The crypto market cap fell below the $2.5 trillion mark on Monday after the U.S. officially moved to impose a maritime blockade on Iranian traffic through the strategic Strait of Hormuz.

According to recent reports, the U.S. Central Command confirmed through a Navy official that it had begun a blockade of all maritime traffic entering and exiting Iranian ports starting at 10 a.m. ET today.

As noted by the U.S. President in a recent Truth Social post, the U.S. Navy would seek and interdict any vessel in international waters that has paid a transit toll to Iran in the Strait of Hormuz. According to the administration, such payments are characterized as world extortion.

Along with the blockade, the U.S. Navy has deployed destroyers to the Strait to begin clearing naval mines allegedly laid by Iran to ensure a safe pathway for non-Iranian commercial traffic.

It should be noted that, unlike a total closure, the U.S. stated it would still permit freedom of navigation for vessels traveling strictly between non-Iranian ports. Hence, the move is an effective attempt to isolate Iran economically while keeping global energy lanes open for allies.

This escalation follows after diplomatic efforts to resolve ongoing tensions failed in Islamabad last week. These talks collapsed specifically over the Iranian government’s persistence in sticking to its long-term nuclear program.

Shortly following the recent report, oil prices spiked back above $100 on fears that rising energy costs and renewed inflation could hurt the global economy. West Texas Intermediate crude oil rose over 8% to $104.6, while Brent crude climbed back to $102.7.

The downturn was not confined to the crypto market alone. Notably, even traditional safe-haven assets such as gold and silver fell slightly on the day as investors scrambled for liquidity, while Asian indices such as Japan’s Nikkei 225 and the Hang Seng closed significantly lower at the end of their sessions.

The crypto market will likely continue to struggle from escalating tensions between the U.S. and Iran, especially as the situation in the Strait of Hormuz remains volatile.

With a shaky so-called ceasefire between the two nations further strained by Iran’s defiance, risk on assets such as cryptocurrencies could continue to lose their appeal to investors as they pivot towards safer alternatives such as U.S. bonds and gold as a defensive hedge.

Against this backdrop, the U.S. PPI is set to be released tomorrow, Tuesday, at 8:30 a.m. ET. The market estimates the headline producer price index to rise by 1.2% on a monthly basis.

A stronger-than-expected PPI reading can embolden the Fed to maintain high interest rates for longer and hence place further downward pressure on crypto prices, while any sign of cooling could provide some much-needed relief to the struggling crypto sector.

Bitcoin and artificial intelligence appear to be moving in opposite directions regarding how their power is distributed.

Galaxy Research head Alex Thorn pointed out on Sunday that Bitcoin mining, which started on simple home computers, now mostly happens in massive industrial warehouses using specialized gear. AI, however, may take the reverse route. 

While AI currently lives in giant, restricted data centers, Thorn believes open-source progress is closing the gap as major models hit limits in memory and data. 

“If local models keep getting smaller, cheaper, and more efficient, AI may become increasingly personal and on-device,” he noted.

Localized computing on the rise

Grand View Research estimates the global market for “Edge AI”—technology that runs locally on gadgets rather than through a central cloud—will reach $119 billion by 2033. 

This represents a jump from roughly $25 billion expected in 2025. The growth stems from the explosion of connected devices and a need for instant data processing that does not rely on a distant server.

Market analysts at GVR attributed this momentum to the expansion of the Internet of Things (IoT). Industry trends show a “rising focus on data privacy and localized intelligence at the network edge,” which allows companies to automate tasks without sending sensitive information to a central hub.

Mining moves to the Global South

A separate report from the crypto exchange KuCoin on Friday showed that while Bitcoin hardware is harder for individuals to own, the locations of these machines are spreading out globally. 

High electricity prices in the United States have made mining unprofitable in certain regions, with costs to produce a single coin sometimes exceeding $100,000.

Operators are now seeking cheaper energy in places like Ethiopia and Paraguay, where hydroelectric power is plentiful. Such a move helps protect the network by ensuring it isn’t tied to the politics or power grids of just one or two nations. 

According to KuCoin, “this decentralization of mining power across different continents enhances the security of the network by making it less vulnerable to any single country’s political or environmental shocks.”

Financial institutions have “accelerated” their participation in crypto markets this year, while retail investors have pulled out, said Exodus CEO JP Richardson on Sunday. 

“This might be the first cycle in crypto history where institutions are in a bull market, and retail doesn’t even know it,” the crypto executive said. 

Richardson cited a few examples, such as the stablecoin market capitalization all-time high this year, Morgan Stanley’s Bitcoin (BTC) ETF launch, Schwab starting a waitlist for spot Bitcoin trading, Franklin Templeton announcing a crypto division and Fannie Mae accepting Bitcoin-backed mortgages.

“In 2018 and 2022, institutions pulled out with retail. This time, they accelerated,” he said.

This shift could signal that crypto has evolved from volatile, retail-driven hype cycles to a more mature, institution-led market with steadier accumulation, deeper liquidity and reduced reliance on emotional spikes or panic selling. 

Cost of living crisis keeping retail away

MN Fund founder and crypto YouTuber Michaël van de Poppe echoed the sentiment in an X post on Sunday, stating, “It’s super clear that retail isn’t interested in crypto.”

“Almost everyone has a hard time paying their bills on a monthly basis,” he added, referring to the escalating cost-of-living crisis and inflationary pressures. 

“That’s why this cycle won’t be the retail cycle. It’s the institutional cycle and will take longer.”

Related: Bitcoin price falls under $71K as US-Iran war tensions spark sell-off

CryptoQuant analyst “Darkfost” noted that retail activity hit a nine-year low earlier this month, reporting that inflows from small accounts with less than 1 BTC reached a record low on Binance.

“Retail investors are clearly absent from the market,” he said. 

The analyst added that some retail investors may have recently left the crypto market to move into equities and commodities, which have also delivered strong performances.

Near-term sentiment remains fragile

CoinEx exchange chief analyst Jeff Ko told Cointelegraph on Monday that near-term sentiment “remains fragile and heavily macro-driven, especially by oil, the dollar, and inflation expectations.” 

“At this stage, the move still looks more like a macro risk premium overwhelming the near-term bid than a genuine deterioration in crypto appetite.” 

He said he was more confident over the medium term, adding, “I do not expect oil prices to remain elevated given the underlying supply-demand fundamentals.”

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