Crypto Update | Despite Trade War Uncertainty, $175K Bitcoin Ahead

Summary

Markets Daily Crypto Roundup: Crypto Update | Despite Trade War Uncertainty, $175K Bitcoin Ahead

Released on February 4, 2025 | Host: CoinDesk

In this episode of Markets Daily Crypto Roundup, CoinDesk delves into the latest movements in the cryptocurrency markets amidst ongoing trade war uncertainties. Host Christine engages in an in-depth conversation with Usman Ahmad, CEO and Co-Founder of Zodia Markets, to explore Bitcoin’s resilience, institutional adoption, and the potential impact of geopolitical tensions on digital assets.

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Bitcoin’s Resilience Amid Trade War Uncertainty

The episode begins with Christine addressing Bitcoin’s recent price fluctuations influenced by the U.S. trade war under President Donald Trump. Bitcoin experienced a significant recovery from below $92,000 to over $100,000 following a deal with Canada and Mexico to delay tariffs. However, the momentum was halted once tariffs against China were enforced.

Usman Ahmad provides his insights:

“Bitcoin and other crypto assets react very similar to other macro risk-on assets... We saw the recovery into Monday, regaining some of those losses.” (01:51)

Ahmad emphasizes that cryptocurrencies are not isolated from global economic factors. He notes that Bitcoin often mirrors the behavior of traditional risk assets, debunking the notion of it being entirely detached from the global financial system.

Is Bitcoin a Risk Asset or a Safe Haven?

Christine probes the dual nature of Bitcoin, questioning whether it serves as a volatile risk asset or a stable digital safe haven as many proponents suggest.

Ahmad responds:

“Bitcoin is ultimately a risk asset. When there's uncertainty, it lends itself to sell-offs, leading to a depression in the price.” (03:37)

He acknowledges Bitcoin's potential as "digital gold" but underscores its inherent link to global economic sentiments, positioning it more accurately as a risk asset influenced by macroeconomic and geopolitical events.

Institutional Positioning in Uncertain Times

The discussion shifts to how institutional players are navigating the current climate. Christine asks about the strategies adopted by large investors amid trade tensions.

Ahmad explains:

“Institutions like MicroStrategy may be buying the dip, dollar-cost averaging their positions, and possibly increasing their holdings.” (04:41)

He highlights the varied approaches of institutional investors, from accumulating assets during downturns to assessing short-term volatility for strategic entry points. Ahmad also points out the rapid recovery characteristic of the crypto market, attributing it to the 24/7 trading environment.

Long-Term Outlook Amid Protracted Trade Wars

Christine inquires about the long-term implications if the trade war extends throughout Trump's term, particularly concerning market risk appetite.

Ahmad offers his perspective:

“As people become more comfortable with uncertainty, we might see an upward trend in digital assets, including Bitcoin, driven by a more supportive U.S. administration.” (06:12)

He anticipates that a sustained period of uncertainty could ultimately foster a more favorable environment for digital assets, especially if regulatory clarity improves and the U.S. adopts a leadership role in the digital asset ecosystem.

Impact of Tariffs on Crypto Markets

The conversation then explores how tariffs, typically increasing consumer goods prices, might affect risk assets like cryptocurrencies.

Ahmad shares his thoughts:

“Normalization of tariffs could bring positive tailwinds for digital assets. Clear regulations would provide certainty, allowing ecosystem actors to build and innovate more effectively.” (07:18)

He believes that as tariffs stabilize, the crypto market could benefit from increased regulatory clarity and a more predictable trading environment, fostering growth and stability.

Sovereign Wealth Funds and Crypto Adoption

Christine brings up the potential establishment of a U.S. sovereign wealth fund, speculating on its implications for Bitcoin holdings.

Ahmad responds thoughtfully:

“A sovereign wealth fund holding Bitcoin as part of a diversified portfolio would be a logical and sensible move, providing strategic value for the U.S. government.” (10:05)

He underscores the significance of sovereign wealth funds as major institutional investors and suggests that their direct allocation to Bitcoin would signal robust institutional adoption, enhancing the credibility and stability of the crypto market.

Institutional Adoption as a Market Boon

Christine references Norway’s sovereign wealth fund and BlackRock’s interest in Bitcoin, questioning whether such trends will benefit the crypto markets.

Ahmad concurs enthusiastically:

“Institutional adoption, especially by sovereign wealth funds and pension funds allocating directly to Bitcoin, is a huge boon for the ecosystem and signifies true institutional support.” (12:22)

He highlights recent instances where pension funds have directly invested in Bitcoin, emphasizing that such moves validate the asset’s legitimacy and attract further institutional interest.

Future Demand for Crypto Amid Economic Uncertainty

In discussing future trends, Christine asks whether the current trade war uncertainty will surge crypto demand or suppress it.

Ahmad expresses optimism:

“I believe we’re going to see a surge in crypto demand, aiming for Bitcoin to reach $175K by the end of the year, aligning closely with my initial prediction.” (13:45 – 13:55)

He confidently forecasts continued growth in Bitcoin’s value, attributing it to increasing institutional adoption and the evolving regulatory landscape that supports digital asset innovation.

Anticipation for U.S. Regulatory Developments

Christine mentions upcoming remarks by David Sacks, the U.S. crypto czar, regarding the Trump administration’s strategy for digital assets.

Ahmad shares his expectations:

“I hope to see a clear regulatory framework that fosters innovation and provides certainty for market participants. The U.S. needs to lead in establishing global standards for crypto regulation.” (14:32)

He underscores the importance of regulatory clarity in enabling businesses to operate confidently within the crypto space, advocating for the U.S. to spearhead global regulatory initiatives to harness the transformational potential of blockchain technology.

Looking Ahead to Consensus Hong Kong

Concluding the episode, Christine asks Ahmad about his upcoming participation in Consensus Hong Kong.

Ahmad provides a preview:

“I’ll be on a panel discussing liquidity in the digital asset ecosystem. It’s an exciting opportunity to engage with global leaders and explore innovative solutions for enhancing market liquidity.” (16:41)

He expresses enthusiasm for the conference, anticipating insightful discussions and the opportunity to contribute to the advancement of the digital asset landscape.

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Conclusion

In this episode, Markets Daily Crypto Roundup offers a comprehensive analysis of Bitcoin’s performance amidst trade war tensions, highlighting its behavior as a risk asset and the pivotal role of institutional adoption in shaping its future. Usman Ahmad’s insights provide a balanced perspective on the interplay between geopolitical factors and the evolving regulatory environment, underscoring the optimistic outlook for Bitcoin reaching $175K by year-end. The discussion encapsulates the dynamic nature of the crypto markets and the critical importance of regulatory clarity in fostering sustained growth and innovation.

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For more insights and updates, tune into CoinDesk’s Markets Daily Crypto Roundup and join industry leaders in navigating the rapidly evolving world of cryptocurrency.

Transcript

[Mark Rebe]

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[Usman Ahmad]

Close to my prediction. I did say 100,000 for NH24. So I said that at the beginning of 24, where I think we're going to be for BTC at the end of this year, I'm going to go 175.

[Unknown Speaker]

We all want to believe in something. In Chinese, belief also means trust. We want to trust our systems and each other so we can build a future beyond what we know. Join us at Consensus Hong Kong, where belief becomes real.

[Christine]

US President Donald Trump's trade war uncertainty has Bitcoin price on a roller coaster ride. Joining us now to discuss the crypto markets and more is Usman Ahmad. He's the CEO and co founder of institutional trading platform Zodia Markets. Welcome, Usman, Good morning.

[Usman Ahmad]

Absolute pleasure to be here. Thank you, Christine. Look forward to chatting.

[Christine]

All right, so bitcoin is recovering from below $92,000 to over $100,000 when a deal was reached with Canada and Mexico to delay tariffs at least, but those gains were kept in check once tariffs against China went to effect. So give me your sense of what you see happening with this trade war uncertainty in the crypto markets.

[Usman Ahmad]

Well, I think I wouldn't be arrogant enough to just talk about the crypto market. So trade war uncertainty, I think it's going to be a macro and geopolitical implication for markets more broadly. For me, it was interesting and unsurprising to see bitcoin and other crypto assets react very similar to other macro risk on assets. In essence, we saw it play out in real time because we have the benefit of, you know, weekend trading in crypto assets. Whereas, you know, if, if we had that going on in the stock market, I think there would have been a bit of a blood bloodbath over the weekend as well, more broadly. And we saw the recovery into Monday, this week of, you know, regaining, shall we say, some of those losses and the pair, the pairing back over the weekend. It's going to be super interest. It's super interesting to see how not just crypto assets but the world at large reacts to what was signaled quite clearly by President Trump. It's not a surprise to anyone, but I think the implication, the implementation and the challenges that's going to have on global trade, it's going to be.

[Christine]

I just want to pick on one point you made, which is that Bitcoin is behaving a lot like traditional assets. It's supposed to be divorced from the traditional global system. It's supposed to be a new digital era of money here. It's supposed to be digital gold, if you will. So what is it? Is Bitcoin more of a risk asset or is it that digital safe haven that idealists had been talking about since the beginning?

[Usman Ahmad]

Well, I think it's a combination. So Bitcoin or other crypto assets don't operate in isolation. Right. So ultimately, from a correlation standpoint, whether Bitcoin behaves like tech stocks or whether it behaves like something that's completely decorated, actually it is ultimately a risk asset. Right. So when there's a risk off event or when there's something macro that happens, it's not like we might want to go to the moon, but it's not like we're trading on the moon when we're trading in a macro environment that has geopolitical implications. And we've seen that over the course of many years. So whilst it is a digital representation of value, digital gold, however we want to represent Bitcoin, ultimately it is linked to what's happening in the world. And when there's uncertainty, uncertainty lends itself to essentially sell offs and by implication that means a depression in the price.

[Christine]

So how are institutional players positioning amid this uncertainty in the short and long term?

[Usman Ahmad]

So I think you've got different types of institutional players. So you've got the likes of microstrategies and large corporate acquiring. I'm not going to say I know exactly what they're doing, but I dare say they may have been buying the dip looking at dollar cost, averaging their positions, perhaps getting more in. I think generally on a risk play you would typically see institutions kind of looking for the exit, so to speak. But I'm not sure that any have, apart from the likes of MicroStrategy and others, any have big enough positions to make it like a real kind of target for them. I think there would have been volatility place. So I think there would have been people looking at are we seeing a pronounced dip? Are we seeing a short term and what do we see recovery being? The thing that we do always see is by virtue of the fact that we trade 24,7 in the crypto market recovery tends to be much faster, so the downward trend seems to be fast, but the recovery seems to also be faster. So, yeah, we have extremes of volatility, which means that many of us in the industry were not surprised to see the recovery pretty quickly, or most of the losses were kind of won back pretty quickly.

[Christine]

If we see a protracted trade, trade war that lasts for Trump's full term, what do you think that will mean for risk appetite in the markets?

[Usman Ahmad]

I mean, that's. That's a big question. So I think with any form of change, you have the initial flurry of change, so you have, you know, you kind of the implementation and then the kind of the partial wind back, shall we say? I think we're going to see that perhaps play out over an extended period. What, what I think we'll see is as people get more comfortable with a bit of the uncertainty, I think we're going to see a general upward trend around digital assets more broadly, including Bitcoin, because the administration coming in is markedly different and the rhetoric is markedly different from the US which, whichever way we slice it, it's one of the global leaders in digital assets. It's one of the biggest markets in the world of digital assets. As some of the biggest market participants, many of whom have been struggling over the last few years with the previous regulatory regime, should we say, what do.

[Christine]

You think ultimately will be the impact of tariffs on the crypto markets? We know that in terms of consumer goods, countries will see a rise in prices, but what about the price of risk assets like crypto?

[Usman Ahmad]

So I think, I mean, at some point you're going to have almost a normalization of some of these tariffs. And whatever's going to happen, however it's going to play out, I think, personally, I'm going to see that there's a set of positive tailwinds for the digital asset markets and crypto markets more broadly, because we've got an administration in the U.S. again, the biggest market in the world, which is patently different to the situation before. So I'm hoping regulation by enforcement is a thing of the past. I'm hoping there's a degree of certainty that allows for, you know, the. The actors in the ecosystem have always been trying to do the right thing. I don't think. I think. I don't think people in this space certainly, or myself and people that I talk to regularly are going out trying to skirt regulation, but actually having clarity there, I think is going to allow us to then build and build better. The other really interesting thing that I also touch upon that is maybe slightly tangential. We've seen stablecoins being a kind of hot topic over the course of the last year and I see that continuing. Obviously, we've seen the executive order around, you know, the banishment or the mitigation of a central bank digital currency in the US and broader adoption of dollar back stable coins as a mechanism and a means of moving value as a counterpoint of tariffs. In terms of trade actually making trade easier, making movement of value easier, making transfer easier without as much friction ecosystem, I think that's another area that we, we don't, we haven't seen what's going to happen should make, should make the ability to transact faster. I'm not saying it's going to do anything to the, the trade imbalances that I think President Trump is trying to try to manage, but I think it's going to have a positive effect on the ability for countries to do business with each other.

[Christine]

Definitely more options out there in terms of handling currencies with a digital currency that can cross borders very easily. Speaking of which, you mentioned the optimism for the crypto markets in the United States. Well, Trump signed an executive order on Monday to establish a sovereign wealth fund. And I mean, I was just looking on crypto Twitter and some of the comments were pretty funny. Some saying, you know, this is better branding than a strategic bitcoin reserve sovereign wealth fund may be more digestible to the traditional types, but what do you think this could mean for crypto? Could a sovereign wealth fund mean holding government, the government's bitcoin holdings?

[Usman Ahmad]

I mean, for me, I mean, a sovereign wealth fund has a very, very clear mandate and direction. And we in our business do deal with many sovereign wealth funds and states around the world. So in the context of that, if we, if we take what President Trump has kind of issued on face value, you're creating a sovereign wealth fund for driving value and outcome for the US PLC, as it were, feels like a logical thing to do, frankly. More broadly, if we infer that it's going to be a mechanism to hold a strategic reserve of bitcoin, I mean, President Trump hasn't been particularly mincing his words in the past. I would envisage that we would have just come out and said it, frankly. Now, does it mean that there's an umbrella under which as part of a diversified portfolio, bitcoin is going to be held as a, as, as a part of driving wealth and creating value for the US Government and more broadly the US At Large. I think that's probably a sensible position. I think it's probably one of those kind of, it's a means in between. Is there a way of, you know, driving, you know, on behalf of, you know, the U.S. government as a sovereign investment in things like AI, investment in, you know, new technologies and also have, you know, kind of a, a stockpile of, of crypto assets and bitcoin in particular that are going to help. It feels like that could be a logical and sensible way to go. But I think, yeah, it's going to be interesting to see how it evolves.

[Christine]

Norway's sovereign wealth fund, the largest in the world, they've invested $500 million in MicroStrategy. They also have 200 or, you know, just a couple hundred million in indirect bitcoin exposure. That's something we could possibly see with the US Sovereign wealth fund. And if I recall some remarks by blackrock's Larry Fink at the World Economic Forum, he said he's, they've been talking to sovereign wealth funds interested in bitcoin. So do you see that trend as a boon for the crypto markets?

[Usman Ahmad]

Oh, absolutely. Because, I mean, when you talk about institutional adoption, you don't get much more institutional than sovereign wealth funds who are managing money on behalf of countries. Right. Maybe there's a better definition of institution. I don't know what the next one upon institutionalism is, but it's basically countries and that's what we're talking about. So. Yeah, no, you're absolutely right. I mean, indirect exposure, that's great. As a proxy, you know, we've also seen pension funds start to allocate into the actual underlying, as it happens, as early markets. We actually helped a UK pension fund advisor allocate into bitcoin directly late last year. So that, that was an area where, you know, we were super excited by that and helped enable that. And so when you've started to get pension funds and sovereign wealth funds that are allocated into the underlying asset itself, I think that's a huge boon for anyone that's involved in the ecosystem because it kind of talks to what people who have been in the industry for a long time have been talking about, which is true institutional adoption.

[Christine]

So in the coming months, do you think we're going to see a big surgeon in crypto demand or the opposite? With this trade war uncertainty? It could deflate the economy a little bit there.

[Usman Ahmad]

So I think we are going to. You won't be surprised to hear, Christine, that my position is that we're going to see A surge. I'm an optimist.

[Christine]

Prediction end of the year?

[Usman Ahmad]

Well, it's a prediction end of the year. So funnily enough, I was pretty close to my prediction. I did say 100,324. So I said that at the beginning of 24, where, where I think we're going to be for BTC at the end of this year. I'm near 175.

[Christine]

All right. David Sachs, he's the crypto czar in the United States. He's having a news conference on digital assets this afternoon on how the Trump administration and Congress will work together to secure America as a leader in the digital asset eco ecosystem. What do you hope to see out of that conference?

[Usman Ahmad]

I mean, for me, I think as I mentioned slightly before, just even the fact that that's happening, right, Even the fact that we're moving towards clarity and frameworks that can allow for innovation, adoption, utilization. One of the challenges. And as a business, we operate outside of the US but have been hampered. Our risk appetite has not been there in terms of or wasn't there, certainly in terms of dealing with US Clients and participants, despite it being the biggest in the world because of the uncertainty around being subject to almost enforcement, regulation by enforcement, or just at the whim of regulators. So from our standpoint, it's really heartening to hear this coming, this pressure off. Really looking forward to hearing what the outcomes are. But ultimately, what I'd be hoping for is, you know, a clear path, you know, some. Some rules of the road, some standardization. I mean, ideally, I'd love for the US to take a lead on a. On a global regulatory basis to provide clarity on how, you know, how, how we can collectively utilize and adopt this. What I think is still transformational technology in its very early stages with, with Bitcoin and crypto being kind of the first viable use case of blockchain technology really transforming the world. And yet, I think as we sit here right now, we need the US to be a leader in that. And unfortunately, for the last few years, the US has absolutely not been a leader. It's been in many respects an impediment. So I'm really looking forward to seeing that change, and I'm hopeful that we're going to. Yeah, it won't be. It probably won't be today, but we'll at least start laying out a groundwork or a framework in order to move forward and provide some certainty for people that want to do the right thing and operate within the rules. But just actually having clarity on what Those rules are would be a great starting point.

[Christine]

Well, Usman, you're also joining us at Consensus Hong Kong in two weeks. Do you think you could give us a quick preview of what to expect?

[Usman Ahmad]

So Consensus is a great conference, right? Credit to CoinDesk. You do a great job of putting it on. I attended a couple of years ago in Austin. I'm delighted to be going back to Hong Kong. I've got very fond memories. I've lived in Hong Kong for a number of years. So I'm looking forward to being back there. I'm going to be on a panel. I'm not going to give too much away, but we're going to be talking about liquidity in the digital asset ecosystem. I think there's going to be some really interesting discussions. It looks like a stellar lineup of people, you know, so a wide range of people all around the world look like they're going to be flying into Hong Kong. I think in many respects for Hong Kong, that's a great thing because, you know, it's been, it's been a challenge there, you know, in terms of perhaps after Covid, the recovery after Covid has been a little bit stilted, perhaps, but super excited to be back there and partaking in hopefully another fantastic conference.

[Christine]

Well, looking forward to seeing there. Isman, thanks so much.

[Usman Ahmad]

My pleasure. Yeah, look forward to seeing you there as well.

[Christine]

All right, folks, join us. Consensus Hong Kong, February 18th to the 20th. That was Zodia Market CEO Usman Ahmad.