Title: Crypto is Macro Again
Author: Marco Manoppo, Investor at Primitive Ventures
Translator: Ashley, BlockBeats
Editor's Note: The author analyzes that the crypto market will be influenced by macroeconomic and policy changes, particularly Trump's tax policies and inflationary pressures. As the Trump administration strengthens its regulatory support for cryptocurrencies, including the CFTC's focus on anti-fraud and the FDIC's adjustment of banking policies, this may promote the stability of the crypto market. In the coming months, stablecoin legislation and macroeconomic factors may dominate the market direction.
The following is the original content (the original content has been edited for easier reading):
Currently, the cryptocurrency market is no longer an isolated asset class. They are once again deeply intertwined with macroeconomic forces and regulatory changes. In the next 3-6 months, the crypto market will be dominated by regulation and macroeconomics, rather than micro-economics or industry developments within the industry.
Since the launch of the $TRUMP token, cryptocurrencies have been steadily declining. The token was released on January 17, 2025, just days before Trump's second inauguration, triggering speculative sentiment, but failing to sustain the market.
At the same time, macroeconomic forces are also at play.
On February 1, 2025, President Trump imposed a 25% tariff on all goods imported from Mexico and Canada, a 10% tariff on Canadian energy exports, and an additional 10% tariff on Chinese imports. This move had an immediate impact on risk assets.
Since the introduction of these tariffs, the overall cryptocurrency market capitalization has declined by about 13%, from $3.8 trillion to $3.3 trillion. Bitcoin itself rebounded from a three-week low of $91K to $96K, while Ethereum and other major cryptocurrencies saw steeper declines of up to 25%.
Why did the crypto market react to the tariffs?
Trade War Fears and Risk Aversion Sentiment
The threat of a global trade war has prompted investors to flee risk assets. Traditional finance (TradFi) investors view Bitcoin as a high-risk asset and are shifting to safer assets like gold, bonds, and the US dollar. Typical risk-off trades are playing out, with cryptocurrencies being lumped into this category.
Inflation and Interest Rates Back in Focus
Tariffs have increased the cost of imported goods, potentially leading to rising inflation. If inflation remains high, the Federal Reserve may delay or cancel expected rate cuts, reducing liquidity in financial markets. Since Bitcoin does not generate yield, higher interest rates make it less attractive compared to US Treasuries or even cash deposits.
This dynamic contrasts sharply with the low-interest-rate, liquidity-driven environment of 2020-2021, when cryptocurrencies thrived. Therefore, macroeconomic trends have once again become the primary driver of cryptocurrency performance.
The Role of Regulation and Traditional Finance
While tariffs and inflation have dominated the short-term outlook, regulatory changes are also crucial. Global regulators are increasing their scrutiny of the crypto market, and the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have recently taken some industry-friendly measures, suggesting a more constructive regulatory stance in the US.
At the same time, traditional financial institutions (TradFi) are accelerating their adoption of cryptocurrencies, recognizing their potential as a diversified asset class.
Matt Britzman of Hargreaves Lansdown noted that the trade war fears triggered by tariffs typically subside quickly, but during this period, investors hedge through gold, government bonds, and the US dollar.
Similarly, Joel Kruger of LMAX Group pointed out that the market is not afraid of extreme tariff measures, but is instead adapting to Trump's negotiation strategy.
This means that while volatility may be high in the short term, long-term investors may continue to accumulate Bitcoin and other cryptocurrencies as prices decline.
What Might Happen in the Next 3-6 Months?
Cryptocurrencies are once again becoming part of the macroeconomic landscape. Cryptocurrencies are no longer independent of the fluctuations in traditional markets. Economic policies, central bank decisions, and geopolitical events are directly impacting the performance of digital assets.
As inflation, interest rates, and trade policies drive the dynamics of the financial markets, digital assets are no longer detached from the broader economic environment. Institutional capital now views the major cryptocurrencies as part of the traditional finance (TradFi) realm, meaning that regulatory changes and global economic trends will shape the trajectory of cryptocurrencies.
Over the next 3-6 months, the market is expected to continue facing volatility as it digests tariff updates, Federal Reserve policy decisions, and upcoming regulatory measures.
The question is not whether cryptocurrencies will decouple from macroeconomics, but how they will adapt to this new reality.
What is truly important now are the macroeconomic events and what Trump says about regulation.
The market is reacting violently to trade policies, interest rate expectations, and regulatory decisions, factors that may shape the entire industry's development trajectory in the coming months.
Key Regulatory and Macroeconomic Developments Driving the Crypto Industry
Cryptocurrencies Become a National Priority in the US
President Trump signed an executive order designating cryptocurrencies as a national priority and established the "President's Digital Asset Markets Working Group" to create a regulatory framework and assess the nation's digital asset reserves.
The order protects fair banking access for self-custody and crypto businesses, and explicitly prohibits the launch of a US Central Bank Digital Currency (CBDC). It also revokes the digital asset policies of the Biden administration, signaling a shift in the US regulatory stance towards a more supportive approach for cryptocurrencies. The working group is led by David Sacks (the "crypto czar").
Impact on Cryptocurrencies:
Rejecting a CBDC and supporting private US dollar-backed stablecoins may benefit stablecoin issuers, while limiting government-controlled alternatives.
The industry's expectations for strategic Bitcoin reserves have not yet materialized, but the assessment of digital asset reserves suggests the government may accumulate them in the future.
A Crypto-Friendly Regulatory Team
Trump has nearly completed the assembly of his cryptocurrency regulatory team, nominating Jonathan Gould (Office of the Comptroller of the Currency, OCC), Jonathan McKernan (Consumer Financial Protection Bureau, CFPB), and Brian Quintenz (Commodity Futures Trading Commission, CFTC) from a16z.
These appointees have experience in cryptocurrency or financial regulation, indicating a market-friendly stance.
Although the Senate confirmation process may take time, the Trump administration is shaping a potentially more open digital asset regulatory framework.
Impact on Cryptocurrencies:
Gould may push for crypto-friendly banking charters, while Quintenz's CFTC may support blockchain innovation.
This signals a shift in the US regulatory attitude, particularly in the regulation of stablecoins and crypto banking, which may result in clearer and more favorable regulatory policies in the future.
19 US States and Endowment Funds Consider Bitcoin Investments
An increasing number of 19 US states are considering legislation to invest public funds in Bitcoin. Some proposals would allocate up to 10% of state funds to larger-cap cryptocurrencies.
Wisconsin and Michigan have already included Bitcoin in their public employee retirement investment portfolios, and another 23 states are actively debating similar proposals.
At the same time, US endowment funds are also increasing their exposure to cryptocurrencies as digital asset prices soar to new highs.
Impact on Cryptocurrencies:
State-level Bitcoin investment could increase legitimacy, demand, and price stability, driving institutional adoption and accelerating regulatory clarity. If these laws are passed, they will further integrate cryptocurrencies with public finance, but legislative approval remains a key hurdle.
Tokenization Pilot Program
Acting CFTC Chair Caroline Pham is advancing a tokenization pilot program that will use stablecoins as collateral.
She is organizing a CEO summit with leaders from Coinbase, Ripple, Circle, and other major crypto companies to discuss this plan.
Impact on Cryptocurrencies:
If this pilot program is implemented, it would help legitimize stablecoins in traditional finance, enhance liquidity in the derivatives market, and drive widespread adoption of tokenized assets.
By integrating blockchain-based collateral into regulated markets, the program may set a precedent for CFTC policies that support cryptocurrencies as it evolves.
CFTC Now Focused on Preventing Fraud
Acting CFTC Chair Caroline Pham also announced a major restructuring of the agency's enforcement division, shifting the focus from "regulation through enforcement" to "preventing fraud".
This reorganization reduces the number of task forces and consolidates enforcement work into two groups: the Complex Fraud Task Force and the Retail Fraud and General Enforcement Task Force.
Impact on Cryptocurrencies:
By more clearly focusing on preventing fraud rather than broad suppression, legitimate crypto companies may face fewer regulatory hurdles, promoting greater institutional participation and enhancing market stability.
Cryptocurrency "Re-Bankification"
FDIC Acting Chair Travis Hill announced a significant shift in the agency's crypto regulation, promising to re-evaluate past guidance that discouraged banks from collaborating with crypto firms.
As part of this reform, the FDIC released internal documents showing that regulators had pressured banks to cut ties with cryptocurrencies.
Impact on Cryptocurrencies:
If the FDIC implements its crypto-supportive reforms, banks may feel more confident partnering with digital asset companies, improving the industry's access to financial services.
This shift could boost liquidity, encourage institutional adoption, and lay the foundation for more balanced regulatory policies.
However, the extent and pace of change will be determined by Senate hearings and ongoing political debates.
SEC's New Crypto Task Force
SEC Commissioner Hester Peirce outlined 10 priority tasks for the agency's new cryptocurrency task force, aimed at providing regulatory clarity for the crypto industry.
Priorities include defining the distinction between securities and commodities, clarifying rules for crypto lending and staking, and creating more viable registration pathways.
Impact on Cryptocurrencies:
Clearer classification rules and registration paths may encourage more institutions to adopt and comply, while the agency's focus on preventing fraud aims to build market confidence.
However, true regulatory clarity may take time to emerge due to ongoing litigation and policy reviews.
U.S. Stablecoin Rules Taking Shape
The U.S. is moving towards stablecoin regulation, with two competing bills: the House's STABLE Act and the Senate's GENIUS Act, proposing different frameworks but aligning on strict compliance measures.
Both bills support private, dollar-backed stablecoins and prohibit central bank digital currencies (CBDCs).
Key differences include:
Regulatory oversight (GENIUS allows state-level regulation of issuers until a $10 billion market cap, while STABLE allows opting out of federal oversight if state rules meet standards)
Reserve requirements (STABLE allows Treasuries, bank deposits, and central bank reserves, while GENIUS also includes money market funds and reverse repos)
Consumer protection (GENIUS focuses on transparency and enforcement, while STABLE requires 1:1 reserves and bans algorithmic stablecoins)
Impact on Cryptocurrencies:
Stricter regulation may challenge Tether's dominance, as both bills require monthly audits, asset segregation, and strict reporting, potentially forcing exchanges to delist non-compliant stablecoins, similar to the EU's MiCA impact.
These laws will pave the way for stablecoin legitimization, attracting institutional adoption, while erecting barriers for opaque issuers. If passed, they will establish clear guidelines for stablecoin issuers, ensuring market stability and compliance.
Final Thoughts
It is clear that the crypto market is now deeply embedded in the macroeconomic landscape. Currently, macroeconomic conditions and policies will drive price volatility in the coming quarters, rather than industry-internal innovation.
While I previously mentioned Trump's crypto-supportive actions, such as the executive order, pardoning Ross Ulbricht, and launching meme coins, which boosted market optimism, many view these as short-term optimizations and speculative drivers - what we need are long-term fundamental catalysts to properly attract new capital inflows from traditional finance (TradFi).
Regardless of what Trump says, the U.S. government's policies will influence traditional finance participants' sentiment towards cryptocurrencies, thereby impacting broader market liquidity.
