Source: TradingView, CNBC, Bloomberg, Messari
Bitcoin is a Chameleon
Rory McIlroy won the Masters, and that is really bad for the price of Bitcoin.
Ok, that’s not true. But there was probably a cohort of people who read this who were genuinely interested in how I was going to tie Rory’s performance this weekend to the price of Bitcoin. And I probably could have come up with a lot of nonsense correlations that explain why Rory’s win would be positively or negatively correlated to Bitcoin. Because that’s essentially what Bitcoin has become – a chameleon that changes its narrative whenever someone feels like telling a story. One day it’s digital gold, the next day it’s high beta Nasdaq, the next day it’s CDS protection against banks and governments, and the next day it’s purely a trading vehicle. Today, BTC appears to be nothing more than an after-hours trading vehicle for macro funds.
I left Wall Street in 2014 after an almost 15-year career for precisely the same reasons that I’m frustrated with crypto right now. In 2013, I specifically said to a colleague, “I love doing analysis on companies, but analysis no longer matters in a market that is 100% driven by the Fed and other government agencies’ actions.” I left my hedge fund job shortly thereafter. The desire to go back to real analysis, without government involvement or intervention, is a big reason why I fell in love with digital assets and have been striving toward legitimizing the asset class through new valuation techniques for almost a decade. For a long time, digital assets really did feel isolated from the rest of the world’s economic and financial distractions.
Sadly, I turned to a colleague last week and said, “I love doing analysis, but analysis no longer matters in a market that is 100% driven by Trump headlines and macro funds.” It won’t last forever, but that’s precisely what Bitcoin has become. Amidst one of the most volatile weeks in history for equities, currencies, and fixed income, BTC had no identity. I can’t remember another time when BTC and the Nasdaq traded lockstep like this, even when the temporary tariff pause led to the S&P 500 posting its biggest daily gain since 2008, jumping 9.5%, and the Nasdaq 100 soaring 12%. BTC has become nothing more than an after-hours trading vehicle for large funds for the past month. Outside of a
VERY short-lived outperformance, you wouldn’t be able to distinguish BTC from the equity market. And that’s pretty sad.
Source: TradingView
Fortunately, this hasn’t been true for the entire digital assets market. Sure, the rest of the market isn’t perfect and definitely takes strong cues from Bitcoin, but there was real differentiation last week.
For example, ETH fell -7% last week, while Solana (SOL) rose +10% (as did some other Layer-1 smart contract platforms like AVAX). That’s partly a reflection of how hated ETH is and that it is being used as the short-leg for just about every crypto-native long/short fund. But it’s still dispersion, which is healthy. We also finally saw some differentiation within DeFi, as a few of the decentralized exchanges (DEXs) that have been printing revenue during the volatility handedly outperformed the rest of the market (HYPE +40%, GMX +42%, AERO +34%, RAY +24%). Total exchange volumes bounced, with volumes up 34% week-over-week to $1.35 trillion in total volumes. The growth was led by decentralized derivatives volumes (up 99% WoW). Hyperliquid and GMX outperformed, with volumes up 100% and 142%, respectively. But some of the best performers for the week came from the memecoin sector and the AI sector, which indicates that when risk appetites return, some traders and investors are still going to grab the highest octane tokens they can find simply.
Source: Artemis and Arca Internal Calculations
Hopefully, the divergence of certain sectors and tokens is a sign of better markets ahead. But the macro backdrop is likely to continue to drive price action. Trump and his team are still creating high volatility with their on-again, off-again tariff talk. At the same time, the Fed reiterated what we already knew – that they’re not cutting rates yet but they also will step in to support markets if they really break (I’d say a 50 bps move higher in the 10-year, while swap spreads are widening and the dollar is crumbling IS a sign of things breaking, but that’s just me).
The bad news for those who want lower headline volatility is that
Trump told everyone to buy the morning before equities rallied over 10%. He was right... very right. And that just means even more whipsaw price action every time he says something, as the market will hang on his every word.
Stablecoins as Strategic Infrastructure in a New Tariff Regime
Recent analysis of tariff impacts on cross-border payments reveals significant opportunities for stablecoins to emerge as critical financial infrastructure. With Tether now ranking as the 7th largest holder of U.S. Treasuries globally, stablecoins are positioned to address specific friction points created by the administration's universal tariffs while supporting essential trade flows. Tariffs can disrupt traditional payment systems, and stablecoins offer strategic alternatives for businesses navigating the new trade landscape. Stablecoins can be a powerful countervailing force here, which Treasury Secretary Scott Bessent acknowledged at the March 7th crypto roundtable at the White House, in which he said, “We are going to keep the U.S. the dominant reserve currency in the world, and we are going to use stablecoins to do that.”
Tariff-Induced Payment Friction
Traditional banking channels face substantial disruption through increased compliance requirements, extending settlement times from hours to weeks. Financial institutions must now verify tariff payments before processing transactions, creating cascading delays throughout supply chains. Currency conversion inefficiencies are exacerbated as tariff-driven trade tensions increase FX volatility, widening spreads and raising hedging costs. Additionally, geopolitical strain from reciprocal tariffs has led to enhanced scrutiny of payment corridors, with some routes facing outright restrictions.
Research indicates these disruptions significantly impact industries reliant on efficient cross-border commerce. Manufacturing supply chains spanning multiple jurisdictions experience compounding delays as payments navigate increasingly complex compliance hurdles. Commodity traders face varying settlement timeframes across markets, complicating cash flow management. Small and medium enterprises, lacking the resources to navigate these complexities, bear disproportionate costs.
Stablecoins as Infrastructure Solution
Written by David Nage, Portfolio Manager at Arca
Stablecoins offer a compelling alternative by enabling direct settlement without intermediary delays. Rather than replacing tariff compliance, they effectively separate payment settlement from compliance processing. This separation allows tariff payments to occur in parallel with commercial transactions rather than as blocking steps.
The result is maintained trade flow velocity despite increased regulatory complexity. Tether's position as a major Treasury holder underscores this shift, with $33.1B in holdings, exceeding the ownership of countries like Canada, Taiwan, and Mexico. This transforms stablecoins from crypto-native tools to legitimate financial infrastructure with nation-state scale influence. The $144B Tether market cap creates a direct transmission mechanism between crypto markets and sovereign debt, fundamentally altering global financial architecture.
Strategic Business Applications
Specific business cases demonstrate practical applications. A U.S. electronics manufacturer with suppliers in tariff-affected countries can maintain consistent 24/7 settlements via stablecoins while handling tariff compliance separately, reducing payment uncertainty. Commodity traders facing retaliatory tariffs in export markets can simplify treasury operations by receiving payments through a unified stablecoin system rather than navigating dozens of banking relationships with varying settlement times. Trade finance for small importers becomes more accessible as stablecoin-based platforms reduce the overhead costs associated with tariff compliance documentation.
Industry data supports these advantages, with settlements occurring in minutes rather than days and potential cost reductions of up to 80% compared to traditional banking channels. Immutable blockchain records provide transparent documentation for both payment and compliance purposes, addressing regulatory concerns while improving efficiency.
Tokenized Compliance Services
A new category emerging at the intersection of regulatory technology and blockchain is tokenized compliance services. These platforms specialize in automating tariff classification, duty calculation, and compliance verification, as well as issuing on-chain attestations that can be attached to stablecoin payments. These services streamline the entire process by providing cryptographic proof of tariff compliance that travels with the payment.
This sector creates a bridge between traditional trade compliance providers and blockchain payment infrastructure, potentially disrupting established customs brokers and compliance consultants. The integration of machine learning for tariff classification with blockchain-based verification creates powerful efficiency improvements for businesses navigating complex duty structures. Projects like Chainlink's CCIP (Cross-Chain Interoperability Protocol) are creating frameworks for verifiable credentials and attestations on blockchains.
How It Could Work in Practice
Here's a concrete example of how such a service might function:
- A U.S. importer needs to bring in electronics components from Taiwan
- The compliance service would:
- Use ML to analyze product specifications and determine correct HTS code classification
- Calculate applicable duty rates based on current tariff schedules
- Create a cryptographic attestation that this analysis was performed
- When the importer sends a stablecoin payment to their supplier, this attestation token is attached
- Customs authorities can verify the attestation without needing to re-analyze the entire transaction
This creates an "audit-ready" payment with compliance built in, rather than treating it as a separate process.
Forward Outlook
With tariffs likely to persist and expand, stablecoins are positioned for accelerated institutional adoption. Their role in maintaining economic velocity while governments implement new trade frameworks provides essential flexibility during structural adjustment periods. Regulatory acceptance appears increasingly likely as stablecoins demonstrate concrete utility in supporting legitimate commerce rather than circumventing compliance requirements.
Developing stablecoin capabilities should be considered a strategic priority for businesses engaged in international trade. Benefits include treasury flexibility during currency volatility, reduced settlement delays, and simplified compliance documentation. While not eliminating tariff obligations, these systems provide operational resilience during trade policy transitions.
As cross-border payment friction increases, stablecoins offer a pragmatic solution bridging traditional finance and blockchain efficiency. Their emergence as substantial players in Treasury markets further legitimizes their role in the global financial system, creating a new infrastructure layer addressing specific pain points in the tariff-affected trade landscape.
