forward, the report emphasized that a key factor for a sustained recovery would be a reduction in macroeconomic uncertainty. However, it asserts that the long-term drivers of the asset class, such as the increasing adoption of stablecoins and tokenized assets, remain intact.

The stablecoin sector has seen rapid expansion in recent years, with total supply rising from approximately $20 billion in 2020 to over $300 billion by 2025, currently estimated at around $315 billion, based on industry data.

The sector added nearly $100 billion in 2025 alone, reflecting renewed growth following a brief contraction, driven by heightened demand for dollar-pegged digital assets across trading, payments, and on-chain finance.

Periods of significant uncertainty like the present one have historically offered attractive opportunities for long-term investors preparing for the next growth phase, the report concluded.

Read more: Bitcoin holds ground as gold, silver slide on ETF outflows and liquidity strains: JPMorgan