The recent tariffs imposed by President Trump, including 25% on imports from Mexico and Canada and 10% on Chinese goods, are likely to lead to increased inflation, which could dampen investor sentiment in crypto markets, according to crypto markets experts.
As inflationary pressures rise, the Fed may maintain or even increase interest rates, which historically has led to less favorable conditions for crypto assets. This could result in contraction for the digital asset sector over the next few quarters.
Options on the Derive cryptocurrency market are currently pricing in a 14% chance of ETH reaching $2,000 before March 28 and a 22% chance of BTC reaching $75K during the same period. There’s an 11% chance that BTC will drop below $65K by June 27 and a 25% chance it will fall below $80K.
“We’re already seeing signs of heightened market volatility, as BTC’s 30-day implied volatility has risen by 4% to 54% in the wake of these tariffs and the broader economic uncertainty,” said Nick Forster, founder of the onchain options platform. “We expect this volatility to persist as more negative catalysts likely unfold in the coming weeks.”
Bullish seeds will be planted in the coming months, but the fruits of this will only be seen in the second half of the year, according to Forster.
Cryptocurrencies continue to retain a remarkably high level of correlation to the US stockmarket, which continues to work against them from a diversification perspective.
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ETF filings will be an important factor in supporting crypto prices
We’re seeing a number of active spot ETF filings for assets like DOGE, SOL, XRP, and LTC from major players like Bitwise and Grayscale. If the SEC approves these, it will signal greater legitimacy for the digital asset industry and trigger more capital inflows, potentially driving prices upward.
Additionally, several US states, including Illinois, have announced plans for BTC reserves, which is a strong signal of political intent to accelerate crypto adoption. While these measures will take time to bear fruit, Forster thinks they will contribute to a positive long-term trajectory for the sector, laying the groundwork for growth later in 2025.
ETH will continue to stagnate for the next 1-2 quarters
BTC has regained its dominance in the market, now accounting for 60%, while ETH has seen its dominance drop to just 10.9% from 17.3% at the start of 2024. Additionally, ETH’s daily transaction volume has remained fairly flat over the past four years, hovering around 1.25 million transactions per day despite the Merge.
While ETH remains a go-to platform for developers and institutions, its market share has weakened over the past two years. However, the upcoming Pectra upgrade and leadership changes at the ETH Foundation, such as ETHrealize, could trigger renewed growth in ETH’s dominance later in the year. “If all goes well, we could see a bullish ETH market by Q2 2025,” Forster said.