Week by numbers
The past week has seen a downward trend in the crypto market. The price of the largest cryptocurrency, Bitcoin, fell by around 5%, while the second-largest, Ether, dropped approximately 11%. The total market cap of the rest of the crypto market (excluding major stablecoins) declined by around 13%.
As is typical during a downturn, Bitcoin price held its ground better than the rest of the market, which led to a rise in Bitcoin dominance by over 2%. For the same reason, the ETH/BTC ratio dropped about 7% this week.
Among the tokens available on Kvarn X trading platform, the steepest weekly declines came from JUP (-32%), ENA (-29%), and IMX (-27%). One of the few gainers in an otherwise bearish week was the crypto veteran EOS (+38%).
Tariffs Shake the Markets
The biggest news this past week was the announcement of new tariffs by the United States on Wednesday, April 2, 2025.
On a day pre-named as “Liberation Day”, U.S. President Donald Trump unveiled tariffs on all major U.S. trading partners. The tariffs varied by country, starting from 10% and in some cases exceeding 50%.
Although tariffs were expected, their magnitude surprised many, and some confusion arose over how the country-specific rates were determined. Some have speculated on social media that the tariff levels were based simply on trade balance calculations between countries.
At the time of writing, the immediate market reaction appears unambiguously negative. Stock futures suggest a sharp drop in equity markets on Thursday. Some analysts have even described the policy implications as an outright global recession.
Despite the dramatic response to the news, we refrain from drawing far-reaching conclusions just yet. Yesterday’s tariff announcement can be seen as a dramatic opening move in U.S. trade policy, leaving many questions still open.
How different trade partners will respond remains yet to be seen. Some may try to negotiate with the U.S., while others may respond with reciprocal measures and escalation. Central banks are also likely to step in next, reacting to the new trade landscape.
There is clearly a high level of uncertainty and anxiety in the investment markets. For now, we don’t find it justified to amplify these fears by painting excessively grim scenarios.
In recent weeks, we have already pointed out that both crypto and stock markets are in a weekly downtrend, despite daily fluctuations. This observation has been a reason to manage risk early on. If readers have followed this approach, the latest tariff news shouldn’t necessitate any drastic new actions.
The coming days will be particularly interesting in terms of both market movements and responses from U.S. trade partners. We’ll revisit these developments next week when, hopefully, the picture will be clearer than today's (Thursday, April 3, 2025) news cacophony.
BTC Resilient Amid Market Turbulence
As highlighted in several past newsletters, Bitcoin has held its ground surprisingly well during early 2025. The recent tariff news and market reaction have further strengthened this interpretation.
If we take Nasdaq 100 E-mini futures, currently being traded, as a real-time indicator of the stock market, they are now at the same level they were in early September 2024.
At that time, Bitcoin’s price was around $58,000. In other words, while tech indices have dropped back to their September 2024 levels, Bitcoin price is currently almost 50% higher than it was back then.
This is quite surprising behavior for an asset often dubbed, not without reason, as a “leveraged Nasdaq.”
To avoid cherry-picking favorable timeframes, let’s also look at the period since November 6, 2024, when Donald Trump's election win was confirmed and the likelihood of these new tariffs increased significantly.
Since that point, Nasdaq futures have declined by about 7%, while Bitcoin is up roughly 20%.
If you had asked experienced crypto traders, “What happens to Bitcoin if Nasdaq futures drop 7%?”, many would have likely predicted a 10–20% decline in Bitcoin. It’s therefore striking to see how resilient Bitcoin has been in a risk-off environment.
Of course, we must be cautious not to overinterpret this. The observed timeframes are relatively short, and in the first example, Bitcoin was starting from a relatively weak position compared to equities.
We also have no reason to assume the current market downturn has bottomed out. It’s best to assess relative performance after the full extent of the decline is clear. It’s still possible that crypto’s deepest drop would still be ahead.
BTC and Stocks: Decoupling?
Even with these caveats, we must entertain the possibility that this weakening correlation between Bitcoin and the stock market could be an early sign of decoupling.
Such Bitcoin-stock market-decoupling is often seen as the “Holy Grail” of Bitcoin investing. If Bitcoin’s price movements were to diverge from equities, it could offer true portfolio diversification—combining uncorrelated returns with high return potential.
Some envision Bitcoin in this case as a mix of gold’s uncorrelated behavior and tech stocks’ growth upside.
Such an asset would be a dream for any investor looking to optimize their risk-return ratio, and would make Bitcoin an attractive asset for virtually any portfolio.
So far, Bitcoin’s price has strongly correlated with equities, and the expected diversification benefit has largely been absent.
If decoupling were to happen, it might start just like we’re seeing now—with weakening correlation, fading high-beta behavior, and Bitcoin’s relative strength in a downtrend. In time, this might even lead to inverse correlation. If decoupling is truly beginning, it might look exactly like what we’re seeing now.
In conclusion, we reiterate our earlier caution. It is entirely possible that Bitcoin’s relative strength is just a matter of differences in timing, and that next week we’ll again see it trading like a “leveraged Nasdaq.”
Still, Bitcoin’s recent performance in a risk-off environment defies our previous expectations, and it’s worth keeping an eye on.
With that, we leave the reader to observe the intriguing situation in the crypto market, as broader investment markets brace for the effects of the new U.S. tariff policy. We’ll return next week with another edition of Kvarn Pulse, so stay tuned!
