By 2025, what macro factors will once again drive the cryptocurrency market?

Original Article Title: Crypto is Macro Again
Original Article Author: Marco Manoppo, Investor at Primitive Ventures
Original Article Translation: Ashley, BlockBeats

Editor's Note: The author analyzed how the crypto market will be affected by macroeconomic and policy changes, especially Trump's tax policy and inflationary pressure. With the Trump administration strengthening regulatory support for cryptocurrency, including CFTC's focus on fraud prevention and FDIC adjusting bank policies, it may promote market stability. In the coming months, the Stablecoin Act and macroeconomic factors may dominate the market direction.

The following is the original content (slightly reorganized for better readability):

Currently, the cryptocurrency market is no longer an isolated asset class. Once again, they are deeply intertwined with macroeconomic forces and regulatory changes. In the next 3-6 months, what will dominate the cryptocurrency market is regulation and macroeconomics, rather than the industry's microeconomics or developments.

Since the launch of the $TRUMP token, cryptocurrency has been steadily declining. The token was released on January 17, 2025, just a few days before Trump's second inauguration, triggering speculative sentiment but failing to sustainably boost the market.

Meanwhile, macroeconomic forces are also at play.

On February 1, 2025, President Trump imposed a 25% tariff on all goods imported from Mexico and Canada, a 10% tariff on Canadian energy exports, and an additional 10% tariff on Chinese imports. This move had an immediate impact on risk assets.

Since the introduction of these tariffs, the overall cryptocurrency market capitalization has dropped by about 13%, from $3.8 trillion to $3.3 trillion. Bitcoin itself hit a three-week low of $91,000 and then rebounded to $96,000, while Ethereum and other major cryptocurrencies experienced more severe declines, up to 25%.

Why Did the Crypto Market React to Tariffs?

Trade War Fear and Risk Aversion Sentiment

The threat of a global trade war has prompted investors to flee risk assets. Traditional finance (TradFi) investors see Bitcoin as a high-risk asset and are transitioning to safer assets like gold, bonds, and the US dollar. Typical risk-off trading is unfolding, and cryptocurrency is included in this category.

Inflation and Interest Rates Back in Focus

Tariffs have increased the cost of imported goods, potentially leading to a rise in inflation. If inflation remains high, the Federal Reserve may delay or cancel the expected interest rate cuts, reducing liquidity in the financial markets. Since Bitcoin does not generate income, higher interest rates make it less attractive compared to US Treasury bonds or even cash deposits.

This dynamic contrasts sharply with the low-interest, liquidity-driven environment of 2020-2021 when cryptocurrencies thrived. Therefore, macro trends have once again become a key driver affecting cryptocurrency performance.

Regulation and the Role of Traditional Finance

While tariffs and inflation have dominated the short-term outlook, regulatory changes are equally crucial. Global regulatory agencies are intensifying scrutiny of the crypto market, and the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have recently taken some industry-friendly measures, suggesting a more constructive regulatory stance in the US.

Simultaneously, traditional financial institutions (TradFi) are accelerating their adoption of cryptocurrencies, recognizing its potential as a diversified asset class.

· Matt Britzman of Hargreaves Lansdown points out that trade war fears triggered by tariffs usually dissipate quickly, but during this time, investors hedge through gold, Treasury bonds, and the US dollar.

· Similarly, Joel Kruger of LMAX Group notes that the market is not afraid of extreme tariff measures but is adapting to Trump's negotiation strategy.

This means that while short-term volatility is high, long-term investors may continue to accumulate Bitcoin and other cryptocurrencies on price dips.

What Might Happen in the Next 3-6 Months?

Cryptocurrency has once again become part of the macroeconomy. Cryptocurrencies are no longer independent of traditional market fluctuations. Economic policies, central bank decisions, and geopolitical events directly impact the performance of digital assets.

With inflation, interest rates, and trade policies driving the dynamics of the financial markets, digital assets are no longer disconnected from the broader economic environment. Institutional funds now view major cryptocurrencies as part of the traditional finance (TradFi) realm, meaning regulatory changes and global economic trends will shape the trajectory of cryptocurrencies.

Over the next 3-6 months, the market is expected to continue facing volatility as it digests tariff updates, Federal Reserve policy decisions, and upcoming regulatory measures.

The question is not whether cryptocurrency will decouple from the macroeconomy, but how it will respond to this new reality.

Currently, what truly matters are macro events and what Trump has said concerning regulation.

The market is reacting sharply to trade policies, rate expectations, and regulatory decisions, factors that may shape the industry's development path in the coming months.

Key Regulatory and Macro Developments Driving the Cryptocurrency Industry

Cryptocurrency Identified as a National Priority in the U.S.

President Trump signed an executive order designating cryptocurrency as a national priority and established the "Presidential Working Group on Digital Asset Markets" to create a regulatory framework and assess the national digital asset reserve.

The order protects fair bank access for self-custody and crypto firms, explicitly prohibits the issuance of a U.S. central bank digital currency (CBDC), and reverses the digital asset policies of the Biden administration, signaling a shift in the U.S. regulatory stance towards supporting cryptocurrency. The working group is led by David Sacks (Crypto Czar).

Impact on Cryptocurrency:

· Rejection of a CBDC launch in favor of private-dollar-backed stablecoins, which may benefit stablecoin issuers while limiting government-controlled alternatives.
· Industry expectations for a strategic Bitcoin reserve have not been met, but the assessment of a digital asset reserve suggests future government accumulation.

Regulatory Team Supporting Cryptocurrency

Trump has nearly completed the formation of his cryptocurrency regulatory team, nominating Jonathan Gould (Office of the Comptroller of the Currency OCC), Jonathan McKernan (Consumer Financial Protection Bureau CFPB), and a16z's Brian Quintenz (Commodity Futures Trading Commission CFTC).

These nominees all have cryptocurrency or financial regulatory experience, indicating their support for a market-friendly stance.

While the confirmation process in the Senate may take time, the Trump administration is working on developing a potentially more open regulatory framework for digital assets.

Impact on Cryptocurrency:

· Gould may push for a banking charter supportive of cryptocurrency, while the CFTC led by Quintenz may support blockchain innovation.
· This marks a shift in the U.S. regulatory attitude, especially towards regulating stablecoins and crypto banking operations, potentially leading to clearer and more favorable regulatory policies in the future.

19 U.S. States and Endowments Considering Bitcoin Investments

An increasing number of 19 U.S. states are considering legislation to invest public funds in Bitcoin. Some proposals allocate up to 10% of state funds to larger-cap cryptocurrencies.

Wisconsin and Michigan have already included Bitcoin in public employee retirement investment portfolios, with an additional 23 states actively debating similar proposals.

Meanwhile, U.S. endowments are also increasing their exposure to cryptocurrency as digital asset prices surge to new highs.

Impact on Cryptocurrency:

State-level Bitcoin investments could boost legitimacy, demand, and price stability, driving institutional adoption and accelerating regulatory clarity. If these laws pass, they will further integrate cryptocurrency with public finance, but legislative approval remains a key hurdle.

Tokenization Pilot Program

Acting CFTC Chair Caroline Pham is advancing a tokenization pilot program that will use stablecoins as collateral.

She is organizing a CEO summit with leaders from Coinbase, Ripple, Circle, and other major crypto companies to discuss this initiative.

Impact on Cryptocurrency:

· If this pilot program is implemented, it will help legitimize stablecoins in traditional finance, enhance liquidity in the derivatives market, and drive widespread adoption of tokenized assets.

· By integrating blockchain-based collateral into regulated markets, this program could set a precedent for future crypto-supportive policies under the CFTC's evolving leadership.

CFTC Shifts Focus to Fraud Prevention

CFTC Acting Chair Caroline Pham also announced a major restructuring of the agency's enforcement division, shifting the focus from "regulation through enforcement" to "fraud prevention."

This reorganization reduced the number of task forces, consolidating law enforcement work into two groups: the Complex Fraud Task Force and the Retail Fraud and General Enforcement Task Force.

Impact on Cryptocurrency:

By more explicitly focusing on preventing fraud rather than broad crackdowns, legitimate cryptocurrency companies may face fewer regulatory hurdles, thereby encouraging more institutional involvement and enhancing market stability.

Cryptocurrency "Rebanking"

FDIC Acting Chair Travis Hill announced a significant shift in the agency's cryptocurrency regulation, committing to reassess past guidance that discouraged banks from working with crypto companies.

As part of this reform, the FDIC released internal documents showing regulatory pressure on banks to sever ties with cryptocurrency.

Impact on Cryptocurrency:

· If the FDIC follows through on its pro-cryptocurrency reform, banks may more confidently engage with digital asset firms, thereby improving industry access to financial services.

· This shift could enhance liquidity, encourage institutional adoption, and lay the groundwork for a more balanced regulatory approach.

· However, the extent and pace of change will be determined by Senate hearings and ongoing political debates.

SEC's Newly Formed Cryptocurrency Task Force

SEC Commissioner Hester Peirce outlined the 10 key priorities of the agency's newly formed cryptocurrency task force, aimed at providing regulatory clarity to the crypto industry.

Key areas include defining the difference between securities and commodities, clarifying rules for crypto lending and borrowing, and creating a more feasible registration process.

Impact on Cryptocurrency:

· Clearer classification rules and registration pathways may encourage greater institutional adoption and compliance, while the agency's focus on fraud prevention is intended to build market confidence.

· However, due to ongoing litigation and policy reviews, true regulatory clarity may take some time to materialize.

Initial Formation of Stablecoin Regulations in the US

The US is moving towards stablecoin regulation, with two competing bills currently in play: the STABLE Act in the House of Representatives and the GENIUS Act in the Senate, proposing different frameworks but agreeing on stringent compliance measures.

Both of these bills support private, USD-backed stablecoins and prohibit central bank digital currencies (CBDC).

The main differences include:

· Regulatory Oversight (GENIUS allows states to regulate issuers until the market cap reaches $100 billion; STABLE allows states to opt out of federal oversight if state regulations meet the standards)

· Reserve Requirements (STABLE allows the use of treasuries, bank deposits, and central bank reserves, while GENIUS also includes money market funds and repurchase agreements)

· Consumer Protection (GENIUS focuses on transparency and enforcement, while STABLE requires a one-to-one reserve and prohibits algorithmic stablecoins)

Impact on Cryptocurrency:

· Stricter regulation could challenge Tether's dominance as both bills require monthly audits, asset segregation, and rigorous reporting, potentially forcing exchanges to delist non-compliant stablecoins, similar to the impact of the EU's MiCA.

· These laws would pave the way for the legalization of stablecoins, attracting institutional adoption while creating barriers for opaque issuers. If passed, they would provide clear guidance for stablecoin issuers, ensuring market stability and compliance.

Final Thoughts

It is clear that the cryptocurrency market is now deeply intertwined with the macro market. Currently, macroeconomic conditions and policies will drive price volatility in the coming quarters, rather than internal industry innovation.

While I previously mentioned Trump's supportive actions toward cryptocurrency, such as executive orders, pardoning Ross Ulbricht, and launching meme coins, which have fueled market optimism, many see these factors as mostly short-term optimizations and speculation-driven—what we truly need are long-term foundational catalysts to attract new capital from Traditional Finance (TradFi) correctly.

Regardless of what Trump says, U.S. government policies will affect traditional financial participants' sentiment toward cryptocurrency, thereby impacting broader market liquidity.

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