Abstract

In March 2026, the global encryption market showed severe differentiation in the dual game of macro and geopolitics. The focus this month is on the dramatic turn of the conflict between the United States and Iran: after issuing a 48-hour ultimatum, the Trump administration suddenly announced a "five-day postponement" of military strikes and claimed to have had "productive dialogue" with Iran. However, Iran immediately denied any direct or indirect contact. This move, widely interpreted by analysts as a "slow-down strategy," is essentially a forced compromise by the U.S. government in the face of oil prices soaring to $110 and pressure on mid-term elections increasing sharply. At the same time, the Federal Reserve kept interest rates unchanged at the March FOMC meeting. The dot plot showed that 14 officials expected zero or only one interest rate cut in 2026. Powell acknowledged that the conflict in the Middle East has pushed up the risk of upward inflation and made it clear that "there will be no interest rate cuts until inflation makes progress." The macro environment has thus fallen into a typical "stagflation" narrative - slowing growth and stubborn inflation coexisting. Against this background, crypto assets have shown significant internal structural differentiation: Bitcoin has shown amazing resilience with the continued support of institutional funds.

1. Geopolitical "delay strategy": Trump's "change of heart" and the game of the Strait of Hormuz

The situation in the Middle East in March 2026 has become the core variable disturbing global risk assets. On March 21, US President Trump issued an "ultimatum" to Iran, requiring Iran to open the Strait of Hormuz within 48 hours, otherwise Iran's "various power stations" will be destroyed. Iran responded forcefully. Once the United States takes action, energy and oil facilities throughout the Middle East will be regarded as legal targets. However, as the deadline was about to expire, Trump dramatically announced on March 23 that the United States would "postpone" the strike on Iran's power stations for five days, claiming that the United States and Iran had had "very good and productive" talks in the past two days and had formed the key points of the agreement.

Behind this "change at the last minute" reflects the multiple pressures faced by the US government. First, the ongoing war has pushed global oil prices above US$110 per barrel, and the average retail price of gasoline in the United States is approaching US$4 per gallon, an increase of more than US$1 from the end of February, directly exacerbating domestic inflationary pressure. Secondly, high oil prices pose a threat to the mid-term elections. The Heritage Foundation, a conservative think tank in the United States, warned that if the war continues to escalate, the Democratic Party may "take control of Congress" in the mid-term elections. In addition, America's Gulf allies privately warned Trump that bombing Iranian power plants could lead to a "catastrophic escalation" of the situation. These factors together contributed to Trump's softening of his position.

However, there are fundamental differences between the official statements of the United States and Iran. Iranian Foreign Ministry spokesperson Bagaei made it clear that Iran has not held any negotiations with the United States and has only received U.S. information from some friendly countries in the past few days. Iranian Parliament Speaker Qalibaf himself denied any negotiations with the United States. This contradiction has triggered high vigilance in the market - as Liang Yabin, a professor at the Institute of International Strategic Studies of the Central Party School, analyzed, Trump's move is likely to be a "delay tactic": on the one hand, after more than 20 days of air strikes, the US military's missile inventory may be insufficient and needs time to be replenished; on the other hand, the US 31st Marine Expeditionary Unit will arrive in the Middle East on March 27, which happens to be Trump's reset deadline.

For energy markets and crypto markets, the fate of the Strait of Hormuz becomes central to pricing. This global oil transportation "throat" is responsible for about 20% of global energy flows. Iranian officials have made it clear that the Strait of Hormuz will not return to pre-war conditions and that energy markets will remain unstable for a long time. The market reacted quickly to this: Brent crude oil continued to hover around $110, and WTI crude oil stabilized above $100. Wintermute's market analysis pointed out that the news that the United States suspended its attack on Iran's energy infrastructure for five days reduced the geopolitical risk premium in the short term, causing Brent crude oil prices to fall back, and Bitcoin subsequently rebounded above $70,000. However, whether this "ease" is a temporary window or an escalation trap, the market is still highly uncertain.

2. The Fed’s “Eagle Claws” and the Shadow of Stagflation: A sharp retracement of interest rate cut expectations

While geopolitical disturbances intensify, the Federal Reserve's monetary policy stance further tightens macro liquidity expectations. In the early morning of March 19th, Beijing time, the Federal Reserve announced the resolution of its March interest rate meeting, keeping the policy interest rate unchanged at 3.5% to 3.75%, in line with market expectations. However, the dot plot releases a clear hawkish signal: 7 of the 19 FOMC members do not expect to cut interest rates in 2026, an increase of 1 from December last year; the number of members supporting more than one interest rate cut has dropped significantly. The median forecast shows that there may be only one rate cut in 2026 and another in 2027, with interest rates eventually stabilizing at long-term levels of around 3.1%.

What is more noteworthy is that the Federal Reserve significantly raised its inflation expectations, raising the PCE inflation rate in the fourth quarter of 2026 from 2.4% to 2.7%, and the core PCE simultaneously increased by 0.2 percentage points. The adjustment directly reflects the impact of conflicts in the Middle East pushing up oil prices. Powell acknowledged at the press conference that "rising energy prices are directly affecting the central bank's outlook" and stressed that "energy inflation cannot be lightly ignored." He made it clear that he would not consider cutting interest rates until he saw progress in inflation. There has even been discussion within the committee about the possibility of a next rate hike, although this is not the baseline scenario for most officials.

Following the FOMC meeting, the U.S. March Purchasing Managers Index (PMI) data released on March 24 further exacerbated the market’s concerns about stagflation. Data show that while U.S. business activity is slowing down, price pressures are accelerating again - a situation in which weak economic growth and inflation continue to coexist is taking shape. The market reacted negatively: the 5-year Treasury yield was pushed to a nine-month high of 4.10%, the Nasdaq Composite Index fell 1.5%, and Bitcoin once fell to $70,900. Even more disturbing to the market is that bond market futures show that the implied probability of the Federal Reserve raising interest rates in July has surged to 20.5% from nearly 0% a week ago.

This macro environment poses a double constraint on cryptoassets. On the one hand, the high interest rate environment suppresses the valuation expansion of risk assets; on the other hand, stubborn inflation means that the Federal Reserve has no room for easing. Powell specifically pointed out that the conflict in the Middle East poses downward risks to the economy and employment, and at the same time poses upward risks to inflation. This "two-way tension" puts monetary policy in trouble. For the crypto market, this means that it is difficult to expect a liquidity release from monetary policy in the short term, and the market must rely on endogenous forces and structural narratives to support prices.

3. Differentiation paths of institutional funds: The resilience of Bitcoin ETFs vs. the dilemma of Ethereum

Against the backdrop of continued macro pressure, institutional capital flows show distinct differentiation characteristics. According to data for the week ending March 22, the U.S. Bitcoin spot ETF recorded a net inflow of $93.1 million, maintaining positive inflow status for the second consecutive week, with total net asset value reaching $90.3 billion. This data is in contrast to previous market concerns - just in mid-March, the Bitcoin ETF had a single-day outflow of US$708 million, the largest in two months. However, institutions did not retreat because of this. Instead, they increased allocations when the market panicked. BlackRock IBIT had a net inflow of US$190 million in a single week, becoming the main inflow.

In stark contrast to Bitcoin, the Ethereum spot ETF recorded a net outflow of US$60 million during the same period, of which BlackRock ETHA had an outflow of US$69.6 million. This divergence in capital flows is directly reflected in price performance: Bitcoin rebounded to around $74,500 in late March, while Ethereum fell to $2,180 levels, a weekly decline of 6%. What is even more worrying is the leverage structure of the Ethereum market - according to CryptoQuant data, 75% of the Ethereum held by the Binance exchange is leveraged. This high leverage status makes Ethereum particularly vulnerable to negative capital flows.

Behind the differences in institutional preferences, two completely different investment logics are reflected. Bitcoin is being regarded by institutions as an alternative to "digital gold" and macro hedging tools. Its scarcity and post-halving supply and demand structure are more in line with the logic of traditional asset allocation. The Morgan Stanley Global Investment Committee even recommends that the proportion of crypto assets in the model portfolio should not exceed 4%, and Bank of America also supports an allocation range of 1% to 4%. Ethereum, on the other hand, is viewed more as a "tech asset" or "beta asset". In an environment of economic uncertainty and high interest rates, such assets are often the first to bear the brunt.

Another signal worth paying attention to is that despite continued net inflows into Bitcoin ETFs, market sentiment indicators are in an "extreme fear" state. Data compiled by Coinglass shows that market sentiment has been at “extreme fear” levels for 25 of the past 30 days. This pattern of institutional buying and retail investor fear coexisting forms a typical "wall of worry." Pratik Kala, director of research at Apollo Crypto, pointed out that “from a historical perspective, these areas have been excellent Bitcoin accumulation ranges.” Institutional funds seem to be taking advantage of the market's panic to accumulate funds in an orderly manner.

4. Bitcoin’s macro positioning: Risk asset or safe-haven asset?

This round of geopolitical shocks provides the latest test scenario for Bitcoin’s asset properties. Traditional logic holds that geopolitical conflicts should drive capital flows to "safe haven assets" such as gold and Bitcoin. However, the market performance after the situation in the Middle East escalated in March overturned this narrative: gold suffered its largest weekly decline since 1983, falling more than 10%, and spot gold almost wiped out all the gains during the year. Bitcoin also fell to a two-week low of $67,371 during the Asian session on March 23, before rebounding spurred by the "delayed strike" news.

This synchronized decline reveals Bitcoin's current core positioning - it remains a risk asset rather than a mature safe-haven asset. Haider Rafique, global managing partner of cryptocurrency exchange OKX, pointed out that "weeks of severe volatility like this often test the new narrative logic of Bitcoin's 'new safe haven', especially since its trading price trend has been more in line with risk assets in the near future, rather than in the opposite direction." Amid the market turmoil in March, Bitcoin showed a clear positive correlation with U.S. and Asian stock markets, which contrasted with its ideal positioning as "digital gold."

不过，与股票市场相比，比特币仍展现出一定的韧性。 Bitcoin has risen about 4% so far in March, while the Nasdaq has fallen more than 5% over the same period. This relative performance may be due to two factors: first, the continued inflow of institutional funds provides price support; second, Bitcoin’s supply-side structure (scarcity after halving) and demand-side (institutional allocation of ETF channels) form a unique micro-foundation. In other words, Bitcoin pricing is shifting from a pure macro drive to a two-wheel drive of "macro + institutional supply and demand".

Another key variable is the relationship between oil prices and Bitcoin. According to Wintermute’s analysis framework, the navigation status of the Strait of Hormuz is transmitted to Bitcoin prices through oil prices. The logical chain is: the Strait of Hormuz is blocked → oil prices rise → inflation expectations rise → the Federal Reserve maintains tightening → risk assets are under pressure → Bitcoin falls. Therefore, the recent decline in oil prices and the subsequent rebound in Bitcoin after Trump announced the "delayed crackdown" confirm this transmission mechanism. If oil prices stabilize around $100 instead of surging further, Bitcoin may benefit from the "controllability" of geopolitical risks.

5. Prospects: Three paths and key observation nodes

Based on the dual variables of geopolitics and macro liquidity, the crypto market in the next 1-2 months may evolve along three scenario paths, each path corresponding to a different price range and allocation strategy.

Scenario 1: The situation continues to ease and oil prices stabilize. If Trump's "delayed strike" is truly transformed into a sustained diplomatic negotiation process and navigation in the Strait of Hormuz is gradually normalized, Brent crude oil is expected to stabilize around $100. Under this scenario, the geo-risk premium falls, the inflationary pressure faced by the Fed is marginally alleviated, and risky assets gain breathing space. Wintermute predicts that Bitcoin is expected to test the resistance range of $74,000 to $76,000. If the momentum of institutional bargain hunting continues, it may even push Bitcoin to $80,000. Key observation nodes in this scenario include: the action choices of US military reinforcements after they arrive in the Middle East on March 27, whether the US and Iran restart indirect negotiations, and whether US retail gasoline prices fall from their high of $4.

Scenario 2: The situation deteriorates again and the conflict escalates. Trump's "delay strategy" may just buy time to prepare for military action. When the March 27 deadline arrives, if tougher actions are taken after US military reinforcements are in place, Iran may fulfill its threat to "block the Strait of Hormuz." Under this scenario, oil prices may exceed US$120 or even rush to US$140. Global inflation expectations will rise sharply, and the Federal Reserve will be forced to further tighten monetary policy. Bitcoin could fall back to the $65,000 range and even test the psychological $60,000 mark. Under this scenario, the market will repeat a "Black Monday"-style comprehensive sell-off, and the co-directional fluctuations of Bitcoin and risk assets will be further strengthened.

Scenario 3: Stagflation deepens and macroeconomics dominates. No matter how the situation in the Middle East evolves, the stagflation characteristics of the U.S. economy may become the dominant factor. March PMI data showed slowing growth coexisting with rising prices, while the Fed's dot plot showed only one interest rate cut in 2026. If this "stagflation" pattern continues to deepen, the Federal Reserve may keep interest rates unchanged throughout 2026 or even reconsider raising interest rates. In this macro environment, Bitcoin will face dual pressures of valuation compression and liquidity tightening, but structural factors (halving effect, ETF channels, institutional allocation) may provide a hedge. The market will enter a tug-of-war phase of "macro pressure vs institutional support", with volatility remaining high.

In terms of key observation nodes, investors need to pay close attention to the following time points and indicators: First, the evolution of the situation after the arrival of U.S. military reinforcements in the Middle East on March 27, which is the first window to test the authenticity of Trump's "delay strategy"; second, the weekly U.S. inflation data (CPI/PCE ) and employment data to judge the evolution of stagflation pressure; the third is the persistence of Bitcoin ETF capital flows, especially the intensity of inflows from leading products such as BlackRock IBIT; the fourth is the actual navigation status of the Strait of Hormuz and tanker premiums and other micro-indicators, which can better reflect the real risks than official statements.

Taken together, the crypto market in March 2026 is standing at the intersection of geopolitics and macro liquidity. The Trump administration's "delay strategy" has provided the market with a brief breathing window, but the differences in positions between the United States and Iran mean that the conflict is far from over. The Fed's hawkish stance and the shadow of stagflation constitute continued suppression at the macro level. In such an environment, Bitcoin has shown unique resilience - the continued inflow of institutional funds is reshaping its supply and demand structure, allowing it to remain relatively strong among risk assets. However, it is too early to conclude that Bitcoin has evolved into a mature safe-haven asset, and its co-directional fluctuations with risk assets are still the main short-term characteristics. For investors, the key in the coming weeks will be to distinguish between "real easing" and "false stops" and finding a balance between geo-risk premiums and macro liquidity. As Wintermute’s analysis shows, the fate of the Strait of Hormuz may become a “compass” for Bitcoin’s short-term price direction.