MARKET INSIGHT II | TRADITIONAL DIGITAL

May 12, 2025

Looking Ahead: Macro Clarity & Market Positioning

With greater clarity now emerging from both the FOMC and U.S. tariff policy, we believe it’s an opportune time to share our forward-looking perspective on the macro landscape and how it may shape near-term digital asset market dynamics.

“The Art of the Deal” in Action 

If you had told markets two months ago that the U.S. would impose 30% tariffs on all Chinese imports, risk assets likely would have sold off aggressively - and indeed, they did. However, by first signaling 145% tariffs and then scaling them back to 30% for 90 days, the administration created a surprising sense of relief and euphoria across markets.

While this easing has provided temporary support, the underlying economic impact of tariffs remains real. We expect to see slowing economic activity in the coming months, coupled with a potential inflationary impulse. These are opposing forces that complicate the macro picture.

Adding to the uncertainty is the Truflation real-time index, which continues to show a sharp decline in inflation, putting the Federal Reserve in a difficult position:

• On one hand, the economy is slowing, suggesting a need for policy support.

• On the other, financial conditions have already loosened (weaker USD, stronger equities), which may reduce the urgency for further Fed intervention.

For now, our base case is that the Fed remains on hold through the June meeting, barring a dramatic decline in inflation or a shock to employment data.

BTC Outlook: A Summer Setup

In this window of reduced macro uncertainty, we believe BTC will resume an up trend, following a modest retracement (like the one we are currently seeing). Our current view is that BTC trades in the $120K - $140K range by the end of June.  Why such a wide range?  Because it will depend on flows (retail, MSTR, etc) and headlines.  Either way, the path of least resistance here is up. How far up in the next two months depends on the timing of flows, though the endgame remains the same - much higher.

From there, we expect the typical summer slowdown to set in:

• Lower liquidity

• Seasonal derisking

• Investor positioning ahead of Q3 earnings and macro data

This dynamic could create a local top for the next 2 - 3 months, as risk-taking naturally pulls back during the summer lull.

Looking Forward: Q4 Is the Real Battleground

In our view, the recent relaxation of tariffs has pushed macro uncertainty out by 60 - 90 days. The summer period may prove relatively quiet, but it will serve as the calm before a very eventful Q4.

That’s when key questions will come to a head:

• Will we be heading into a recession?

• Will the tariff situation be permanently addressed in a constructive way?

• Will inflation drop sharply as Truflation suggests, or spike due to tariff-related pressures (or both, sequentially)?

The path from here won’t be linear. Markets will need to recalibrate around macro outcomes that are anything but certain - and in that volatility, real opportunity will emerge for active, risk-managed investors.

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This material is for informational purposes only and does not constitute investment, legal, or tax advice, nor an offer or solicitation to buy or sell any securities or financial instruments. The views expressed are based on information believed to be reliable as of the date of publication but may change without notice. Accuracy or completeness is not guaranteed.

Past performance is not indicative of future results, and any forward-looking statements involve risks and uncertainties. Investors should conduct their own research and consult with financial and legal advisors before making any investment decisions. Traditional Digital and its affiliates accept no liability for any losses arising from reliance on this material.