Tradfi markets have experienced a sharp downturn over the past two days following President Donald Trump's announcement of reciprocal worldwide tariffs, triggering a widespread selloff. The Dow, Nasdaq and S&P 500 had their worst single-day performances and overall weeks since the summer of 2020, reflecting broader risk-off sentiment.

Several Bitcoin mining stocks fell as much as 15% on Thursday, while spot Bitcoin ETFs saw nearly $100 million in net outflows. Altcoins have been hit harder than Bitcoin during the downturn, a trend Injective CEO Eric Chen attributes to Bitcoin’s evolving market structure post-ETF approval.

"Bitcoin is holding up better than altcoins because its market structure has fundamentally changed post-ETF, with demand now coming from retirement accounts, macro funds and corporate treasuries like MicroStrategy (MSTR) and GameStop (GME)," said Chen.

However, bitcoin and other cryptocurrencies began to rebound on Friday. The price of bitcoin was up 2.2% to $84,000, according to The Block's BTC price data. Among the 10 largest cryptos by market cap, ether (1.1%), XRP (4%), solana (6%) and dogecoin (7%) were also trading higher.

Pantera Capital General Partner Cosmo Jiang highlighted the macroeconomic nature of the current pullback, emphasizing that digital assets remain borderless and unaffected by tariffs in a direct sense.

"The tariff-driven pullback is idiosyncratic and not a reflection of deeper economic issues," Jiang noted. "Just like it was artificially injected in, it can also be taken out once the Trump administration feels it has won concessions. Digital assets, as the tip of the spear in growth assets, were the first to pull back and may also be the first to bottom out and rebound."

Standard Chartered analysts suggested bitcoin could be evolving into a hedge against U.S. economic isolation, making it more attractive to global investors looking for alternatives to traditional assets in times of geopolitical instability. This reinforces the argument that Bitcoin's growing demand may help it recover faster than other risk assets.

The new policy imposes a baseline 10% tariff on imports, exempting USMCA-compliant goods. Some countries will see tariffs rise as high as 49%. The baseline 10% tariff will take effect on April 5, and the reciprocal tariffs are set to take effect on April 9. On Friday, Fed Chair Jerome Powell said the tariffs will likely raise inflation and slow U.S. economic growth.

Institutional investors remain hesitant to enter the crypto market meaningfully due to ongoing regulatory uncertainty, according to Benchmark equity analyst Mark Palmer.

"While there was a lot of excitement about institutional adoption of Bitcoin and crypto following the U.S. elections in November, the reality is that institutions are still looking for a green light to invest in the space in earnest," said Palmer. "They likely won’t have one until crypto market structure legislation is enacted and regulatory clarity is not only apparent but codified."

Without long-term institutional investors, Palmer crypto stocks remain largely in the hands of retail traders and hedge funds. Lawmakers are currently working on a crypto market structure bill, while President Trump has signaled he would like stablecoin legislation on his desk by August.

John Glover, chief investment officer at Ledn, said Trump’s tariff announcement wiped out significant equity wealth globally and pushed bitcoin down from the $88,000 level to the $81,500 area. However, from a technical analysis perspective, he suggests bitcoin remains in Wave IV of its Elliott Wave cycle — a theory that the natural ebb and flow of market psychology can be observed in trending markets – and is on the verge of its next potential rally.

"Unless we see a close below $62K, this wave count will play out as expected," said Glover, a former managing director at Barclays. "For those getting nervous, the options activity suggests many are hedging at $70K while allowing for upside participation up to $100K by the end of June."

Despite Bitcoin's relative resilience, experts warn that Trump's tariffs may derail crypto IPO plans, as heightened macroeconomic uncertainty could cause firms to delay their public listings. Given the reliance of IPOs on strong market conditions, several high-profile crypto firms considering going public may now rethink their timelines and wait for a more stable environment.

Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.

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