Binance Research: Effects of increased tariffs on crypto markets
Last week, U.S. President Donald Trump announced large new tariffs, leading to significant changes in the global trading system and severely impacting financial markets.
As a result of U.S. protective measures, retaliatory tariffs were imposed by major trading partners, creating uncertainty and volatility in the global financial system.
The severe volatility in the crypto market and the changing correlation with traditional assets indicate a reassessment of the role of this asset class, which may have long-term effects.
At the beginning of 2025, the U.S. initiated the largest trade policy changes in the last century. President Trump imposed a 10% general tax on all imports starting April 5.
On April 2, which President Trump declared 'Independence Day', the White House announced heavy tariffs on 60 countries, including 34% on China, 20% on the European Union, 24% on Japan, and 46% on Vietnam. Canada and Mexico were already subject to a 20% duty.
As a result, the average rate of U.S. import taxes reached 18.8%, whereas it was only 2.5% in 2024.
Major trading partners also took retaliatory actions: China imposed a 34% tax on U.S. products, Canada imposed a 25% general tax, while the European Union, South Korea, and India also hinted at retaliatory measures.
Investor response: risk-averse strategies
Market decline due to sudden changes in trade policy:
The total market capitalization of crypto has decreased by about 26% from January (approximately a $1 trillion loss)
S&P 500 index down more than 17%
Investors moved towards safe assets: U.S. bonds and gold (gold prices at record highs)
Bitcoin down 19%, Ethereum down over 40%
Meme coins, AI, and gaming tokens have dropped more than 50%
Among surveyed investors in February, only 3% considered BTC a preferred asset in the event of a trade war, while 58% preferred gold.
Return of volatility in crypto
After the tax announcement on Canada and the European Union, BTC dropped by 15% in February
ETH's one-month volatility exceeded 100%
BTC volatility above 70%
The uncertainty of further policy announcements is causing continued volatility in the crypto market.
Economic impacts: inflation, stagnation, and Fed challenges
Increase in import prices
One-year inflation estimates above 3%
Consumer inflation expectations above 5%
The global economy could suffer a loss of $1.4 trillion
1% drop in U.S. per capita GDP
Federal Reserve Chairman Jerome Powell acknowledged this shock and stated that its effects would be monitored.
The market now expects four rate cuts in 2025 (initially only one was anticipated).
Changes in crypto relationships
In January, the correlation between BTC and the S&P 500 was -0.32
Rebounded to 0.47 in March
The correlation of BTC with gold has become -0.22
According to long-term statistics, the average correlation of BTC with equities is 0.32 and with gold is 0.12 – the current relationship seems temporary.
The way forward: key factors to watch
New trade policies
Inflation data
Global development indicators (PMI, unemployment, income decline)
Decisions of central banks (Fed, ECB, PBOC)
Crypto-specific developments such as ETF approval, clarification of regulations, state BTC purchases
The trade war of 2025 has severely impacted the crypto market. Currently, crypto assets are considered risk assets, but in the future, BTC could regain its role as a hedge against inflation.
If central banks lower rates despite inflation, and trust in fiat currencies declines, Bitcoin's status as a sovereign alternative may emerge. Currently, investors need to be cautious, diversified, and vigilant.
