Washington’s commerce policy decisions threatened to disrupt a historically bullish second quarter for risk assets following dreary returns in financial markets during Q1 2025.

Bitcoin, ether, the tech-heavy S&P500, and Japan’s Nikkei 225 recorded their worst quarterly numbers in over three years. Crypto equities were unspared by the sweeping downturn. Titans like Coinbase logged the worst quarter since FTX collapsed, and major bitcoin miners shed significant portions of their market capitalizations as the digital asset industry reeled from macro-driven turbulence.

“Over $160 billion in crypto market cap was erased since Friday, underlying a sobering start to Q2 and a market still searching for its bullish momentum,” wrote QCP Capital in a Tuesday note.

Bitcoin reclaimed the $85,000 mark ahead of “Liberation Day,” according to The Block’s price page. However, BTC’s price action remained muted and was down over 9% year-to-date. QCP Capital said the broader crypto market also signaled “exhaustion with numerous coins down 90% YTD, with some shedding over 30% in the past week.”

Bleak sentiment stemmed from Wednesday’s global commerce rebalancing. President Trump will announce tariffs on several trade partners at the Rose Garden. Debates abound about whether these economic duties would be reciprocal or more lenient. Sid Powell, CEO of Maple Finance, stressed that the decision “could swing either way” but noted that crypto markets would benefit from the latter. “If he rolls out lighter tariffs — say, 10% vs. the feared 25%  — expect a risk-on surge,” they told The Block.

Nicolai Sondergaard, a Nansen Research Analyst, told The Block that the second quarter of 2025 could still mimic seasonal patterns, depending on Trump’s final announcement. “Tariff fears, which sparked risk-off moves recently, seem to be nearing a local peak," Sondergaard argued. "The U.S. administration’s shift toward a more reciprocal and negotiation-based approach from April to June suggests this won’t turn into a full-blown trade war. While confusion may linger post-April 2, especially with overlapping country-specific proposals, the longer arc points to eventual de-escalation."

Markets looked to this week’s jobs data and speeches from Federal Reserve Chairman Jerome Powell and Christopher Waller, a Federal Reserve Board of Governors member, for hints of a Fed interest rate decision at next month’s Federal Open Market Committee meeting. Bitcoin and risk assets typically thrive in low-interest-rate environments. Crypto’s increased correlation to traditional macro variables due to surging institutional adoption has only strengthened this paradigm.

Traders anticipated at least two rate cuts this year based on the Fed’s March 19 FOMC meeting. However, the consensus among analysts said Trump’s policies have seemingly stalled a clear Fed pivot toward a dovish or hawkish path. “The Fed has taken a ‘wait and see’ stance. Powell made it clear that the Committee won't react to sentiment alone — cuts will only come if hard data, particularly labor market indicators, show real signs of deterioration,” said Nansen’s Sondergaard. “In the meantime, Treasury QT has been slowed due to money market tightness, a subtle signal that the Fed remains sensitive to liquidity, even if it’s not outright dovish,” they added.

Maple’s Powell agreed with the assertion, stating that the Fed’s decision would weigh on crypto’s possible relief in Q2. “If Trump’s April 2 tariff rhetoric — where he hinted at being ‘flexible’ — turns into lighter policies, markets could exhale… But here’s the catch: Liquidity’s still tight, and the dollar’s running high. That’s a headwind. BTC’s bounce might cap at $100K unless we get a big macro surprise — like CPI dropping to 2.5% or jobless claims easing. Without that, expect a choppy, muted recovery,” they said.

QCP Capital analysts shared a similar thesis in an April 2 update, adding that Trump’s policies may briefly sideline risk assets while global traditional equities climb higher. “In the short term, we expect all risk assets to remain under pressure. But as the new status quo beds in, we could witness pockets of ex-U.S. exceptionalism. Global equity indices may continue to push toward new highs, even as the U.S. risks being sidelined by its own policy choices.”

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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