Strategic Navigation through Turbulence

Financial markets are navigating an exceptionally dynamic period, shaped by diverging forces: from escalating trade wars and sweeping tariff measures to transformations in both the private credit markets and the crypto sector. The recent Trump tariffs, with up to 54% on China, are triggering a global economic shock. At the same time, private credit has reached a record $2 trillion in AUM and crypto lending has seen remarkable 250% growth over the last two years.

📈 Market Update

A brief analysis on Bitcoin, Ethereum and Blockrise Fundamentals:

Bitcoin Analysis

Bitcoin recorded its third consecutive month of negative performance last month, declining by 4,80%. The downward trend has continued into April, with Bitcoin currently down 5,04%, though this represents a partial recovery from its monthly low of 9,85% reached during peak selling pressure from trade war concerns.

Global markets experienced substantial selling pressure, and it remains uncertain whether potential retaliatory measures from key regions (including Asia and the EU) have been fully priced into current valuations. Despite these macroeconomic headwinds, underlying on-chain metrics indicate fundamentally healthy network conditions, with significant loss realisation in the rearview. Notably, the growing base of long-term Bitcoin holders suggests strengthening demand fundamentals, potentially signalling accumulation at current price levels.

Ethereum Analysis

Ethereum has now recorded five consecutive months of negative returns, with its current valuation dipping below October 2022 levels. This stands in stark contrast to Bitcoin, which maintains a price point 3,5 times higher than comparative periods, demonstrating significant divergent market trajectories. Since the beginning of April, Ethereum has experienced further depreciation of -18,15%, compounding its underperformance. Notably, transaction fees on the network have reached their lowest levels since 2020, signalling a potential migration of activity to Layer-2 solutions built atop Ethereum's Layer-1 infrastructure. Despite this technological relationship and the fundamental utility these Layer-2 networks provide to the Ethereum ecosystem, Ethereum continues to exhibit persistent downward price pressure, reflecting challenging market dynamics for the protocol's valuation.

Fundamentals

Blockrise offers comprehensive care with its asset management strategy called "Fundamentals." This strategy involves managing assets in Bitcoin and Ethereum versus a euro position, reassessing and adjusting these positions monthly.

Fundamentals recorded a negative performance of -5,84% last month, primarily driven by Ethereum's significant underperformance. The market experienced a pronounced correction due to evolving trade tariff policies, which we leveraged as an opportunity to strategically enhance our cryptocurrency exposure during the interim rebalancing period.

After extensive evaluation of market conditions and asset performance characteristics, Blockrise has concluded that eliminating the Ethereum position represents the most prudent course of action. This decision reflects Ethereum's persistently downward volatility profile compared to other digital assets, coupled with Bitcoin's continued consolidation of market dominance as the preferred cryptocurrency. Consequently, Fundamentals will maintain exposure exclusively to Bitcoin and the Euro going forward, optimising for risk management and strategic clarity.

Blockrise executed a comprehensive rebalance, increasing the Bitcoin allocation by 12,5% to reach 92,5% of the portfolio assets, while simultaneously reducing the Euro position to 7,5% and completely selling the Ethereum position.

🗞 Crypto Highlights

An overview of the most notable events in crypto:

Influence of tariffs on Crypto

As the global trade war intensifies, investors are shifting their strategies toward capital preservation. This often involves selling high-performing equities to lock in profits and reallocating capital to safer assets such as bonds. Beyond traditional markets, the cryptocurrency sector is also feeling the impact of escalating tariffs. While crypto assets are not directly subject to tariffs, with the exception of U.S.-based miners, they are still being affected. A likely explanation is that, in times of uncertainty, investors tend to offload their riskiest assets across the board, including digital currencies.

It will be interesting to observe which asset classes demonstrate the most resilient recovery. Our previous market research report, “Getting Off Zero: The power of Bitcoin allocation,” suggests that Bitcoin, in particular, has shown strong recovery potential following broad-based market disruptions.

Mining industry struggles with their supply chain

U.S. cryptocurrency mining operations currently face substantial operational challenges due to supply chain constraints, specifically concerning equipment procurement from their primary Chinese suppliers amidst evolving regulatory requirements.

Bitmain Technologies' shipments to U.S. clients are experiencing extended processing times as Customs and Border Protection implements enhanced verification protocols. These measures were initiated following the U.S. Commerce Department's January regulatory decision regarding Bitmain's AI subsidiary, Xiamen Sophgo Technologies. At present, all Bitcoin mining equipment arriving via air freight undergoes thorough customs examination.

Bitmain, as the industry's leading equipment manufacturer, maintains strategic partnerships with several distinguished U.S. mining entities, notably including established market leaders MARA Holdings and CleanSpark.

🏦 Macro Economy

An overview of relevant global economic events:

Private credit expansion

The private credit market has experienced significant expansion over the past decade, with assets under management increasing from $500 billion in 2013 to $2 trillion in 2024. This growth has been predominantly driven by direct lending activities, supported by both the strategic withdrawal of banks from leveraged lending and the continued expansion of private equity. In response to the current market environment, private equity firms are diversifying their strategies to include asset-based financing structures. Furthermore, the private credit sector is attracting a broader range of investors, including substantial capital inflows from retail and insurance sectors.

The sector's evolution has led to increased market participation and enhanced competition. This transformation presents substantial opportunities for established private-credit funds, asset management firms, and insurance providers. While traditional banks navigate regulatory requirements and heightened competition from non-bank institutions, McKinsey's analysis indicates that the addressable market for private credit reaches approximately $34 trillion.

Similarly, the cryptocurrency sector is experiencing comparable growth in lending activities amid increasing regulation. Financial institutions are actively developing USD-pegged stablecoins with yield-generating capabilities. Decentralised finance lending has demonstrated remarkable growth, increasing by 250% since 2022, following a period of market share decline during the previous bull market. Established financial institutions now offer Bitcoin collateralised lending solutions, enabling investors to access liquidity while maintaining their Bitcoin positions. This expansion of cryptocurrency lending services is expected to demonstrate correlation with traditional private credit market growth.

Investors brace for tariff wars

The Trump Tariffs have consistently been an important topic as the reactions on the announcements have been volatile. The announcements itself also had their fair share of last minute iterations, causing discrepancy between expectations and outcomes. After many announcements, Trump unveiled its tariff plan which threatens to ignite a full-blown trade war. For example, new tariffs imposed for China total 54%, the European Union will have 20% additional tariffs, and Japan another 24%. These additional costs, will likely cause a major economics shock, where countries and industries have to re-evaluate their global strategy and cost functions. The EU is already preparing emergency packages that support parts of its economy that will be hit the hardest. Finally, the next big topic will be the response of the big players, such as China, Japan, and EU.