Crypto Update | Could the Trump Administration Lead to a 'New World' for ETFs?

Summary

Markets Daily Crypto Roundup: Could the Trump Administration Lead to a 'New World' for ETFs?

Released on February 11, 2025, by CoinDesk

In this episode of Markets Daily Crypto Roundup, hosted by Jen Senazi, CoinDesk delves into the latest developments shaping the crypto markets, with a particular focus on the potential impact of the Trump administration on cryptocurrency Exchange-Traded Funds (ETFs). Joining Jen is Ben Emmons, founder of FedWatch Advisors, who provides expert insights into institutional investment trends, regulatory environments, and broader economic policies influencing the crypto space.

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1. Market Overview

The episode opens with a discussion on the current state of the crypto markets. Ben Emmons highlights the subdued activity in Bitcoin, serving as a barometer for market risk sentiment. At [00:00], Emmons notes:

“A significant amount of institutional investors are starting now coming into the crypto market, really embracing the ETF because it's the regulated vehicle...”

Jen Senazi observes the stable Bitcoin price, mentioning it was "under $97,000" at the time of recording, setting the stage for a conversation about market dynamics and investor behaviors.

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2. The Rise of Crypto ETFs

A central theme of the discussion revolves around the burgeoning interest in crypto ETFs. Emmons explains that the current administration has fostered a more favorable regulatory environment for these financial instruments compared to previous administrations. At [03:40], he states:

“It seems to be much more favorable regulatory environment even than previous administration when it comes to crypto ETFs. So we can expect a new world. Yes, this probably will be a year of the ETF in that space...”

This optimism is further supported by recent market actions, such as ADA Cardano's token rally following Grayscale's spot ETF application, indicating growing institutional confidence in crypto assets as legitimate investment vehicles.

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3. Institutional Adoption and Challenges

While institutional interest in Bitcoin and Ether ETFs is rising, Emmons points out challenges facing other cryptocurrencies. At [04:16], he remarks:

“There's still a lot of... fundamental investors that probably don't [understand other cryptocurrencies].”

The primary hurdles include limited understanding of less prominent cryptocurrencies like ADA, Solana, Terra, and XRP, as well as lingering concerns about the overall stability and security of the crypto technology. Emmons emphasizes the need for comprehensive research and increased transparency to facilitate broader institutional adoption.

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4. Regulatory Environment and Future ETF Launches

Looking ahead, Emmons anticipates a surge in ETF launches, particularly for Bitcoin, with Ethereum ETFs potentially following as regulatory approvals progress. At [05:28], he comments:

“I think you like you're going to see more launches coming, so a flurry of launches in the Bitcoin ETF itself...”

However, the approval process remains a critical factor, and while Bitcoin ETFs are poised to lead, the path for other cryptocurrencies will require navigating complex regulatory landscapes to gain acceptance among fundamental investors.

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5. Tariffs and Economic Policy Under Trump Administration

The discussion shifts to the Trump administration's tariff policies and their implications for the markets. Emmons analyzes the strategic use of tariffs as both a negotiation and signaling tool. At [09:22], he explains:

“Tariffs are a negotiation tactic, a negotiation tool, but also think it's a signaling tool...”

The administration's approach aims to balance firmness with proportionality, particularly in responses from allies like the European Union. This measured stance has contributed to the currently subdued market reactions, as investors await clearer signals on the extent and duration of potential trade tensions.

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6. Federal Reserve's Stance and Powell’s Testimony

A significant portion of the episode focuses on Federal Reserve Chairman Jerome Powell's upcoming testimony before the Senate. Emmons anticipates a "hawkish" tone, reflecting the Fed's cautious stance amidst ongoing trade policy announcements. At [06:39], he predicts:

“He will be somewhat, what we say, hawkish... projecting out that there will be a possibility bringing rates down and at the same time being very mindful of the independence of the Fed.”

The outcome of Powell's testimony is expected to influence market expectations regarding future rate cuts, with Emmons suggesting that inflation concerns and trade policies will play crucial roles in shaping Fed decisions.

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7. Market Outlook for 2025

Synthesizing the various narratives, Emmons provides an optimistic yet cautious outlook for the crypto markets in 2025. He describes the environment as "risk on," driven by a strong economy and stable treasury yields. At [10:55], he summarizes:

“This is still much of a positive risk on type environment... Stock markets will probably go a little bit higher. Crypto markets will go a little bit higher.”

Emmons cautions that any shifts in Fed policy or unexpected economic pressures could alter this trajectory, emphasizing the importance of monitoring inflation data and policy responses.

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8. Conclusion

The episode concludes with Jen Senazi thanking Ben Emmons for his valuable insights. The discussion underscores the intersection of regulatory developments, institutional investment trends, and broader economic policies in shaping the future of crypto markets. As 2025 unfolds, the potential for ETFs to redefine crypto investment landscapes appears promising, contingent on continued regulatory support and enhanced understanding among institutional investors.

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Notable Quotes:

• Ben Emmons [00:00]: “A significant amount of institutional investors are starting now coming into the crypto market, really embracing the ETF because it's the regulated vehicle...”

• Ben Emmons [03:40]: “...this probably will be a year of the ETF in that space as it is for other markets...”

• Ben Emmons [04:16]: “There's still a lot of... fundamental investors that probably don't [understand other cryptocurrencies].”

• Ben Emmons [09:22]: “Tariffs are a negotiation tactic, a negotiation tool, but also think it's a signaling tool...”

• Ben Emmons [10:55]: “This is still much of a positive risk on type environment...”

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For more insights on the ever-evolving crypto markets, subscribe to the Markets Daily podcast on the CoinDesk Podcast Network, available across all major platforms.

Transcript

[Ben Emmons]

A significant amount of institutional investors are starting now coming into the crypto market, really embracing the ETF because it's the regulated vehicle, as you say, under this current administration. It seems to be much more favorable regulatory environment even than previous administration when it comes to crypto ETFs. So we can expect a new word. It's like, yes, there probably will be a year of the ETF in that space as it is for other markets, but importantly that it is a vehicle where fundamental investors can invest in.

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[Jen Senazi]

Hello and welcome to Markets Daily, hosted by me, Jen Senazi. On this show, we navigate the currents shaping the crypto markets, providing insights against the broader financial landscape. So whether you're actively investing or simply fascinated in the volatility that is the crypto markets, this show is your compass to understanding what's happened, where we are, and where we're going. Joining me on Today's show is FedWatch Advisors founder Ben Emmons. Ben, welcome back.

[Ben Emmons]

Good morning, Jen. It's great to be back home with you.

[Jen Senazi]

Yeah, well, as you know, every morning we talk about what's going on in the crypto markets. They are looking pretty boring this morning at time of recording. I'm just looking at the price of bitcoin right now under $97,000. Talk to me about what you're watching this morning.

[Ben Emmons]

Yeah, I am watching that crypto because it's always a good barometer of the risk sentiment in the markets. And, you know, it's subdued, obviously. I think people are waiting for Powell to speak in about less than half an hour. And people are sort of taking in stride these tariff announcements by Trump because it's just becoming more of a familiar pattern. They're getting announced and there's a lot of fomp fire about it, and then you get some counter response. But it all seems to be very measured. I think that reflects itself into the markets. You can also see that in the price of bitcoin. Not really doing it much here until we get a little bit more clarity.

[Jen Senazi]

I want to talk about Powell. I want to talk about the tariffs. But first, let's talk about this story because I see it gaining some traction across all of our social platforms. It's gaining traction on our site. Ada Cardano's token rallied this morning after Grayscale's recent spot ETF application. And this story Just has me wondering, given the current administration, is this the year of the etf? Like what are we going to see from a crypto ETF standpoint?

[Ben Emmons]

Yeah, in a way we already had a genres. I think the last time you and I spoke was was that was just launched a few months earlier and it already sparked this sort of view that we can finally embrace cryptos as an asset, fundamental asset. And it was recently news out too, I think by the Wall Street Journal and other not a news outlet that had reported on that. A significant amount of institutional investors are starting to now coming into the crypto market, really embracing the ETF because it's the regulated vehicle, as you say, under this current administration. It seems to be much more favorable regulatory environment even than previous administration when it comes to crypto ETFs. So we can expect a new word. Yes, this probably will be a year of the ETF in that space as it is for other markets. But importantly that is a vehicle where fundamental investors can invest in. I think you see more and more, more and more of them embracing it and putting it in their portfolios as an asset allocation or diversification.

[Jen Senazi]

Are there any challenges or blockers that still exist when it comes to institutional interest and the institutional adoption of these crypto ETFs? And I ask you that because Bitcoin and Ether, I feel like stand in their own class right now. We're talking about ADA ETFs, the potential for a sole ETF, maybe an XRP. I feel like these cryptocurrencies maybe have a little bit of a further way to go when it comes to its acceptance in the mainstream and also the understanding from institutional investors. What's your perspective there?

[Ben Emmons]

I think the last point of an understanding that is I think where there's still more research to be done because we sort of well understand Bitcoin, how the dynamic in that market is playing out every day. There's now a lot of data available, how it's trade on different exchanges and liquidations. But some of the other cryptocurrencies are less known. And there's always been concern about the space itself. Like it's a technology. Right. And it can be therefore affected by people doing things. And we know a lot of stories of things went wrong. So there's still a lot of like concern. But there's also now the fact that if you get ETFs, that idea of role is in suddenly your money could disappear. That sort of story may not really count anymore. That's I think for the fundamental investor really important that you can trust the vehicle that you invest in. But I think the fact of how these underlying cryptocurrencies are trading, there's still somewhat more knowledge base to be gathered there. Meaning you're very specialized portfolio managers out there that know how the space trades. But there's a lot of fundamental investors that probably don't. And that's, I think the issue here. There's a slow adoption of other ETFs this year.

[Jen Senazi]

So what does that mean? How should we be watching the crypto ETF space?

[Ben Emmons]

Well, I think to your point, you like you're going to see more launches coming, so a flurry of launches in the Bitcoin ETF itself. So Ethereum is sort of put on hold. And I think that maybe now following because of the approval, as that goes through and it gets more like traction, I do think you could see more of others being launched, you know, whether Solana or Terra or xrp. Any of those could potentially be depending on approval process obviously, but it's possible as in, you know, it's obviously a regulatory issue. So, you know, I can't speak for that. How long it's going to take, I don't know. But I just think it would probably be the case terms of the interest that it has and the need for a ETF in this space, you know, because that's, I think what people want to. I don't think the fundamental investors are really willing to take actual spot crypto on there in their portfolios. That's still, I think, a huge reluctance to do so.

[Jen Senazi]

All right, let's talk about tariffs and Powell. Let's start with Powell. We know that he's going to be testifying in the Senate later today. This is part of his twice yearly testimony before Congress. What are we expecting to hear there and how do you expect the markets to react?

[Ben Emmons]

Well, I think he will be somewhat, what we say, hawkish. Right. As in he will have a tone where he's taking an independent voice because of what's happening with the administration putting out so much policy currently to the trade policy in particular. So he would be saying we were going to be watching those initiatives, so we're going to be calibrating accordingly. But he's not going to take a view on any of those items, particularly on trade and tariffs, other than I think people will be curious, like there's already some economic analysis done on this, like what would it do? Right. What happens here when you get these 25% tariffs on steel, aluminum now or maybe in March the tariffs on Canada and Mexico happen after all, what will then happen? So some scenario analysis where he will be questioned on. I think he will be coming back to like the economy's good shape, it's strong, we can stay on hold here. We don't have to be in rush to cut rates. But still, still projecting out that there will be a possibility bringing rates down and at the same time being very mindful of the independence of the Fed. I think he will over emphasize that in this testimony. It's my take my own view simply because of what's happening with the flurry of policy announcements seen coming out of the Trump administration.

[Jen Senazi]

Do you think we're still going to see two rate cuts this year?

[Ben Emmons]

I think it's possible Jim, but it's market pricing, right? That we're where we are currently and it's a bit less than 2. And as we know that that market pricing is very quickly influenced by any type of data points. So it still remains a very data dependence rate cut, so to speak. It's not set in stone. There are some Fed members that have already come out saying like we have to keep in mind what these tariffs could do to inflation and if it does drive inflation up we may not be able to cut rates something in that nature. So where Powell has probably going to take some view there too. So it's just not guaranteed I think. So it really depends on how inflation behaves from here. We're going to get inflation tomorrow. So it will be interesting to see what's the impact of late it still looks like an inflation environment that's stickier than normal. Hence this Fed will be more restrictive and potential hold for a few meetings.

[Jen Senazi]

You know a lot of analysts that have been commenting on these tariffs have really said that the President is using them as a negotiating tactic. Markets really reacted to the first tariff announcement on Canada and Mexico. Then when it was announced that, you know we have a month timeline to figure out some negotiations, the market's kind of bounced back. Now we have the steel and aluminum tariff announcement from Trump. Just curious to get your perspective. Do you think this is a negotiating tactic or do you think we are going to see tariffs implemented on some of the US's allies as we head deeper into 2025?

[Ben Emmons]

Yeah, it could be. I think the response by Europe was interesting this morning. They want to be firm but they want to be proportionate. That word proportionate. That's what market are responding to. Okay, so Trump comes down with 25% which a high number but the EU is not immediately swinging for the fences themselves. And I think this is where markets are, why they're subdued currently as these announcements come out. Because if Europe would announce like, well, okay, Trump, great, we're going to put also 25%, guess what, even more on, on, on your exports to us then, then the trade war is really on right there. That that's going to be then more tension marks about how will this really play out. As you say, it's a negotiation. Therefore the tariffs are a negotiation tactic, a negotiation tool, but also think it's a signaling tool. Trump has other reasons why he puts on these tariffs, as we now have learned, border protection, for example, or NATO payments. So things like that, that have nothing to do with economics, more to do with I want other outcomes. But I'm using tariffs as a way to negotiate that. So it's all in the open, but it's proposed proportionate response. So therefore markets are for now subdued on this.

[Jen Senazi]

Now, we talked about three big narratives this morning. I keep saying that we talked about Powell testifying today. We talked about tariffs and we talked about 2025 potentially being the year of the ETFs. If we take all of that we put into perspective of how crypto markets might perform in 2025. What are your thoughts there? What do you think we're going to see happen?

[Ben Emmons]

So if I take it in aggregate, I say this is still much of a positive risk on type environment. It does look like that because we have a strong economy and because we don't see any, at least for now, any kind of meaningful response by the Federal Reserve in particular to start tightening rates. Right. Therefore markets stay in this risk on tone. That's, I think really important part of the calculus. Like if the Fed were to reverse courses are raising rates, then I think the environment really shifts. So in this environment of a neutral fat, with Trump trying to negotiate tariffs, I think the risk on markets will remain risk on as in you have always crypto is leading in that. So, you know, probably we're going to go a little higher here again at some point where we get a little bit, you know, the dust settling. At the same time, we have to keep in mind that the economy is strong. So any type of like pressure on prices could lead to overheating. So this is where markets will be sensitive. So I think it's a good market environment. Stock markets will probably go a little bit higher. Crypto markets will go a little bit higher. How high? I don't know can I give the recommendation? But better, better environment. Whereas yields are sort of controlled at this moment, which plays a role too. So treasury yields probably going to be ranging here for periods of time.

[Jen Senazi]

Ben, I appreciate you joining the show today. Thank you very much.

[Ben Emmons]

Thank you, Jen. It was great to be on.

[Jen Senazi]

And thank you to our audience who watches markets daily every day. If you don't already do it, subscribe to our YouTube channel. Give us a thumbs up if you prefer listening to this show. We are on the CoinDesk Podcast Network that is available across all podcast platforms. Thanks again for listening. We will see you tomorrow.