F5 Crypto Fund | Market Report on the effects of US tariffs
In recent days, the new US tariff policy has turned out to be more unconventional than expected – causing considerable turbulence on capital markets. This time, however, the slump in share prices exceeds the drops in crypto markets.
The FTSE 100 lost –6.1% this month, the German DAX even –10.7%, while the crypto bellwether BTC is down –4.9%. Is thus Bitcoin fulfilling its promise as a safe-haven asset? Or would it need to rise, like gold?
In short: What are the main consequences of the novel US tariff policy, how does F5 Crypto assess them, and what actions pertain to the F5 Crypto Fund?
What followed the US tariff announcement
Auslöser der aktuellen Verwerfungen in den Kapitalmärkten ist zweifelsohne die Verlautbarung der USA, Zölle gemäß einer mehr als erratisch anmutenden Formel [1] zu erheben. Insbesondere das Ausmaß der Zölle hat die Markterwartungen nach den bisher verlautbarten Drohungen nochmals deutlich übertroffen.
- Naturally, this has led to a slump in share prices, especially in countries with strong exports and those with a large trade surplus with the USA.
Whether the particularly high tariffs for Lesotho are intended to boost diamond production in the USA or those for Vietnam represent a strategic change of direction from AI leadership to a leading role in low-cost shoe production, may be entertain social media – it is irrelevant for the economic impact. What matters is that trade barriers to value creation in international business models are just that: Barriers. And the stock markets price them in.
The justification of US tariffs as “medicine to fix something” is not convincing: if the long-term positive consequences would more than offset the short-term distortions, share prices would rise. We see no reason to assume that mispricing is currently occurring here. - Yields on US government bonds have not fallen. This fact is rarely commented on, but it is of crucial importance. For 80 years, increased international uncertainty almost invariably has begotten rising demand for the “safe haven” of US government debt –
Die Renditen auf US-Staatsanleihen sind nicht gefallen. Dieser Umstand wird wenig kommentiert, ihm kommt jedoch entscheidende Bedeutung zu. Denn erhöhte internationale Unsicherheit führte in den letzten 80 Jahren fast zwangsläufig zu steigender Nachfrage nach dem “sicheren Hafen” der US-Staatspapiere – even if the uncertainty was triggered by a rating downgrade of the USA itself, as in 2011
So the US bond market for the first time has reacted less in line with its historical pattern and more in line with that of developing countries. A tangible expression of the markets’ starting to doubt the value proposition of US debt payments. - Crypto markets have fallen – but largely not now.
Sudden attention to red charts is steering investor attention to year-to-date returns, suggesting misleading conclusions: Yes, virtually all crypto assets are down this year so far. However, bear in mind:- At the end of 2024, most major cryptocurrencies were chasing one all-time high after another. A price 25% below the all-time high is not a catastrophe, but still a price that skeptics declared unrealistically high only a few years ago. It is also a typical fluctuation even during a growth phase.
- Importantly, the majority of these declines were not due to the current trade dispute: Bitcoin fell from €90,000 to €76,000 in Q1 2025, but only lost €5,000 as a result of the latest US announcements – on Sunday, when stock markets were unable to react – to trade up €1,500 yesterday.
- Gold has risen – but not now.
Gold is currently enjoying a lot of attention again – and deservedly so – as the classic safe haven. Nevertheless, the increase in value of over +50% in the last one and a half years masks the fact that the gold price has also fallen since the beginning of the month from almost €2,900 to yesterday’s closing price of just over €2,700.
So, then, are cryptocurrencies safe-haven assets, or not?
What does this imply for crypto markets?
To answer this question, choosing the right time perspective is quintessential.
- In the short run, critics point to price declines in crypto assets simultaneously with stock markets and point out that this means a positive correlation. Not a hedge.
Leaving aside that smaller losses do offer some protection for a portfolio, this is of course correct – in the short term. As mentioned, gold has also fallen this month – yet nobody seriously denies the golden metal’s character as a financial hedge and safe haven in times of crisis. - In the long run, Bitcoin and gold share the fact that their ability to store of value is highly independent of the legal relationships that establish ownership of company shares (stocks) or debt (bonds). Ownership on the basis of a state-sanctioned legal claim is necessarily subject to the whims of the legal system – and thus also of the government in office. A recent European example? From Cyprus, with love. [2]
As the value of long-standing investment vehicles such as US government bonds becomes suspect, the attractiveness of alternatives that are not primarily dependent on legal claims increases. Gold and cryptocurrencies rely on the power of disposal.
This fact is currently being highlighted in the USA with particular publicity: The creation of the Strategic Bitcoin Reserve on March 6th explicitly treats Bitcoin as a reserve currency!
How does the F5 Crypto Fund act in this environment?
As an actively managed crypto portfolio, the F5 Crypto Fund is responding to fundamental changes at all times. However, it is just as important not to react to fluctuations when there is no clear mispricing in the market.
Our decision to sell individual crypto assets or to reduce the investment ratio does not depend on the returns of the last few hours, but on expectations for the coming days, weeks and months.
Despite the corrections in the first quarter and the now significantly increased uncertainty in capital markets due to the new US tariffs, the management of F5 Crypto does not yet see sufficient reason to conclude the crypto boom has come to an end. Therefore, the F5 Crypto Fund remains fully invested.
As always, crypto markets are volatile and often still inefficient. Active management is therefore more important in this asset class than, for example, in the impressively efficient equity market. Nevertheless, our investment strategy’s cornerstone is to never give in to hectic activism triggered by short-term distortions: the F5 Crypto Fund is fundamentally designed to ensure solid long-term exposure to the crypto market – safely and through all cycles.
Regarding the long term, decentralized crypto assets have been significantly strengthened by current developments, not only due to the US trade war.
Notes
A German version of this article exists.
All Return numbers are based on daily close prices in € from CoinMarketCap and were calculated in GNU/R.
Endnotes
[1] A noteworthy aspect of the announcement lies in the fact that it cites 5 academic papers (4 of which have been peer-reviewed) – not a matter of course for many countries’ announcements of economic policies.
[2] In 2013, Cyprus closed all banks, not to re-open them before a haircut was levied on all deposits.