March Newsletter: Tariffs on, Tariffs Off, Market Up, Market Down

February 2025 witnessed major developments in the crypto industry, with the U.S. government taking unprecedented steps to integrate Bitcoin into its financial strategy. President Trump signed an executive order establishing a strategic Bitcoin reserve, utilizing confiscated BTC without taxpayer funds. Meanwhile, bipartisan efforts in Congress aimed to overturn IRS crypto tax regulations, potentially reducing regulatory burdens on DeFi participants.

In macroeconomic shifts, the U.S. Treasury signaled interest rate cuts, while the European Central Bank reduced rates by 25 basis points, setting the stage for shifting liquidity flows into risk assets. On the institutional front, Bitcoin’s dominance continued, even as the broader altcoin market faced sell-offs and declining memecoin speculation.

Key blockchain advancements included Ethereum’s upcoming Pectra hard fork, Arbitrum’s move towards permissionless validation, and Solana’s new fee model. Regulatory clarity improved as the SEC dropped lawsuits, and 20+ U.S. states advanced Bitcoin reserve legislation.

As market volatility persisted, institutional accumulation and regulatory clarity solidified Bitcoin’s structural maturity, reinforcing its role as a global digital asset. The upcoming White House Crypto Summit on March 7 is expected to further shape the industry's trajectory.

February was a month of significant developments in the crypto industry, marked by major policy shifts, regulatory debates, market turbulence, and continued advancements in blockchain technology. Here’s a comprehensive breakdown of the most impactful events shaping the crypto landscape.

Trump’s Tariff Policies: Market Jitters and Hidden Bullish Signals

Financial markets have been rattled since Trump’s return to office, with risk assets selling off sharply. Concerns over his aggressive tariff policies have fueled fears of rising inflation, weaker consumer demand, and a broader economic slowdown. Meanwhile, speculation about government spending cuts and potential layoffs has only added to investor anxiety, despite little concrete evidence to support such concerns.

Yet, beneath the surface of market volatility, there are reasons for cautious optimism. Bond yields have fallen significantly, with the 10-year Treasury yield dropping nearly 60 basis points since Trump took office. Mortgage rates have followed suit, offering potential relief for the housing market. Futures markets now anticipate at least three rate cuts from the Federal Reserve this year, reinforcing the case for looser monetary policy.

The U.S. dollar appears to have peaked, following a trajectory similar to its movement when Trump first took office. Meanwhile, global liquidity is on the rise. China has ramped up fiscal stimulus, posting its highest deficit in three decades and injecting billions into its banking sector to stabilize growth.

U.S. Government Embraces Bitcoin with Strategic Reserve

President Donald Trump signed an executive order to establish a strategic Bitcoin reserve, leveraging confiscated BTC from criminal and civil asset forfeitures. This move, spearheaded by AI and Crypto Affairs Chief David Sacks, ensures that taxpayer funds are not used while positioning Bitcoin as a national store of value. The Treasury Department will manage the reserve, with the potential for future BTC acquisitions under a “budget-neutral” framework. Additionally, a separate digital asset reserve will hold other confiscated cryptocurrencies, including XRP, ADA, ETH, and SOL, without active government purchases.

The executive order mandates a full audit of all government-held digital assets, reinforcing accountability. While Trump has fulfilled many of his campaign promises regarding crypto, broader legislative efforts, such as establishing a Federal Strategic Reserve to purchase more Bitcoin, remain in congressional deliberations.

IRS Crypto Tax Regulations Face Reversal

Congress is considering a resolution under the Congressional Review Act (CRA) to overturn newly implemented IRS tax reporting rules for DeFi transactions. The regulations require DeFi participants to report transaction proceeds and taxpayer information, drawing bipartisan criticism. The resolution, introduced by Senator Ted Cruz, has gained strong support (70–28 vote in the Senate), reflecting a growing pro-crypto sentiment in Washington. Should it pass both chambers, Trump is expected to sign it into law, marking a pivotal win for the industry.

White House to Host First Cryptocurrency Summit

On March 7, the White House hosted its first-ever cryptocurrency summit, bringing together leading industry figures, including Coinbase CEO Brian Armstrong, Chainlink co-founder Sergey Nazarov, and Kraken CEO Arjun Sethi. Chaired by David Sacks and managed by Bo Hines, the summit fostered dialogue between policymakers and the crypto industry, potentially setting the stage for future regulatory shifts and institutional integration. However, after the meeting, the market's general takeaway was that not much of substance came from the meeting.

Macroeconomic Forces Shaping the Market

U.S. Treasury Signals Interest Rate Cuts: Treasury Secretary Scott Bessent hinted at upcoming interest rate reductions, citing global trade imbalances and the need to ease economic pressures. A softer rate environment could enhance liquidity for risk assets, including cryptocurrencies.
European Central Bank Cuts Rates: The ECB reduced its deposit facility rate by 25 basis points to 2.5%, marking the fifth consecutive rate cut. While expected, the move underscores the growing divergence between U.S. and European monetary policies, influencing global asset flows.
El Salvador’s $1.4 Billion IMF Loan Comes with Bitcoin Conditions: The IMF’s latest loan agreement includes provisions requiring government transparency on Bitcoin holdings, liquidation of certain state-backed BTC initiatives, and the publication of audited financial data. However, President Nayib Bukele reassured that El Salvador will continue Bitcoin acquisitions.

Market Outlook: Structural Maturity and Policy Tailwinds

While market volatility remains high, institutional adoption, regulatory clarity, and sovereign engagement are making this cycle the most structurally resilient to date. With the Crypto Summit, potential IRS tax rollbacks, and increasing state-level Bitcoin reserves, the long-term trajectory for digital assets remains bullish. The short-term macroeconomic environment remains uncertain, but as central banks shift policies and institutional inflows increase, the stage is set for significant upside potential once risk sentiment stabilizes.

Market Performance & Institutional Trends

Bitcoin Volatility and Institutional Interest: Bitcoin ended February with a 0.2% YTD gain, despite a sharp 28% drawdown from its January highs. Institutional players now control nearly 14% of BTC supply, with 20+ U.S. states advancing Bitcoin reserve legislation.
Altcoin Weakness Continues: Broader market turbulence weighed on altcoins, with Ethereum struggling to convert strong fundamentals into price appreciation. Despite promising network upgrades, DeFi lagged due to regulatory uncertainty and token unlock-driven sell pressure.
Memecoin Mania Fizzles Out: Speculative fervor cooled, though select projects like Berachain and Story Protocol saw multi-X gains post-mainnet launches.

Bitcoin Cycle Dynamics: A New Era?

Bitcoin’s historical cycles have featured sharp 30%+ corrections as part of its growth trajectory. However, February’s pullback from $109,000 to $78,000 (-28%) avoided breaching this threshold, fueling speculation that institutional adoption and sovereign involvement may be stabilizing BTC’s price volatility. The extended cycle structure suggests Bitcoin may be entering a new era of maturity, where long-term price stability becomes more pronounced.