If it said "the seed of hope is being ground against the hard stone of reality" it would make more sense.
The idea is that a positive thing 'the hope' is being lost because it's being destroyed by being ground against the hard stone of the current reality.
The hard stone is a grinding stone - the sort of thing that millers used to make flour out of wheat grains. But in this case, it's hope that's being ground. Unfortunately, the author has decided to use a silly metaphor - since "hysteria of hope" cannot be ground against a stone. But "seeds of hope" can be, and it destroys them.