Crucial moment for Bitcoin

Binance Research says whether Bitcoin remains strongly correlated with equities or returns to its pattern of low correlation will be pivotal in shaping its longer-term role as an asset class and its effectiveness as a portfolio diversifier.

This comes after a market shake-up caused by the United States imposing wide-ranging import tariffs under emergency authority​.

Global trade tensions escalated on 2 April when the U.S. announced sweeping tariffs, including a 10% blanket tariff on all imports to the U.S., reversing decades of trade liberalisation​. This baseline levy took effect on 5 April.

U.S. President Donald Trump also announced tariffs on Washington’s “worst offenders” in terms of trade, claiming that the superpower was imposing reciprocal tariffs on them.

However, a closer look at the formulas the Trump administration used to calculate the new tariffs revealed that they had nothing to do with import duties.

Instead, they calculated countries’ trade deficit with the U.S. and imposed a tax based on that. In most cases, the U.S. used half the trade deficit as the new tariff.

Based on this calculation, Trump announced that the U.S. would impose a 30% tariff on South African imports.

However, yesterday, Washington said punitive tariffs for countries on the “worst offenders” list were being paused for 90 days — except for China, which would see its tariff increase to 125%.

The blanket 10% tariff on all imports to the U.S. remains in effect.

“The resurgence of trade protectionism is introducing significant volatility across global markets — and crypto is no exception,” said Binance CEO Richard Teng.

“In the short term, this kind of macro uncertainty tends to trigger a risk-off response, with investors pulling back as they wait to see how things unfold around growth, policy, and trade.”

Teng said that looking further ahead, this environment could accelerate interest in crypto as a non-sovereign store of value.

“Many long-term holders continue to view Bitcoin and other digital assets as resilient during periods of economic stress and shifting policy dynamics.”

Depression-era protectionism

Moulik Nagesh from Binance Research wrote that these were the most aggressive tariffs the U.S. have imposed since the depression-era Smoot-Hawley Tariff Act of 1930.

He said that according to available data, the average U.S. tariff rate has climbed to around 18.8%, with some estimates placing it as high as 22% — a sharp rise from just 2.5% in 2024.

For context, tariffs averaged 1–2% for much of recent history​, and even during the 2018–2019 trade skirmishes, they only peaked near 3%.

“The 2025 measures, therefore, represent an unprecedented tariff shock in modern times — akin to a return to 1930s-era protectionism,” said Nagesh.

Nagesh said that crypto may remain volatile in the near term, with sentiment swinging in response to ongoing trade war developments.

“If inflation runs hot while growth falters, the U.S. Federal Reserve’s response will be pivotal,” he said.

“A pivot to quantitative easing and rate cuts could fuel a crypto rally through renewed liquidity, while a hawkish stance may keep pressure on risk assets.”

Nagesh said progress or setbacks in tariff negotiations will likewise sway investor sentiment in either direction. He was proven right when markets rallied in response to the U.S. announcing a 90-day reprieve in its punitive tariffs.

“Should macro conditions stabilise, new narratives take hold, or crypto reassert its role as a long-term hedge — renewed growth could follow,” Nagesh said.

“Until then, markets are likely to remain range-bound and reactive to macro headlines. Investors should stay closely attuned to global developments, remain diversified, and be ready to capitalise on any market dislocations this trade war may create.”

Risk-off sentiment

Nagesh noted that market sentiment turned decidedly cautious, with investors reacting to the tariff announcements in classic “risk-off” behaviour.

Total crypto market capitalisation dropped an estimated 25.9% from January highs — wiping out $1 trillion (R19.5 trillion) in value — underscoring its sensitivity to macroeconomic instability.

“Crypto assets have moved largely in lockstep with equities, with both experiencing cooling demand, broad selloffs, and a slide into correction territory,” said Nagesh.

“In contrast, traditional safe havens like bonds and gold have rallied, with gold breaking successive all-time highs as investors seek shelter from growing macroeconomic uncertainty.”

Correlation and diversification

Nagesh said the evolving relationship between crypto and traditional market assets is coming to focus, with and Bitcoin, as the market’s dominant asset, offering the clearest lens into this shift.

“While crypto’s response to recent macro and liquidity shocks underscores its current positioning as a risk asset, the broader trend remains intact,” he said.

“Bitcoin’s correlation with traditional markets tends to rise during acute stress but fades as conditions normalise.”

Since 2020, Bitcoin’s 90-day correlation with equities (~0.32) and gold (~0.12) has fluctuated but never sustained deep alignment — reinforcing its distinction from conventional asset classes.

“Even in the wake of recent tariff announcements, Bitcoin has shown some signs of resilience, holding steady or rebounding on days when traditional risk assets faltered,” said Nagesh.

“Separately, long-term holder supply has continued its upward trajectory — reflecting conviction and limited capitulation during recent volatility. This behaviour suggests that, despite short-term swings, Bitcoin may still have room to reassert a more independent macro identity.”

Whether Bitcoin can reassert its safe haven narrative will hold implications for major altcoins, which Nagesh said have exhibited more risk-off behaviour in this climate.

He predicted that they would likely continue doing so until broader sentiment shifts — most often by following Bitcoin’s lead.

Looking ahead, crypto markets face a complex macroeconomic landscape dominated by trade policy risks, stagflationary pressures, and fractured global coordination.

“If global growth continues to weaken and no clear narrative takes hold for crypto, investor sentiment may erode further,” Nagesh warned.

“A protracted trade war would test the industry’s resilience — potentially drying up retail flows, slowing institutional allocation, and curbing VC funding.”

He said that key macro catalysts to watch in the coming months include further trade developments, core inflation data, global growth indicators, central bank policy, and crypto-specific policy.

“Developments such as ETF approvals, strategic Bitcoin reserves, the passing of key crypto legislation, and other regulatory shifts could serve as independent catalysts within this macro backdrop,” said Nagesh.

“A clear, distinct crypto-native driver may help the market break from its current macro-driven risk profile and reassert its idiosyncratic strength.”

However, he warned the effect could cut both ways.

“Overhangs like unresolved litigation, stalled policy efforts, or even tighter regulatory oversight triggered by trade tensions could all weigh on sentiment,” Nagesh said.

“Whether the next catalyst is positive or negative may shape how independently crypto trades in the near term.”