TL;DR — Despite the pause, tariffs and resulting negotiated deals should continue to weaken the DXY (US Dollar Index), thereby increasing global liquidity and money supply.
BTC’s price is very highly correlated to loosening financial conditions (see chart below), which makes sense given it’s viewed as digital gold and a hedge against currency devaluation. We are bullish BTC and are looking to add call exposure.
Macro: Tariffs Are the Headline, but They Don’t Tell the Full Story
The Trump Administration’s publicly stated goals are to i) raise revenue via private sector growth while shrinking the public sector, ii) bring manufacturing jobs back to the US (“re-onshoring”), and iii) reduce the trade deficit — especially with China.
The tariffs are being used as leverage to negotiate better deals that would protect these domestic economic interests. Interestingly, although the Trump administration does not explicitly seek to end the dollar’s role as the world’s reserve currency, its “protectionist” trade policies could impact the dollar’s reserve status.
Ultimately, to accomplish their stated goals, they need to i) devalue USD (weakening DXY decreases the real debt burden of the U.S. government), ii) lower bond yields, making it easier to refinance $9T of debt due this year, and iii) reduce commodity prices to keep inflation low.*
For now, the administration’s plan appears to be working with respect to i) and iii) as DXY is at 100, US Oil is at its lowest price in 3 years and the inflationary scare which appeared in January appears to be a one-time effect of companies trying to front run tariffs when Trump won the election.**
Additionally, the latest Producers Price Index (PPI) dropped by 0.4% month over month, the largest decline since October 2023, supporting the notion that inflation continues to ease.
* Note this is slight shift from Bessent’s initial narrative which was drive rates lower, USD higher and the latter would compensate for inflation pass through. The bond market is not cooperating .
* This article is from 2025 and relates to Apple which heavily relies on China but the point remains the same. Companies purchased a lot of inventory when Trump was elected trying to get ahead of tariffs, so one could argue that the effect is transitory and would further decline if any deals are negotiated — especially with China.
What About ii) Bond Yields?
This is the most problematic issue for the administration.
China and Japan are the two biggest foreign holders of US debt (see pic), but because the biggest trade imbalance is with China, Bessent must negotiate with Japan first. If either country starts selling its US bond holdings, yields will rise, running counter to Bessent’s goals (while unconfirmed, conspiracy theorists hypothesize that China is already selling the 10y, causing yields to rally to ~4.5%).
Bessent wants the JPY (and CNY) to strengthen relative to the USD. For years, the Bank of Japan has artificially depressed interest rates to near 0%, making the carry trade attractive (carry trade = borrow in JPY at 0%, sell JPY for USD, lend to USG earning 4%). If the Japanese rates were allowed to float freely, or if US rates declined, then unwinding the carry trade would strengthen the JPY relative to the USD (unwinding = sell USD for JPY, repay cheap debt) but this only partially accomplishes Bessent’s goals because selling bonds also increases the yield on US debt.
As it applies to the CNY, the Chinese are the world’s biggest exporters, and they invest the dollars they earn from trade into US stocks, bonds, and real estate. If the USD weakens relative to the CNY, it would i) reduce demand for dollars and make Chinese ownership of US assets less attractive on a relative basis and ii) make the US less reliant on China for imports, given the purchasing power of the dollar has weakened, leading to a lower trade deficit.
Ultimately, with the $9T coming due this year and the long-dated yields rising, we think the Fed has no choice but to intervene with some combination of rate cuts (reducing the Federal Funds Rate (FFR)) and quantitative easing (QE), or more generally, “money printing”.
The market expects the Fed to cut 3x this year, but the FFR has a much bigger impact on the front end of the yield curve (i.e. <1 year); the long-end of the yield curve is much more sensitive to term premium, inflation expectations, currency strength, and growth expectations of the issuing country. Stated differently, cutting alone is insufficient to solve the yield issue and we think some form of QE — where the Fed buys bonds to keep rates in check — is more likely than not this year.
Furthermore, we expect central banks around the world to follow suit and support their local economies with various forms of stimulus (read: money printing) in response to a potential slowdown in growth resulting from the tariffs.
How Do Tariffs Impact Crypto — Specifically BTC?
In short: they don’t.
BTC is not a company with a global supply chain that is subject to tariffs. While it trades like a risk asset, its performance is much more closely correlated to global liquidity conditions and changes in M2 (money supply). Lower DXY and increased monetary stimulus create loosening financial conditions, thereby increasing M2, which is a good leading indicator for BTC (see chart, which shows the BTC price on a 3-month lag relative to global liquidity). Intuitively, this makes sense given that many view BTC as digital gold or a hedge against currency debasement.
While recent USD weakness has contributed significantly to global liquidity breaking out to a new all-time high (ATH) (see 2nd chart) we expect loosening conditions to continue and therefore remain bullish on BTC in the medium term (i.e., 3–6 months).
We like buying both near dated (May) and longer dated (September) call spreads.
What About Alts?
We remain tactically bullish on high-quality alts with fundamentals and other near-term catalysts, such as potential ETF listings.
“Fundamentals” in this case means a cash flow generating protocol that uses fees to buyback and burn the token, thus driving value back to holders — i.e., $HYPE (we discuss in greater detail below). Although HYPE is — 67% from its high in December (like most other alts), the fundamentals have only improved, so we remain bullish and plan to continue buying tactically. In fact, the lower the price of HYPE, the more impactful the buyback/burn becomes because more tokens are burned when prices are cheaper. These burns reduce HYPE’s circulating supply, which is akin to traditional companies buying back shares from the market when they feel it’s advantageous to do so.***
Stablecoins And DeFi
We anticipate a reduction in short-term rates this year. There has been a massive increase in on-chain stablecoin market capitalization (MC) ($235B is an ATH and a 15% increase YTD (discussed more below)), so we expect on-chain yield compression to continue (current supply APY ~3%), and therefore we are less bullish on “blue-chip” DeFi (AAVE, UNI, etc.) in the near term.
The caveat to this is if BTC breaks out to a new ATH, and animal spirits return to the market, on-chain trading will increase, and traders will look to borrow from markets like AAVE, increasing rates. However, in the near term, the supply of stables outweighs the demand (current supply APY ~3% vs 15%+ in bull market cycles driven by willingness to trade on leverage).
Nonetheless, the current environment provides an opportunity for new stablecoin protocols to negotiate better terms (read lower yields) from private liquidity providers (LPs) in exchange for capital (or TVL) to bootstrap the protocol. Historically, many delta-neutral funds (like our Credit Fund) and other private LPs would provide capital for a combination of interest paid in stables and the project’s native token, targeting an APY of 20–30%. Simply based on the downward market pressure and the explosion of stablecoin supply on-chain, the supply-demand imbalance should shift toward projects as they can borrow at lower rates, and lenders should be willing to take lower rates to remain competitive.
** Perp trading accounts for 97% of Hype’s total volume. 54% of Hype’s trading fees from perps goes to buying back and burning the token via the Assistance Fund.
Beyond Macro — Crypto Specific News
Regulatory: Digital asset companies are going public, benefiting from a friendlier US regulatory regime as with many more in the pipeline.
Circle (CRCL) -
Circle, the U.S.-based stablecoin issuer of USDC, is seeking to go public and raising at a $5B valuation. USDC at a $61B MC, is the 2nd largest stablecoin behind Tether (USDT) at $145B MC. The company filed an S-1 form with the SEC on April 1st, with the stock trading under the symbol CRCL. However, in light of Liberation Day and elevated VIX, the company is rumored to have delayed its public raise.
Even though Circle delayed its IPO, the IPO will be another win for the digital asset industry as it proves institutional demand for stablecoin exposure and showcases an important use case for digital assets beyond trading (i.e., payments and value transfer). Valuing Circle is not easy, given its the first public stablecoin issuer and therefore lacks comps relative to a pure FinTech play. Circle’s net take rate on the yield generated is < 40%, as it has to pay out the bulk of its revenue to its distribution partners (Coinbase and Binance among others) to continue growing its MC, and therefore the business is highly sensitive to short-term rates, which would likely decline in the face of a recession.
Amber International Holding Limited (AMBR) -
In March 2025, Amber Group’s digital wealth management platform, Amber Premium, went public on the Nasdaq under the new name Amber International Holding Limited (ticker symbol: AMBR).
This was achieved via a reverse merger with iClick Interactive, a U.S.-listed company, marking another significant milestone for the crypto industry as it allowed the company to access public markets without a traditional IPO or SPAC process. AMBR’s current MC is approximately $1B.
Stablecoin Growth
Stablecoin MC has increased nearly 15% YTD to ~$240B (with USDC and USDT holding ~80% of the total MC). This figure is comfortably higher than the 2022 previous all-time high (~$180B), which occurred in a near 0% interest rate environment and proves the product market fit for stablecoins as a method of payment and cost-efficient value transfer.
As stated above, stablecoin growth should lead to further on-chain yield compression and more private TVL deals. This can already be seen as borrow rates remain historically low at < 3% (see AAVE supply rate below). Why?
In crypto, borrow rates and crypto volatility are inherently correlated — i.e., no one will borrow at 10% on-chain unless they feel they can beat the cost of capital, which is generally possible when (i) asset prices are going up (not the case currently) or (ii) when good yield opportunities exist, which is the case today as we’re seeing a “mini DeFi Yield Farming Renaissance”. See: Berachain, Reservoir, Resupply.fi, and Perena all boasting stable yields > 10% due to incentives.
CONCLUSION
- Macro / BTC — We expect global financial conditions to continue loosening over the coming months, as countries impacted by tariffs print money to support their domestic economies. Given the historical correlation between an increase in global liquidity or M2 (money supply) and BTC price appreciation on a 3-month lag, we remain bullish on BTC.
- Altcoins — We remain bullish on high quality alts with strong fundamentals, such as protocols that are fee-generating and use those proceeds to buy back and burn their tokens — e.g., $HYPE. We intend to continue accumulating these select alts tactically.
- Stablecoins / DeFi — Between the significant growth of on-chain stablecoins YTD — increased capital supply — and the downward pressure on asset prices, we expect further on-chain yield compression. The caveat is that the on-chain yield market is cyclical, so when the market (specifically BTC) goes up, we expect mean reversion in the average supply rates (>10% APY) as traders borrow to take leverage.
-
The value of digital asset investments may fall as well as rise, and you may get back less than you originally invested. It is therefore important that you understand the risks involved before investing. This report represents RockawayX’s view at a point in time, and information included has been sourced from third parties, such as companies in RockawayX-managed portfolios. While these sources are considered reliable, RockawayX has not independently verified this information and makes no warranties regarding its current accuracy or suitability for specific situations. We may also take the opposite view/position from that stated in this report. This is because our view may change as facts or circumstances change.
This material constitutes general advice only and not personal financial product, tax, legal, or investment advice, and does not take into account the specific investment objectives, financial situation or individual needs of any particular person. We recommend consulting with your own professional advisers on these topics. Any mention of securities or digital assets is for illustration only and does not imply a recommendation or constitute an offer of investment advisory services. Furthermore, this material is not intended for use by current or prospective investors and should not be used as the basis for any investment decisions regarding funds managed by RockawayX. Any potential investment in RockawayX funds would be subject to documentation such as a private placement memorandum, subscription agreement, and other relevant materials, which should be carefully reviewed in their entirety. The investments or portfolio companies mentioned may not represent all investments made by RockawayX, and past results do not assure similar outcomes in future investments.
