How Crude Oil "Controls" Cryptocurrency—A Complete Macro Transmission Chain

There is a clear but often overlooked transmission chain between rising oil prices and cryptocurrency trends. Understanding this chain helps explain why Bitcoin comes under pressure during oil price surges and why the two are not simply negatively correlated.

The four-step transmission chain:

Step 1: Supply shocks push up oil prices. The disruption of the Strait of Hormuz is the starting point. About 20% of global oil flows through this strait, and its closure directly causes a supply gap. Currently, oil prices are above $110, with Goldman Sachs warning that supply shocks could keep prices above $100 until 2027, potentially even surpassing the 2008 peak of $147.50.

Step 2: Energy prices boost inflation expectations. Rising oil prices directly impact transportation costs, manufacturing expenses, and global energy bills, driving overall inflation higher. In March, the input prices index in the ISM Non-Manufacturing PMI significantly exceeded previous levels, preliminarily reflecting energy transmission effects.

Step 3: Inflation alters interest rate paths. When inflation rises, the Federal Reserve finds it difficult to ease policy. Fed Governor Lisa Cook publicly stated that "due to the Iran war, inflation risks are greater," directly changing market expectations for interest rate trajectories. After stronger-than-expected non-farm payroll data, markets nearly fully priced out the remaining rate cuts expected in 2026.

Step 4: Interest rate expectations suppress risk assets. High interest rates → liquidity tightening → high-volatility assets like Bitcoin come under pressure. Analysts point out that the crypto market is in a "high-impact macro phase," with US-Iran tensions and oil prices above $110 increasing inflation pressure, reducing the likelihood of rate cuts in the near term, and maintaining high volatility in risk assets.

Scenario mapping: When oil prices are at $105, the market is in a consolidation phase amid uncertainty; at $110 to $120, strong risk-averse pressure emerges; above $120, panic environments set in. This is the fundamental reason why Bitcoin has fluctuated roughly between $60k and $75k since the outbreak of conflict at the end of February.

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