Staying disciplined matters in both up and down markets

 

Since late January, global financial markets have been shaken by President Trump’s aggressive tariffs on imports from about 90 countries, sparking widespread volatility across asset classes. The S&P 500 has plunged as much as 20% from its January peak as investors grapple with expected rising costs and potentially disrupted supply chains. Meanwhile, bonds face uncertainty due to sudden shifts in 2025 interest rate expectations.

 

This macroeconomic turbulence, as we recently highlighted, has created a chaotic environment that clouds underlying trends—especially for crypto. Though detached from government control, the crypto market faces headwinds as investors remain uncertain about the resolution of Trump’s tariff conflicts. Yet, amid this storm, crypto stands out—not only for bitcoin’s relative price resilience but also for the enduring strength of the asset class’s fundamentals.

 

Tariffs and crypto

 

Will crypto be impacted by the tariff fallout differently than other asset classes? Crypto is a risk asset class and will typically struggle in periods of significant macro uncertainty like we are currently experiencing. But as a global trade war unfolds, there are some important considerations for investors to keep in mind regarding bitcoin and many other crypto assets. 

 

 

1. Crypto Is borderless and non-physical

 

Tariffs are designed to affect the flow of physical goods across borders—steel, electronics, cars, etc. Crypto, by contrast, is a digital-native asset class. Bitcoin is not shipped in containers and smart contracts do not need to go through customs. These assets exist entirely on decentralized networks, outside the purview of traditional international trade frameworks. So while tariffs may drive up the cost of iPhones assembled in Shenzhen or cars built in Germany, they have no direct impact on the supply, distribution, or utility of bitcoin or other crypto assets. 

 

 

2. Digital asset infrastructure is not dependent on any one country

 

Crypto networks are incredibly resilient due to their global decentralization. Bitcoin’s mining, for instance, is distributed across a wide array of jurisdictions. Most key protocols in DeFi, Web3, and layer-2 ecosystems operate in a permissionless environment, where innovation and participation can shift jurisdictions almost instantly in response to regulatory or macro pressures. In essence, no single country's trade policy can meaningfully disrupt the operations of these networks.

 

 

3. Bitcoin’s narrative as a hedge against fiat instability 

 

Historically, tariffs—especially on the scale Trump is proposing—can trigger inflationary pressures. If import costs rise due to added duties, businesses most often pass those increases on to consumers. Higher consumer prices could entrench inflation, eroding trust in fiat currencies and government fiscal discipline, and creating a strong macro backdrop for bitcoin’s “digital gold” narrative.

 

 

4. Tariffs could accelerate the use of stablecoins and payment cryptocurrencies

 

Trump’s proposed trade policies could further alienate key trading partners and reinforce the de-dollarization trend. Countries seeking to reduce reliance on the US financial system have already begun exploring alternative payment rails and reserve assets. Stablecoins like USDT and USDC are already being used in cross-border commerce in Latin America, Africa, and parts of Asia. Meanwhile, native digital assets can offer censorship-resistant value transfer mechanisms that bypass traditional intermediaries altogether. If the global financial system moves toward a more multipolar model, where dollar dominance is less entrenched, crypto may become an increasingly relevant parallel system—not just an investment but a critical piece of financial infrastructure.

 

 

5. Bitcoin hasn’t flinched over the longer term

 

Since Trump first floated his tariff plans in late 2023, we’ve seen modest reactions in equity and commodity markets, but bitcoin has risen significantly since that time, driven by macro tailwinds like falling real yields, institutional ETF inflows, and rising adoption. Investors understand that while trade wars may disrupt supply chains and introduce volatility in traditional equities, they don’t touch the monetary dynamics underpinning bitcoin.

 

 

Lessons from the recent past

 

In November 2024, as crypto markets hit all-time highs, we talked to investors to resist the “fear-of-missing-out” (FOMO) trap following a sharp rise in digital asset prices. We emphasized our long-standing view that crypto’s positive long-term asymmetry can enhance portfolios with just a modest 1-5% allocation. Rather than chasing gains by over-allocating after significant increases, we advised disciplined rebalancing to maintain predefined targets.

 

At that time (October 31, 2024), the Nasdaq Crypto IndexTM (NCITM) had surged nearly 50%. Trump’s victory further fueled its ascent, raising hopes of a regulatory breakthrough in the US. By year-end, the NCITM closed with an impressive 105% gain. This momentum, driven by cyclical factors, adoption trends, and Trump’s win, carried into early 2025. However, tariff-induced volatility has since tested crypto’s rally, erasing much of its post-election gains and raising questions about its potential to outperform going forward. While further corrections remain possible, we believe this shakeout—much like those in recent years—will likely prove to be a significant entry point for long-term investors.

 

Our Head of Research Pedro Lapenta recently noted that crypto thrives on drivers beyond short-term macro shocks. The 2024 bitcoin halving tightened supply, US interest rate cuts are a tailwind for risk assets, and institutional adoption of crypto continues in its steady climb. Now, a pivotal factor—one we believe most investors are not paying attention to—is rapidly emerging: regulatory clarity in the US. 

 

Two weeks ago, we met with the new SEC Crypto Task Force and heard from many other regulators and policymakers. We left Washington with a few important takeaways for investors. 

First, there has clearly been a complete turnaround from the previous administration regarding how to engage with the digital assets industry and we were highly encouraged by the level of progress. After years of uncertainty, US policymakers are inching toward a coherent framework, actively seeking industry input in shaping the future of crypto regulation in the world’s largest capital markets. Second, bipartisan efforts in Congress suggest forthcoming rules on custody, stablecoins, and crypto ETPs—developments that could unlock greater institutional participation, stablecoin adoption, and tokenization. Finally, the public policy activity isn’t merely noise reduction; it’s a structural tailwind strengthening crypto’s foundation. And it’s one we think most market participants are underappreciating. 

 

Despite recent price declines, digital assets, as tracked by the NCITM,remain up 7.0% since Trump’s election—outpacing most risk assets and trailing only gold’s 8.7% rise since the US elections in November. By contrast, tariff pressures have erased the “Trump rally” gains in traditional markets, with the S&P 500 and Nasdaq 100 now down over 10% since early November. While crypto isn’t immune to global forces, it continues to outperform other risk assets since Trump’s election on a relative basis.

 

 

Staying the course
 

Looking ahead, as Trump’s tariffs and geopolitical maneuvers potentially reshape global trade into a multipolar framework, crypto’s decentralized, borderless, and neutral nature positions it as a compelling alternative. The euphoria we flagged in November wasn’t an anomaly in crypto’s history, nor is today’s fear a reason to abandon the asset class. Its potential to play a key role in a reconfigured world remains intact.

 

So, what should investors do? The temptation to overreact—whether chasing peaks or fleeing troughs—is powerful, but discipline is paramount. Our November guidance still holds: maintain appropriate allocations, resist emotional swings, and trust the fundamentals. As regulatory clarity and adoption trends unfold in 2025 and beyond, crypto is poised to shine even brighter.

 

 

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