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According to a new report published by crypto asset management company Grayscale Investments, rising geopolitical tensions in the Middle East and increasing oil prices have become key determinants of investor behavior in the cryptocurrency market.
The report stated that the risk of war with Iran, in particular, led to a “wait and see” approach in the markets, and that the macroeconomic outlook, which had previously shown signs of improvement, was overshadowed by these developments. It concluded that “in March, the conflict with Iran almost overshadowed all other market dynamics.”
The report noted that prior to the conflict, global growth was showing signs of recovery and central banks were expected to cut interest rates, but the sharp rise in oil prices reignited inflation concerns. This, it added, pushed interest rate expectations higher, putting pressure on risky assets.
While significant fluctuations have been observed in the crypto market since the start of tensions in the Middle East, prices have generally moved within a horizontal range. It was noted that the Bitcoin price, in particular, has moved in parallel with changes in oil prices and risk appetite. Bitcoin, which fell to around $60,000 during the initial wave of tensions, later recovered to levels below $70,000, but retreated again as the conflicts continued and macroeconomic conditions tightened. With the latest surge, Bitcoin has lost approximately 10% of its value compared to its March peak. Despite this, the report also highlighted that the asset has generally managed to remain flat since the start of the conflict and has even outperformed US stocks at times.
The report added that despite the volatility, crypto assets have shown significant resilience. The relative stabilization of prices amidst the fluctuations raises the possibility of a more sustained bottom formation; however, it noted that inflows into spot crypto investment products continue and positions in futures are increasing again. This indicates that while there is a cautious outlook on the market surface, risk appetite has not completely disappeared.
According to Grayscale, the most critical factor for a sustained market upswing remains a reduction in uncertainty. The report predicts that if conflicts subside and energy prices fall, the cryptocurrency market could quickly price in more favorable macroeconomic conditions and enter a strong recovery phase.
*This is not investment advice.