Trump's tariff effect tumbled crypto volumes in Q1, but catalysts abound in the second quarter: Kaiko

President Donald Trump’s return to the White House was touted as rocket fuel for bullish momentum in crypto markets and the broader financial ecosystem. This initially proved true as bitcoin reached a fresh zenith in January and stocks rose to new highs. However, Trump’s quickfire tariff rollout inserted uncertainty and markets wobbled as volatility surged, according to a Kaiko Q1 report .

Weekly trading volumes for BTC, ether, and the top 10 altcoins receded 30% from pre-election levels seen by November, averaging $266 billion in the first quarter of 2025. The report stated that offshore exchanges and weakened altcoin demand accounted for most of the decreased activity due to a stifled risk appetite from aggressive price swings.

"Altcoin volatility surged in early 2025, reaching multi-year or all-time highs for certain tokens, notably Cardano's ADA,” Kaiko researchers wrote. “Bitcoin's volatility also rose, from 34% in February to 51% in March, though it stayed below the peaks observed during last August's carry trade unwinding. The growing volatility gap between Bitcoin and altcoins may discourage risk-averse traders from entering the market in the near future.”

BTC beat altcoins but lost to equities and gold

Down some 25% from its January all-time high, bitcoin trailed behind U.S. equities and gold during the global market sell-off. Still, BTC outperformed most altcoins — especially tokens in the AI and meme sectors. “The shift toward a risk-off environment has weighed on both crypto and equities,” wrote Dessislava Aubert, a Kaiko analyst. “While expectations for rate cuts in the US have been growing, this isn't the type of rate-cut cycle markets had hoped for.”

Bitcoin shed about 12% in Q1, its worst quarter since 2018. Memecoins and alts tied to artificial intelligence witnessed much larger drops. AI and memecoins recorded over 50% declines on average, according to Kaiko.

Market depth protected by U.S.-based exchanges like CEX.IO, Kraken and Coinbase helped stem BTC’s bleed, per the report. Market depth measures liquidity and tracks how many large orders trading venues can handle without significant price changes. Meanwhile, altcoin liquidity dipped 30% in Q1 and concentrated around assets with the biggest market capitalization, like ether. “Bitcoin's liquidity resilience was primarily supported by U.S. platforms, with their global depth share reaching a two-year high of 58% before slightly decreasing at the end of March,” Kaiko said.

The aforementioned exchanges now comprise 60% of bitcoin’s market depth, boasting the most liquid BTC exchanges.

Additionally, tariff announcements shook options markets and triggered the largest spike in short-term at-the-money implied volatility since early 2024. Traders readjusted risk exposure as macroeconomic justling overshadowed previous stimulants like last year’s bitcoin halving and the global elections. Yet, Kaiko said data suggests investors are willing to hold out and weather the storm. “Despite this and the increasing uncertainty, trading volumes still favor calls, indicating that investor sentiment hasn't been completely eroded by the market activity in Q1,” the Q1 report noted.

Q2 tailwinds

Seasonal patterns predict a positive second quarter for markets and risk assets. The ongoing trade war threatens to mute this historical dynamic, but analysts argued that potential catalysts abound. Kaiko’s Adam McCarthy opined that institutionalizing BTC was a major market mover. Altcoins require regulatory approvals akin to bitcoin exchange-traded products.

“If there is to be a bull run in the second half of 2025, altcoins will need to see similar uptake,”  said McCarthy. “Exchange-traded funds tied to altcoins and other product launches will play an important role in improving demand. The first quarter was full of noise around new ETFs and more exotic products. There are currently over 40 active ETF applications sitting at the SEC for incoming chair Paul Atkins to address with his team in Q2. The advent of products like these could spark a rally due to increased demand.” The U.S. Senate approved pro-crypto Paul Atkins as the new Securities and Exchange Commission chair, The Block reported on April 9.

Furthermore, Kaiko sees stablecoin market expansion and expected market rules as a signal for broad crypto ascent. The stablecoin ecosystem — which is dominated by U.S. dollar-pegged products like Tether’s USDT and Circle’s USDC — leaped by 33% since late 2024 and has exceeded $230 billion in supply, according to The Block’s data page . “Historically, stablecoin market growth has often preceded increases in other asset classes,” Kaiko stated. Policymakers on Capitol Hill also pushed two stablecoin bills to standardize the landscape, which may propel adoption.

Although President Trump issued some of the largest tariffs in U.S. history on April 2’s “Liberation Day,” the White House paused these blanket import dues for 90 days on Wednesday. Markets immediately rallied on the news as trade tensions temporarily cooled.

Kaiko analysts hinted that clearer policies and further de-escalation would bolster sentiment, particularly for bitcoin. “As crypto legislation takes shape and regulatory support builds, bitcoin may begin to decouple from traditional assets in the months ahead,” Aubert said. The report also mentioned that a weaker greenback could “strengthen BTC’s narrative.” Bitwise CIO Matt Hougan shared the same view in a Tuesday note to investors.