Tariff ping-pong inbound
Are you already sick and tired of tariffs? Well, tough luck. Tariff ping-pong is coming, and our base case is that this will enforce choppy conditions throughout April. Since the inauguration, tariffs back-and-forth have been the number one source of market volatility, and with Liberation Day coming tomorrow, nothing suggests that this trend is coming to a halt. We don’t expect a sense of certainty and clarity post-April 2, as we expect responses, negotiations, sudden turnarounds, and surprises throughout April. This is poised to generate a vividly fluctuating market sentiment, in which we expect BTC to extend its consolidation and hover in the $88k to $75k range.A fool’s gold?
It’s frustrating to see gold thrive in this environment while BTC tags along with any other risk asset. However, that’s the way of the market. Gold is a time-tested safe haven, while BTC is a young asset facing its first significant wave of institutional adoption. In our opinion, the gold reflex from the market is fully rational, but it gives an informational edge for patient BTC accumulators. Just like gold, BTC is scarce with globally efficient pricing and strong liquidity. Unlike gold, nation-state accumulation in BTC is in its very early days. Both assets are well equipped to handle increased global friction gracefully, but BTC sits far earlier in its adoption cycle. Strategic bitcoin reserves are a fresh new narrative and formal processes and time will be needed to materialize and subdue the ongoing perception of BTC as a risk-on vehicle.Strategic reserve news inbound?
Amidst this hectic news cycle, headlines are easily forgotten. The strategic bitcoin reserve is one such thing. The executive order issued on March 6 gave federal agencies 30 days to complete evaluations and submit reports detailing their authority to transfer funds to the SBR. That deadline is hit on April 5. The transparency following this deadline is unclear, but we might see large on-chain transactions and consolidation to the U.S. treasury department and the early soft launch of the SBR. Did the DOJ sell the 69,000 BTC they were granted permission to sell during Christmas? Does the U.S. government hold more coins than the market is aware of? We know the SBR is designed as a hold and potentially buy vehicle—any balance surprise to the upside tells the market of more BTC locked away from the market in the years to come, which is a positive.We also know that BTC seized with identifiable victims will be returned. Many news sources cite U.S. BTC balances of 200k BTC. This creates a false impression, as 94,000 BTC is set to be returned from the U.S. government to Bitfinex. We expect these coins to be returned between the first (April 5) and second (May 6) executive order deadline. While it should be clear to any participant that these coins belong to Bitfinex and that Bitfinex intends to sell 80% of the coins in an 18-month buy-and-burn process for LEO, the market has a peculiar tendency to forget and overreact. Thus, a plausible Bitfinex transfer is well-equipped to create a predictable but unnecessary sell-off worth buying. We expect no details on budget-neutral acquisition strategies following the 30-day deadline, but expect them to come in proximity to the May 5 deadline. That’s Scott Bessent’s deadline for delivering an evaluation of the legal and investment considerations for the reserve. Another crypto summit could happen in early to mid-May, re-drumming up excitement as tariff headlines gradually taper.Beyond the headlines
Crypto traders remain largely apathetic. Funding rates have not averaged at or above neutral levels for 69 days, and CME yields have plummeted to 5%. Open interest on CME is at 11-month lows, and in the offshore market, it is at 6-month lows. Short-term skews are at 18-month highs as traders seek protection.The chop has materialized in passivism, which over time may exhaust sellers. While near-term headlines justify this defensive structure, long-term fundamentals favor spot accumulation. After selling the inauguration, I’ve gradually added exposure in the lower 80s and higher 70s. I intend to maintain this strategy and be fully allocated by the end of the month, as I expect a positive feedback loop in the market once the worst of tariffs are fully digested in the market, and focus again may expand to strategic bitcoin reserves and eventual rate cuts by the Fed.
