Hassan Maishera
Binance, the world’s leading cryptocurrency exchange by daily trading volume, has published its report on the ongoing tariff war and how it is affecting the crypto market.
The Tariff War So Far
In the report titled The 2025 Tariff Resurgence, Binance Research revealed that trade tensions escalated further on April 2, when the U.S. announced sweeping reciprocal tariffs — marking “Liberation Day” as the latest inflection point in the global trade war.
The White House announced a new 10% blanket tariff on all imports to the U.S., reversing decades of trade liberalization. This baseline levy took effect on April 5.
Notably, China will face an additional 34% tariff, raising its effective rate to 54% when combined with the existing 20%. Other targeted rates include 20% on European Union goods, 24% on Japan, 46% on Vietnam, and 25% on auto imports. Canada and Mexico were notable omissions, having already been hit with 20% tariffs back in February.
This resulted in U.S. trading partners responding in kind. By mid-February, several countries targeted by early tariffs had already announced retaliatory measures. Canada, after failing to secure delays on U.S. duties, imposed a 25% tariff on all U.S. imports. China, which had also responded early, escalated further on April 4 by announcing a sweeping 34% tariff on all U.S. imports. The European Union has already signaled that a response is imminent, while several other major economies have outlined plans to retaliate against the latest U.S. tariffs.
Together, these developments have raised U.S. import taxes to levels not seen since the Smoot- Hawley Tariff Act of 1930, which imposed sweeping tariffs on thousands of goods during the Great Depression. According to available data, the average U.S. tariff rate has climbed to around 18.8%, with some estimates placing it as high as 22%, a sharp rise from just 2.5% in 2024.
Crypto Market Loses $1 Trillion Amid Trade War
The financial markets took a hit due to the ongoing trade war. According to Binance Research, market sentiment has turned decidedly cautious, with investors reacting to the tariff announcements in classic 'risk-off' behaviour.
Thanks to this latest development, the total crypto market capitalization has dropped an estimated 25.9% from January highs — wiping out ~$1 trillion in value — underscoring its sensitivity to macroeconomic instability.
Crypto assets have moved largely in lockstep with equities, with both experiencing cooling demand, broad selloffs, and a slide into correction territory. In contrast, traditional safe havens like bonds and gold have rallied, with gold breaking successive all-time highs as investors seek shelter from growing macroeconomic uncertainty.
Bitcoin (BTC), the leading cryptocurrency by market cap, has dropped 19.1%, with most major altcoins matching or exceeding that decline. Ethereum (ETH) dropped over 40%, while high-beta categories like Memecoins and Artificial Intelligence (AI) have plunged more than 50%. The broad selloff has erased early-year gains across much of the crypto market, pushing even BTC into negative territory year-to-date (YTD) as of early April — despite its strong performance in 2024.
Binance Research predicts that a prolonged trade war could continue to weigh on capital flows and dampen demand for digital assets in the near term. As a result, capital that might have entered crypto is either staying on the sidelines or shifting into perceived safe havens like gold.
Trade War Increases Market Volatility
The Binance Research report added that the ongoing trade war increased volatility in the crypto market. BTC has experienced several violent price swings in recent months, including one of its largest single-day drops since the 2020 COVID crash. When Trump surprised markets in late February with plans to impose tariffs on Canada and the EU, BTC briefly dropped around 15% over the following days, coinciding with an uptick in realized volatility. ETH followed a similar path, with its 1-month volatility rising above 100%, up from prior ranges near 50%.
In this high-uncertainty macro environment, elevated volatility is likely to persist — both as part of a broader risk-off dynamic and as the potential for further trade war escalations lingers. For markets to stabilize, a key condition will be clarity — or confidence that the bulk of tariff-related announcements and policy shifts are behind us.
BTC and Correlation with Equities
In the report, Binance Research pointed out that the recent trade war–driven risk-off episode has impacted BTC’s correlation profile with both equities and traditional hedges. Binance Research stated that,
“While tariffs were first mentioned on January 23, the initial market response was fragmented — BTC and equities moved somewhat independently, pushing their 30-day correlation to a local low of –0.32 by February 20. However, as the trade war rhetoric intensified and risk-off sentiment deepened into March, that figure climbed to 0.47, reinforcing BTC’s short-term alignment with broader risk sentiment. In contrast, BTC’s correlation with traditional hedges like gold weakened sharply. What was previously a neutral-to-positive relationship turned sharply negative, with the 30-day BTC–gold correlation dropping to –0.22 in early April.”
The shifts suggest that macroeconomic factors — particularly trade policy and rate expectations — are increasingly driving crypto market behavior, temporarily eclipsing underlying demand dynamics. Whether this correlation structure persists will be key to understanding Bitcoin’s longer-term positioning and diversification value.
Furthermore, Bitcoin’s recent response to the macro and liquidity shocks underscores its current positioning as a risk asset. Bitcoin’s correlation with traditional markets tends to rise during acute stress but fades as conditions normalize.
Binance Research pointed out that since 2020, BTC’s 90-day correlation with equities (~0.32) and gold (~0.12) has fluctuated but never sustained deep alignment — reinforcing its distinction from conventional asset classes.
Even in the wake of recent tariff announcements, BTC has shown some signs of resilience, holding steady or rebounding on days when traditional risk assets faltered. Separately, long-term holder supply has continued its upward trajectory — reflecting conviction and limited capitulation during recent volatility. This behavior suggests that, despite short-term swings, BTC may still have room to reassert a more independent macro identity.
What Next for the Crypto Market?
According to the Binance Research team, crypto markets face a complex macroeconomic landscape dominated by trade policy risks, stagflationary pressures, and fractured global coordination.
If global growth continues to weaken and no clear narrative takes hold for crypto, investor sentiment may erode further. A protracted trade war would test the industry's resilience — potentially drying up retail flows, slowing institutional allocation, and curbing VC funding.
If inflation runs hot while growth falters, the Fed’s response will be pivotal: a pivot to easing could fuel a crypto rally through renewed liquidity, while a hawkish stance may keep pressure on risk assets. Progress or setbacks in tariff negotiations will likewise sway investor sentiment in either direction.
