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Binance Research: Analysis of the Impact of Tariff Escalation on the Crypto Market
Original Source: Binance Research
Original Author: Moulik Nagesh
Key Points
By 2025, U.S.-led trade protectionism made a strong comeback. Since Donald Trump's reinauguration as President in January 2025, the U.S. has triggered global trade war concerns by implementing a series of large-scale new tariffs—targeting specific countries and industries. Just in the past week, the U.S. has rolled out a new round of "reciprocal" tariffs, and other countries have announced retaliatory measures.
This report will analyze how these tariffs (the most aggressive tariff measures since the 1930s) have impacted the macroeconomy and the crypto market. We will examine the tariff levels, macroeconomic trends (including inflation, growth, interest rates, and the Fed's outlook), and their effects on crypto asset performance, volatility, and correlation based on data. Finally, we will explore key future observations and the market prospects that crypto assets may face in an environment of stagflation and protectionism.
2025 Tariff Comeback
After years of relative trade peace, a rapid reversal occurred in 2025. President Trump, in the initial days of his return to the White House, began fulfilling his campaign promises by levying tariffs on a wide range of imported goods based on emergency authorizations—covering specific countries and industries.
The trade tension escalated on April 2nd. On that day, the U.S. announced the rollout of comprehensive "reciprocal" tariffs and named it "Liberation Day," marking the latest turning point in this global trade war cycle. Many countries that previously had normalized trade relations with the U.S. have now undergone fundamental shifts. Key events of the past week include:
● Base Tariffs: The U.S. announced a new 10% uniform tariff on all imported goods, reversing decades of trade liberalization processes. This base tax rate took effect on April 5th.
● Targeted Tariffs: On top of the base tax rate, additional country-specific tariffs were imposed. President Trump referred to these as "reciprocal" tariffs aimed at countries that have erected high barriers to American products. Notably, Chinese goods will face an additional 34% tariff—adding to the existing 20%, resulting in a combined tariff rate of 54%. Other countries' targeted tariffs include: EU goods at 20%, Japan at 24%, Vietnam at 46%, and a 25% tariff on car imports. Canada and Mexico were not included in the new list as they were already subjected to a 20% tariff in February.
● Global Countermeasures: The United States' trading partners swiftly responded. As of mid-February, several countries that were early subjects of tariffs have announced retaliatory measures. Canada, unable to secure a tariff delay from the United States, decided to impose a 25% tariff on all U.S. imports. China also responded early on and further escalated on April 4th by announcing a 34% tariff on all U.S. imports.
With the implementation of "mirror" tariffs and the escalation of trade tensions, it is expected that more countries will introduce their own retaliatory measures. The European Union has expressly stated its intention to respond promptly, and several other major economies have drafted related counterattack plans. While the full extent of the global response is not yet clear, all current indications point to a broad trade war unfolding on multiple fronts.
Chart 1: Liberation Day Tariffs on April 2, 2025, cover up to 60 countries, including several of the United States' key trading partners. Note: The table reflects the "mirror" tariffs imposed by the U.S. on its top ten import sources as of April 2nd.
These policies have pushed U.S. import tariff rates to their highest levels since the implementation of the Smoot-Hawley Tariff Act of 1930, which levied comprehensive tariffs on thousands of goods during the Great Depression. According to current data, the U.S.' average tariff rate has risen to around 18.8%, with some estimates as high as 22%—a drastic increase compared to 2.5% in 2024.
For reference, over the past few decades, the U.S.' average tariff rate has typically remained between 1–2%; even during the U.S.-China trade tensions of 2018 to 2019, it only rose to around 3%. Therefore, the measures in 2025 represent an unprecedented tariff shock in modern history—almost equivalent to a return to 20th-century protectionism of the 1930s.
Chart 2: U.S. Tariff Rebound Raises Import Rates to Nearly Century-High Levels
Market Impact: Cooling Demand, Risk Aversion, and Soaring Volatility
1. Cooling Demand and Rising Risk Aversion
Market sentiment has notably shifted to caution, with investors exhibiting typical "risk-off" behavior in response to the tariff announcements. The total market capitalization of the crypto market has dropped by around 25.9% from its January peak, wiping out nearly $1 trillion, underscoring its high sensitivity to macroeconomic instability factors.
Cryptocurrencies and the stock market have experienced highly correlated trends, both facing cooling demand, widespread selling, and entering a correction phase. In contrast, traditional safe-haven assets such as bonds and gold have shown strong performance, with gold hitting consecutive all-time highs, becoming investors' go-to safe haven in times of rising macro uncertainty.
Chart 3: Since the initial tariff announcement, the cryptocurrency market has dropped by 25.9%, the S&P 500 has dropped by 17.1%, while gold has risen by 10.3%, hitting consecutive all-time highs
The sharp market reaction also highlights the performance characteristics of cryptocurrencies during periods of intense "risk-off" sentiment: Bitcoin (BTC) has dropped by 19.1%, with most mainstream altcoins experiencing similar or even larger declines. Ethereum (ETH) has plummeted by over 40%, and high-beta sectors (such as meme coins and AI-related tokens) have seen crashes of over 50%. This sell-off has wiped out much of the gains seen in the crypto market since the beginning of the year, with even BTC's year-to-date (YTD) returns turning negative as of early April—despite its strong performance in 2024.
Chart 4: Amid the macro uncertainty sparked by tariffs, altcoins have seen more significant declines compared to Bitcoin, exacerbating market pessimism
As the cryptocurrency market increasingly exhibits characteristics of a risk asset, if the trade war persists, it may continue to dampen inflows, temporarily suppressing demand for digital assets. Funds may remain cautious, either staying on the sidelines or shifting to gold and other assets seen as safer. This sentiment is also reflected in a recent fund manager survey, where only 3% of respondents indicated they would allocate to Bitcoin in the current environment, while 58% showed a stronger preference for gold.
Chart 5: Only 3% of global fund managers view Bitcoin as their preferred asset class in a trade war scenario
2. Soaring Volatility
The market's sensitivity to tariff policies is very apparent, with every major announcement causing significant price fluctuations. Over the past few months, BTC has experienced several significant price swings—including one of the largest single-day drops since the 2020 COVID-19 market crash. At the end of February 2025, when Trump suddenly announced plans to impose tariffs on Canada and the EU, BTC dropped by around 15% in the following days, with its actual volatility also increasing significantly. ETH followed a similar path, with its one-month volatility soaring from around 50% to over 100%.
These market behaviors highlight the extreme sensitivity of the crypto market to sudden policy changes in the current highly uncertain macro environment. In the near future, if the policy direction remains unclear or if the trade war escalates further, the market will maintain high volatility. Historical experience also indicates that only when the market fully digests and prices in the new tariff policies, volatility may gradually decrease.
Chart 6: At this stage, BTC's one-month actual volatility rose to over 70%, with ETH exceeding 100%, reflecting the market's dramatic volatility after the tariff announcement
Macroeconomic Impact: Inflation, Stagflation Concerns, Interest Rates, and Fed Outlook1. Inflation and Stagflation Concerns
The new tariffs amount to a significant additional tax on imported goods, coming at a time when the Federal Reserve is trying to suppress price growth, adding fuel to inflationary pressures. The market has shown concerns that these measures may disrupt the process of inflation easing. Market-based indicators such as the one-year inflation swap rate have surged to over 3%, and consumer surveys have seen expectations rise to around 5%, both indicating widespread expectations of continued price increases over the next 12 months.
Meanwhile, economists warn that if the trade war escalates further and triggers a global retaliatory response, global economic output could suffer losses of up to $14 trillion. The U.S.'s real GDP per capita is expected to initially decrease by nearly 1%. Fitch Ratings has pointed out that if the comprehensive tariff system continues to exist, most economies may slide into a recession, stating that "the current high level of tariffs in the U.S. has already rendered most economic forecasting models useless."
Amidst rising inflation expectations and growth concerns, the risk of global stagflation (a combination of economic stagnation and price inflation) is becoming increasingly prominent.
2. Interest Rate Outlook and the Fed's Stance
Federal funds rate futures data from the Federal Reserve indicates a significant increase in market expectations of interest rate cuts in the coming months. This marks a clear shift in sentiment—just a few weeks ago, the Fed was still firmly committed to containing inflation, but now, due to growing concerns about economic growth prospects, the market has begun to anticipate a possible shift in monetary policy towards accommodation to support the economy.
Figure 8: Market expectations for rate cuts in 2025 continue to rise, with the current expectation of 4 25-basis-point cuts—far exceeding the previous expectation of only 1 cut
Reflecting this sentiment shift are public statements by Fed officials. They have expressed concerns, emphasizing that the new round of tariffs contradicts previous economic policy directives. Now, the Fed faces a difficult decision: whether to tolerate the additional inflation brought by tariffs or to stick to a hawkish stance, risking further growth suppression?
"The scale of tariffs announced in recent weeks exceeds expectations, and its impact on inflation and growth—especially the cumulative effect—needs to be closely monitored."
—Jerome Powell, April 4, 2025
In the short term, the Federal Reserve seems to still be committed to maintaining stable long-term inflation expectations. However, monetary policy decisions will continue to rely on data, depending on which signal, inflation or growth, appears weaker. If inflation far exceeds the target, a stagflation environment could limit the Fed's policy response capability. This uncertain policy outlook has also heightened market volatility.
Outlook1. Relevance and Diversified Allocation
The evolving relationship between crypto assets and traditional markets is becoming a focus—where Bitcoin, as the dominant asset in the market, serves as the best window to observe this change. The recent "risk-off" event triggered by the trade war has significantly affected the correlation structure between BTC and the stock market and traditional safe-haven assets.
Since the first mention of tariffs on January 23, the initial market reactions were not consistent—Bitcoin and stocks showed slightly independent trends, causing their 30-day correlation to drop to -0.32 on February 20. However, as trade war rhetoric escalated and risk aversion continued to spread, this value rose to 0.47 in March, indicating Bitcoin's increased short-term linkage with overall risk assets.
In contrast, the correlation between Bitcoin and traditional safe-haven assets like gold has significantly weakened—originally neutral to positive relationships turned into a negative correlation of -0.22 in early April.
These changes reflect macroeconomic factors, especially trade policy and rate expectations, increasingly shaping crypto market behavior, temporarily suppressing the market structure that was originally demand-driven. Observing whether this correlation structure continues will help understand Bitcoin's long-term positioning and its diversified value.
Figure 9: Initial differentiated response, with BTC strengthening correlation with the S&P 500 as the trade war escalated, while its correlation with gold continued to weaken
2. Reviving the Safe Haven Asset Narrative
Despite recent macro and liquidity shocks highlighting crypto assets' "risk attributes," the long-term trend remains unchanged: Bitcoin's correlation with traditional markets usually rises under extreme pressure but gradually declines once the market stabilizes. Since 2020, BTC has had an approximately 0.32 90-day average correlation with the stock market and only a 0.12 correlation with gold, indicating that it has consistently maintained a certain distinctiveness from traditional asset classes.
Even under the impact of recent tariff announcements, BTC has shown resilience on days when some traditional risk assets weakened. Meanwhile, the supply held by long-term holders continues to increase—indicating that core holders have not significantly reduced their holdings during recent volatility, but instead have shown strong confidence.
This behavior implies that despite intensified short-term price fluctuations, Bitcoin may still re-establish a more independent macro identity.
Figure 10: Since 2020, Bitcoin has maintained a mild long-term correlation with traditional assets: 0.32 with the S&P 500 and 0.12 with gold
The key issue is whether BTC can regain a long-term structure of low correlation with the stock market. A similar trend was reflected during the March 2023 banking crisis, when BTC successfully decoupled from the stock market downturn and strengthened.
Today, facing an escalating trade war and global markets adapting to a pattern of long-term trade fragmentation, whether Bitcoin can once again be seen as a "non-sovereign, permissionless" safe-haven asset will determine its future macro role. Market participants will closely observe whether BTC can maintain this independent value proposition.
One potential path is to regain its attractiveness during currency inflation and fiat devaluation periods, especially when the Fed turns to easing. If the Fed starts cutting rates while inflation remains high, Bitcoin may regain favor as a "hard asset" or inflation hedge asset.
Ultimately, this process will determine BTC's long-term positioning as an asset class—and its role in portfolio diversification. This also applies to other mainstream altcoins, which exhibit stronger risk attributes in the current environment and may continue to rely on BTC's market sentiment dominance.
3. Stagflation and the Crypto Market in a Protectionist World
Looking ahead, the crypto market will face a complex macro environment dominated by trade policy risks, stagflationary pressures, and global coordination fractures. If global growth continues to weaken and the crypto market fails to form a clear narrative, investor sentiment may further deteriorate.
Long-term trade wars will test the resilience of the entire industry—potentially leading to retail fund outflows drying up, institutional allocations slowing down, and venture capital funding diminishing. Key macro variables to closely monitor in the coming months include:
● Trade Dynamics: Any new tariff list, unexpected easing measures, or significant bilateral changes (such as U.S.-China negotiations or further escalation) will directly impact market sentiment and inflation expectations.
● Core Inflation Data: The upcoming CPI and PCE data are crucial. If driven higher unexpectedly by import costs, it will exacerbate stagflation concerns; if the data is soft, it may alleviate central bank pressure and increase the attractiveness of risk assets (including crypto).
● Global Growth Indicators: Declining consumer confidence, slowing business activity (PMI), weak labor markets (rising jobless claims, slowing nonfarm payrolls), corporate profit warnings, and an inverted yield curve (a common recession signal) may further trigger risk aversion in the short term. However, if macro weakness accelerates expectations of monetary easing, it may also support the crypto market.
● Central Bank Policy Path: How the Fed and other major central banks seek to balance between inflation and recession will determine various asset liquidities. If they refuse to cut rates in the context of slowing growth, risk assets will continue to be under pressure; if they shift towards accommodation, it may lead to a broad boost. If real interest rates fall (whether due to policy or sustained inflation), long-duration assets like Bitcoin may benefit. Central bank policy divergence (such as Fed turning dovish while the ECB remains hawkish) may also trigger cross-border capital flows, further intensifying crypto market volatility.
● Crypto-Specific Policy Events: Approval of ETFs, strategic BTC reserves, advancement of key legislation, etc., may serve as independent catalysts in the current macro backdrop, potentially breaking the "macro linkage" status of crypto assets and highlighting their uniqueness. However, one should also be cautious of reverse risks, such as regulatory delays or unfavorable legal developments, which may result in negative feedback.
Conclusion
The most aggressive round of tariff policies since the 1930s is having profound effects on the macroeconomy and the crypto market. In the short term, the crypto market may continue to exhibit high volatility, with investor sentiment swaying with the latest trade war news.
If inflation remains high while growth slows, the Federal Reserve's response will be a key inflection point: if it turns dovish, the crypto market may rebound due to liquidity recovery; if it remains hawkish, pressure on risk assets will persist.
If the macro environment stabilizes, a new narrative emerges, or if crypto assets regain their long-term safe haven status, the market may see a revival. Until then, the market may remain in a state of flux, highly sensitive to macroeconomic news. Investors need to closely monitor global developments, maintain asset allocation diversification, and seek opportunities in potential market dislocations brought about by trade tensions.
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$COIN Joins S&P 500, but Coinbase Isn't Celebrating
On May 13, S&P Dow Jones Indices announced that Coinbase would officially replace Discover Financial Services in the S&P 500 on May 19. While other companies like Block and MicroStrategy, closely tied to Bitcoin, were already part of the S&P 500, Coinbase became the first cryptocurrency exchange whose primary business is in the index. This also signifies that cryptocurrency is gradually moving from the fringes to the mainstream in the U.S.
On the day of the announcement, Coinbase's stock price surged by 23%, surpassing the $250 mark. However, just 3 days later, Coinbase was hit by two consecutive events: a hack where employees were bribed to steal customer data and a demand for a $20 million ransom, and an investigation by the U.S. Securities and Exchange Commission (SEC) into the authenticity of its claim of having over 100 million "verified users" in its securities filings and marketing materials. These two events acted as mini-bombs, and at the time of writing, Coinbase's stock had already dropped by over 7.3%.
Coincidentally, Discover Financial Services, being replaced by Coinbase, can also be considered the "Coinbase" of the previous payment era. Discover is a U.S.-based digital banking and payment services company headquartered in Illinois, founded in 1960. Its payment network, Discover Network, is the fourth largest payment network apart from Visa, Mastercard, and American Express.
In April, after the approval of the acquisition of Discover by the sixth-largest U.S. bank, Capital One, this well-established digital banking company of over 60 years smoothly handed over its S&P 500 "seat" to this emerging cryptocurrency "bank." This unexpected coincidence also portrayed the handover between the new and old eras in Coinbase's entry into the S&P 500, resembling a relay race scene. However, this relay baton also brought Coinbase's accumulated "external troubles and internal strife" to a tipping point.
Over the past decade, cryptocurrency exchanges have been the most stable "profit machines." They play a role in providing liquidity to the entire industry and rely on trading fees to sustain their operations. However, with the comprehensive rollout of ETF products in the U.S. market, this profit model is facing unprecedented challenges. As the leader in the "American stack," with over 80% of its business coming from the U.S., Coinbase is most affected by this.
Starting from the approval of Bitcoin and Ethereum spot ETFs, traditional financial capital has significantly onboarded users and funds that originally belonged to exchanges in a more cost-effective, compliant, and transparent manner. The transaction fee revenue of cryptocurrency exchanges has started to decline, and this trend may further intensify in the coming months.
According to Coinbase's 2024 Q4 financial report, the platform's total trading revenue was $417 million, a 45% year-on-year decrease. The contribution of BTC and ETH's trading revenue dropped from 65% in the same period last year to less than 50%.
This decline is not a result of a decrease in market enthusiasm. In fact, since the approval of the Bitcoin ETF in January 2024, the inflow of BTC into the U.S. market has continued to reach new highs, with asset management giants like BlackRock and Fidelity rapidly expanding their management scale. Data shows that BlackRock's iShares Bitcoin ETF (IBIT) alone has surpassed $17 billion in assets under management. As of mid-May 2025, the cumulative net inflow of 11 major institutional Bitcoin spot ETFs on the market has exceeded $41.5 billion, with a total net asset value of $1214.69 billion, accounting for approximately 5.91% of the total Bitcoin market capitalization.
Institutional investors and some retail investors are shifting towards ETF products, partly due to compliance and tax considerations. On one hand, ETFs have much lower trading costs compared to cryptocurrency exchanges. While Coinbase's spot trading fee rate varies annually in a tiered manner but averages around 1.49%, for example, the management fee for IBIT ETF is only 0.25%, and the majority of ETF institution fees fluctuate around 0.15% to 0.25%.
In other words, the more rational users are, the more likely they are to move from exchanges to ETF products, especially for investors aiming for long-term holdings.
According to multiple sources, several institutions, including VanEck and Grayscale, have submitted applications to the SEC for a Solana (SOL) ETF, with some institutions also planning to submit an XRP ETF proposal. Once approved, this may trigger a new round of fund migration. According to a report submitted by Coinbase to the SEC, as of April, the platform's trading revenue from XRP and Solana accounted for 18% and 10%, nearly one-third of the platform's fee revenue.
However, the Bitcoin and Ethereum ETFs passed in 2024 also reduced the fees for these two tokens on Coinbase from 30% and 15% to 26% and 10%, respectively. If the SOL and XRP ETFs are approved, it will further undermine the core fee revenue of exchanges like Coinbase.
The expansion of ETF products is gradually weakening the financial intermediary status of cryptocurrency exchanges. From their original roles as matchmakers and clearers to now gradually becoming mere "on-ramps and off-ramps" for funds, exchanges are seeing their marginal value squeezed by ETFs.
On May 12, 2025, SEC Chairman Paul S. Atkins gave a keynote speech at the Tokenization and Cryptocurrency Working Group roundtable. The theme of his speech revolved around "It is a new day at the SEC," where he indicated that the SEC would not approach enforcement and regulation the same way as before but would instead pave the way for cryptocurrency assets in the U.S. market.
With signs of cryptocurrency compliance such as the SEC's "NEW DAY" declaration, an increasing number of traditional brokerages are attempting to enter the cryptocurrency industry. One of the most representative cases is the well-known U.S. brokerage Robinhood, which began expanding its crypto business in 2018. By the time of its IPO in 2021, Robinhood's crypto business revenue accounted for over 50% of the company, with a significant boost from the Dogecoin "moonshot" promoted by Musk.
In Q1 2025 earnings report, Robinhood showcased strong growth, especially in revenue from cryptocurrency and options trading. Fueled by Trump's Memecoin, cryptocurrency-related revenue reached $250 million, nearly doubling year-over-year. Consequently, Robinhood Gold subscription users reached 3.5 million, a 90% increase from the previous year, with the rapid growth of Robinhood Gold providing the company with a stable source of income.
Meanwhile, RobinHood is actively pursuing acquisitions in the cryptocurrency space. In 2024, it announced a $2 billion acquisition of the long-standing European cryptocurrency exchange Bitstamp. Additionally, Canada's largest cryptocurrency CEX, WonderFi, which recently went public on the Toronto Stock Exchange, also announced its integration with RobinHood Crypto. After obtaining virtual asset licenses in the UK, Canada, Singapore, and other markets, RobinHood has taken a proactive approach in the compliant cryptocurrency trading market.
Furthermore, an increasing number of brokerage firms are exploring the same path. Futu Securities, Tiger Brokers, and others are also dipping their toes into cryptocurrency trading, with some having applied for or obtained the VA license from the Hong Kong SFC. Although their user bases are currently small, traditional brokerages have a natural advantage in user trust, regulatory licenses, and low fee structures. This could pose a threat to native cryptocurrency platforms in the future.
In April 2025, security researchers discovered that some Coinbase user data was leaked on the dark web. While the platform initially responded by attributing it to a "technical misinformation," it still raised concerns among users regarding its security and privacy protection. Just two days before Dow Jones Indexes announced Coinbase's addition to the S&P 500 Index, on May 11, 2025, Coinbase received an email from an unknown threat actor claiming to have obtained customer account information and internal documents, demanding a $20 million ransom to keep the data private. Subsequent investigations confirmed the data breach.
Cybercriminals obtained the data by bribing overseas customer service agents and support staff, mainly in "non-U.S. regions such as India." These agents abused their access to Coinbase's internal customer support system and stole customer data. As early as February this year, blockchain detective ZachXBT revealed on X platform that between December 2024 and January 2025, Coinbase users lost over $65 million to social engineering scams, with the actual amount potentially higher.
Among the victims was a well-known figure, 67-year-old Ed Suman, an established artist in the art world for nearly two decades, having been involved in the creation of artworks such as Jeff Koons' "Balloon Dog" sculpture. Earlier this year, he fell victim to an impersonation scam involving fake Coinbase customer support, resulting in a loss of over $2 million in cryptocurrency. ZachXBT critiqued Coinbase for its inadequate handling of such scams, noting that other major exchanges have not faced similar issues and recommending Coinbase to enhance its security measures.
Amidst a series of ongoing social engineering incidents, although there has not been any impact on user assets at the technical level so far, it has raised concerns among many retail and institutional investors. Especially institutions holding massive assets on Coinbase. Just considering the U.S. BTC ETF institutions, as of mid-May 2025, they collectively hold nearly 840,000 BTC, and 75% of these are custodied by Coinbase. If we price BTC at $100,000, this amount reaches a staggering $63 billion, which is equivalent to the nominal GDP of two Iceland in the year 2024.
In addition, Coinbase Custody also serves over 300 institutional clients, including hedge funds, family offices, pension funds, and endowments. As of the Q1 2025 financial report, Coinbase's total assets under management (including institutional and retail clients) reached $404 billion. The specific amount of institutional custodied assets was not explicitly disclosed in the latest report, but it should still be over 50% based on the Q4 2024 report.
Once this security barrier is breached, not only could the rate of user attrition far exceed expectations, but more importantly, institutional trust in it would undermine the foundation of its business. Therefore, after a hacking event, Coinbase's stock price plummeted significantly.
Facing a decline in spot trading fee revenue, Coinbase is also accelerating its transformation, attempting to find growth opportunities in derivatives and emerging assets. Coinbase acquired a stake in the options platform Deribit at the end of 2024 and announced the official launch of perpetual contract products in 2025. This acquisition fills in Coinbase's gap in options trading and its relatively small global market share.
Deribit has a strong presence in non-U.S. markets, especially in Asia and Europe. The acquisition has enabled Coinbase to gain a dominant position in bitcoin and ethereum options trading on Deribit, accounting for approximately 80% of the global options trading volume, with daily trading volume remaining above $2 billion.
Meanwhile, 80-90% of Deribit's customer base consists of institutional investors, with their professionalism and liquidity in the Bitcoin and Ethereum options market highly favored by institutions. Coinbase's compliance advantage, coupled with its already robust institutional ecosystem, makes it even more suitable. By using institutions as an entry point, it can face the squeeze from giants like Binance and OKX in the derivatives market.
Facing a similar dilemma is Kraken, which is attempting to replicate Binance Futures' model in non-U.S. markets. Since the derivatives market relies more on professional users, fee rates are relatively higher and stickiness is stronger, making it a significant source of revenue for exchanges. In the first half of 2025, Kraken completed the acquisition of TradeStation Crypto and a futures exchange, aiming to build a complete derivatives trading ecosystem to hedge the risk of declining spot transaction fee income.
With the surge of Memecoin in 2024, Binance, OKX, and various CEX platforms began massively listing small-market-cap, highly volatile tokens to activate active trading users. Due to the wealth effect and trading activity of Memecoins, Coinbase was also forced to join the battle, successively listing popular tokens from the Solana ecosystem such as BOOK OF MEME and Dogwifhat. Although these coins are controversial, they are frequently traded, with fee rates several times higher than mainstream coins, serving as a "blood-boosting" method for spot trading.
However, due to its status as a publicly traded company, this practice is a riskier endeavor for Coinbase. Even in the current crypto-friendly environment, the SEC is still investigating whether tokens like SOL, ADA, and SAND constitute securities.
In addition to the forced transformation strategies carried out by the aforementioned CEXs, they are also starting to lay out RWAs and the most talked-about stablecoin payment fields, such as the PYUSD launched through a collaboration between Coinbase and Paypal, Coinbase's support for the Euro stablecoin EURC by Circle that complies with EU MiCA regulatory requirements, or the USD1 launched through a collaboration between Binance and WIFL. In the increasingly crowded trading field, many CEXs have shifted their focus from just the trading market to the application field.
The golden age of transaction fees has quietly ended, and the second half of the crypto exchange platform game has silently begun.
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Switzerland Zug, April 28, 2025, Chainwire
The world's fastest parallel MPC network, Ika, is set to launch on the Sui blockchain, announces a strategic investment from the Sui Foundation. Previously, Ika successfully completed a record-breaking 1.4 million SUI NFT art event on Sui. Ika is the world's first sub-second MPC network, capable of achieving zero-trust interoperability among hundreds of signing nodes, unprecedented in scale and rock-solid security.
Ika's core values of performance, speed, and high decentralization align perfectly with Sui. With its upcoming launch on the Sui blockchain, Ika will bring its unparalleled MPC technology into the Sui ecosystem, providing Sui Move smart contract developers with secure cross-Web3 interoperability. This further solidifies Sui's position as the preferred solution in cross-chain DeFi, decentralized custody, chain abstraction, AI-agent defense, native Bitcoin programmability, leveraging the first truly scalable and secure MPC signature scheme.
Ika addresses key bottlenecks of existing MPC networks and delivers unparalleled performance through innovative 2PC-MPC encryption scheme and Sui's Mysticeti consensus protocol:
1. Record Throughput: Ika's transaction processing capability is up to 10,000 times higher than current MPC networks, supporting unprecedented transaction volumes.
2. Ultra-Low Latency: While traditional network signatures may experience delays of 30 seconds or more, Ika can generate signatures in sub-seconds, supporting cross-chain real-time applications.
3. Tremendous Scalability: Ika breaks the conventional limit of 4-8 nodes, and the 2PC-MPC can scale to hundreds or even thousands of signers, enhancing decentralization without sacrificing performance.
4. Zero-Trust Security: Ika's architecture ensures that even in the most extreme scenarios, user assets remain secure, setting a new standard for decentralized security.
Ika's ultra-fast MPC network supports various applications on the Sui blockchain, and several Sui developers have utilized Ika to build tech, including:
· DeFi Interoperability: Ika's sub-second speed and scalability enable instant secure operations within the Web3 ecosystem, bringing liquidity from chains like Bitcoin and Ethereum into Sui. Sui developers Full Sail and Rhei have announced upcoming tech launches based on Ika.
· Decentralized Custody: Ika provides a secure, decentralized custody solution for digital assets on Sui, delivering unparalleled security for both institutional and individual users. Sui developers Aeon and Human Tech have announced the integration of Ika into their technology.
· Chain Abstraction: Ika helps Sui developers abstract away multi-chain complexity for users, combining with Sui's zkLogin feature to deliver a seamless user experience. Sui developers Covault and Lucky Kat have announced the integration of Ika into their technology.
· Programmable Bitcoin: Ika unlocks new possibilities for native BTC on Sui, enabling programmable and secure DeFi and custody. Sui developers Native and Nativerse have announced the upcoming launch of Ika-based technology.
· AI Agent Protection: Ika enhances AI applications on Sui by providing secure MPC protection, ensuring AI agents do not possess unrestricted power and safeguarding user asset security. Sui developers Atoma and Ekko have announced the upcoming launch of Ika-based technology.
The strategic investment in Ika by the Sui Foundation underscores Sui's commitment to driving cutting-edge technology for high performance and decentralization. This amplifies the technical synergy within the Sui ecosystem, propelling Sui and Ika to the forefront of the Web3 revolution, jointly advancing the future of secure, scalable, decentralized infrastructure.
Ika has raised over $21 million in funding, with a peak private valuation of $6 billion FDV, backed by support from Sui Foundation, DCG, Big Brain Holdings, Blockchange, Node Capital, Amplify Partners, Liquid2 Ventures, FalconX, Tykhe Block Ventures, Lightshift, Token Bay Capital, Collider, Zero Knowledge Ventures, NoLimit Holdings, Rubik Ventures, Dispersion Capital, Insignius Capital, Impatient Ventures, Cerulean Ventures, Earl Grey Capital, HDI Ventures, Flowdesk, TPC Ventures, Purechain Capital, Solr DAO, Heroic Ventures, Naval Ravikant, NotVCs, G-20 Group, Artifact Capital, DSRV, Encapsulate, and many other key players in the Web3 space.
Ika also demonstrated the strong support of Sui users by launching the "MF Squid Market" NFT art event, which became the largest and most successful NFT event in Sui's history, raising over 1.4 million SUI and establishing an active grassroots community.
The IKA token is set to native launch on the Sui blockchain, unlocking new decentralized security features and utilities. As the native token of the Ika MPC Network, IKA will play a key role in its ultra-fast, scalable infrastructure, used for paying MPC signature services, enabling seamless transactions within the Web3 ecosystem. Leveraging Sui's unparalleled speed and performance, Ika enhances the security and scalability of the entire ecosystem, introducing the most promising MPC technology in blockchain to the fastest-growing L1 of Web3.
Ika is the world's fastest parallel MPC network, offering sub-second latency, unprecedented scale and decentralization, and zero-trust security. As the preferred choice for interoperability, decentralized custody, and chain abstraction, Ika will fundamentally transform digital asset security and multi-chain DeFi.
Sui is the first Layer 1 blockchain and smart contract platform designed from the ground up to provide fast, private, secure, and inclusive digital assets. Built on the Move programming language, its object-centric model supports parallel execution, sub-second finality, and rich on-chain assets. Through horizontally scalable processing and storage capacity, Sui supports widespread applications at low cost with unparalleled speed. Sui represents a significant advancement in blockchain technology, offering creators and developers a platform to build exceptional user experiences.
Contact:
Ika PR
pr@ika.xyz (mailto:pr@ika.xyz)
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$COIN Joins S&P 500, but Coinbase Isn't Celebrating
On May 13, S&P Dow Jones Indices announced that Coinbase would officially replace Discover Financial Services in the S&P 500 on May 19. While other companies like Block and MicroStrategy, closely tied to Bitcoin, were already part of the S&P 500, Coinbase became the first cryptocurrency exchange whose primary business is in the index. This also signifies that cryptocurrency is gradually moving from the fringes to the mainstream in the U.S.
On the day of the announcement, Coinbase's stock price surged by 23%, surpassing the $250 mark. However, just 3 days later, Coinbase was hit by two consecutive events: a hack where employees were bribed to steal customer data and a demand for a $20 million ransom, and an investigation by the U.S. Securities and Exchange Commission (SEC) into the authenticity of its claim of having over 100 million "verified users" in its securities filings and marketing materials. These two events acted as mini-bombs, and at the time of writing, Coinbase's stock had already dropped by over 7.3%.
Coincidentally, Discover Financial Services, being replaced by Coinbase, can also be considered the "Coinbase" of the previous payment era. Discover is a U.S.-based digital banking and payment services company headquartered in Illinois, founded in 1960. Its payment network, Discover Network, is the fourth largest payment network apart from Visa, Mastercard, and American Express.
In April, after the approval of the acquisition of Discover by the sixth-largest U.S. bank, Capital One, this well-established digital banking company of over 60 years smoothly handed over its S&P 500 "seat" to this emerging cryptocurrency "bank." This unexpected coincidence also portrayed the handover between the new and old eras in Coinbase's entry into the S&P 500, resembling a relay race scene. However, this relay baton also brought Coinbase's accumulated "external troubles and internal strife" to a tipping point.
Over the past decade, cryptocurrency exchanges have been the most stable "profit machines." They play a role in providing liquidity to the entire industry and rely on trading fees to sustain their operations. However, with the comprehensive rollout of ETF products in the U.S. market, this profit model is facing unprecedented challenges. As the leader in the "American stack," with over 80% of its business coming from the U.S., Coinbase is most affected by this.
Starting from the approval of Bitcoin and Ethereum spot ETFs, traditional financial capital has significantly onboarded users and funds that originally belonged to exchanges in a more cost-effective, compliant, and transparent manner. The transaction fee revenue of cryptocurrency exchanges has started to decline, and this trend may further intensify in the coming months.
According to Coinbase's 2024 Q4 financial report, the platform's total trading revenue was $417 million, a 45% year-on-year decrease. The contribution of BTC and ETH's trading revenue dropped from 65% in the same period last year to less than 50%.
This decline is not a result of a decrease in market enthusiasm. In fact, since the approval of the Bitcoin ETF in January 2024, the inflow of BTC into the U.S. market has continued to reach new highs, with asset management giants like BlackRock and Fidelity rapidly expanding their management scale. Data shows that BlackRock's iShares Bitcoin ETF (IBIT) alone has surpassed $17 billion in assets under management. As of mid-May 2025, the cumulative net inflow of 11 major institutional Bitcoin spot ETFs on the market has exceeded $41.5 billion, with a total net asset value of $1214.69 billion, accounting for approximately 5.91% of the total Bitcoin market capitalization.
Institutional investors and some retail investors are shifting towards ETF products, partly due to compliance and tax considerations. On one hand, ETFs have much lower trading costs compared to cryptocurrency exchanges. While Coinbase's spot trading fee rate varies annually in a tiered manner but averages around 1.49%, for example, the management fee for IBIT ETF is only 0.25%, and the majority of ETF institution fees fluctuate around 0.15% to 0.25%.
In other words, the more rational users are, the more likely they are to move from exchanges to ETF products, especially for investors aiming for long-term holdings.
According to multiple sources, several institutions, including VanEck and Grayscale, have submitted applications to the SEC for a Solana (SOL) ETF, with some institutions also planning to submit an XRP ETF proposal. Once approved, this may trigger a new round of fund migration. According to a report submitted by Coinbase to the SEC, as of April, the platform's trading revenue from XRP and Solana accounted for 18% and 10%, nearly one-third of the platform's fee revenue.
However, the Bitcoin and Ethereum ETFs passed in 2024 also reduced the fees for these two tokens on Coinbase from 30% and 15% to 26% and 10%, respectively. If the SOL and XRP ETFs are approved, it will further undermine the core fee revenue of exchanges like Coinbase.
The expansion of ETF products is gradually weakening the financial intermediary status of cryptocurrency exchanges. From their original roles as matchmakers and clearers to now gradually becoming mere "on-ramps and off-ramps" for funds, exchanges are seeing their marginal value squeezed by ETFs.
On May 12, 2025, SEC Chairman Paul S. Atkins gave a keynote speech at the Tokenization and Cryptocurrency Working Group roundtable. The theme of his speech revolved around "It is a new day at the SEC," where he indicated that the SEC would not approach enforcement and regulation the same way as before but would instead pave the way for cryptocurrency assets in the U.S. market.
With signs of cryptocurrency compliance such as the SEC's "NEW DAY" declaration, an increasing number of traditional brokerages are attempting to enter the cryptocurrency industry. One of the most representative cases is the well-known U.S. brokerage Robinhood, which began expanding its crypto business in 2018. By the time of its IPO in 2021, Robinhood's crypto business revenue accounted for over 50% of the company, with a significant boost from the Dogecoin "moonshot" promoted by Musk.
In Q1 2025 earnings report, Robinhood showcased strong growth, especially in revenue from cryptocurrency and options trading. Fueled by Trump's Memecoin, cryptocurrency-related revenue reached $250 million, nearly doubling year-over-year. Consequently, Robinhood Gold subscription users reached 3.5 million, a 90% increase from the previous year, with the rapid growth of Robinhood Gold providing the company with a stable source of income.
Meanwhile, RobinHood is actively pursuing acquisitions in the cryptocurrency space. In 2024, it announced a $2 billion acquisition of the long-standing European cryptocurrency exchange Bitstamp. Additionally, Canada's largest cryptocurrency CEX, WonderFi, which recently went public on the Toronto Stock Exchange, also announced its integration with RobinHood Crypto. After obtaining virtual asset licenses in the UK, Canada, Singapore, and other markets, RobinHood has taken a proactive approach in the compliant cryptocurrency trading market.
Furthermore, an increasing number of brokerage firms are exploring the same path. Futu Securities, Tiger Brokers, and others are also dipping their toes into cryptocurrency trading, with some having applied for or obtained the VA license from the Hong Kong SFC. Although their user bases are currently small, traditional brokerages have a natural advantage in user trust, regulatory licenses, and low fee structures. This could pose a threat to native cryptocurrency platforms in the future.
In April 2025, security researchers discovered that some Coinbase user data was leaked on the dark web. While the platform initially responded by attributing it to a "technical misinformation," it still raised concerns among users regarding its security and privacy protection. Just two days before Dow Jones Indexes announced Coinbase's addition to the S&P 500 Index, on May 11, 2025, Coinbase received an email from an unknown threat actor claiming to have obtained customer account information and internal documents, demanding a $20 million ransom to keep the data private. Subsequent investigations confirmed the data breach.
Cybercriminals obtained the data by bribing overseas customer service agents and support staff, mainly in "non-U.S. regions such as India." These agents abused their access to Coinbase's internal customer support system and stole customer data. As early as February this year, blockchain detective ZachXBT revealed on X platform that between December 2024 and January 2025, Coinbase users lost over $65 million to social engineering scams, with the actual amount potentially higher.
Among the victims was a well-known figure, 67-year-old Ed Suman, an established artist in the art world for nearly two decades, having been involved in the creation of artworks such as Jeff Koons' "Balloon Dog" sculpture. Earlier this year, he fell victim to an impersonation scam involving fake Coinbase customer support, resulting in a loss of over $2 million in cryptocurrency. ZachXBT critiqued Coinbase for its inadequate handling of such scams, noting that other major exchanges have not faced similar issues and recommending Coinbase to enhance its security measures.
Amidst a series of ongoing social engineering incidents, although there has not been any impact on user assets at the technical level so far, it has raised concerns among many retail and institutional investors. Especially institutions holding massive assets on Coinbase. Just considering the U.S. BTC ETF institutions, as of mid-May 2025, they collectively hold nearly 840,000 BTC, and 75% of these are custodied by Coinbase. If we price BTC at $100,000, this amount reaches a staggering $63 billion, which is equivalent to the nominal GDP of two Iceland in the year 2024.
In addition, Coinbase Custody also serves over 300 institutional clients, including hedge funds, family offices, pension funds, and endowments. As of the Q1 2025 financial report, Coinbase's total assets under management (including institutional and retail clients) reached $404 billion. The specific amount of institutional custodied assets was not explicitly disclosed in the latest report, but it should still be over 50% based on the Q4 2024 report.
Once this security barrier is breached, not only could the rate of user attrition far exceed expectations, but more importantly, institutional trust in it would undermine the foundation of its business. Therefore, after a hacking event, Coinbase's stock price plummeted significantly.
Facing a decline in spot trading fee revenue, Coinbase is also accelerating its transformation, attempting to find growth opportunities in derivatives and emerging assets. Coinbase acquired a stake in the options platform Deribit at the end of 2024 and announced the official launch of perpetual contract products in 2025. This acquisition fills in Coinbase's gap in options trading and its relatively small global market share.
Deribit has a strong presence in non-U.S. markets, especially in Asia and Europe. The acquisition has enabled Coinbase to gain a dominant position in bitcoin and ethereum options trading on Deribit, accounting for approximately 80% of the global options trading volume, with daily trading volume remaining above $2 billion.
Meanwhile, 80-90% of Deribit's customer base consists of institutional investors, with their professionalism and liquidity in the Bitcoin and Ethereum options market highly favored by institutions. Coinbase's compliance advantage, coupled with its already robust institutional ecosystem, makes it even more suitable. By using institutions as an entry point, it can face the squeeze from giants like Binance and OKX in the derivatives market.
Facing a similar dilemma is Kraken, which is attempting to replicate Binance Futures' model in non-U.S. markets. Since the derivatives market relies more on professional users, fee rates are relatively higher and stickiness is stronger, making it a significant source of revenue for exchanges. In the first half of 2025, Kraken completed the acquisition of TradeStation Crypto and a futures exchange, aiming to build a complete derivatives trading ecosystem to hedge the risk of declining spot transaction fee income.
With the surge of Memecoin in 2024, Binance, OKX, and various CEX platforms began massively listing small-market-cap, highly volatile tokens to activate active trading users. Due to the wealth effect and trading activity of Memecoins, Coinbase was also forced to join the battle, successively listing popular tokens from the Solana ecosystem such as BOOK OF MEME and Dogwifhat. Although these coins are controversial, they are frequently traded, with fee rates several times higher than mainstream coins, serving as a "blood-boosting" method for spot trading.
However, due to its status as a publicly traded company, this practice is a riskier endeavor for Coinbase. Even in the current crypto-friendly environment, the SEC is still investigating whether tokens like SOL, ADA, and SAND constitute securities.
In addition to the forced transformation strategies carried out by the aforementioned CEXs, they are also starting to lay out RWAs and the most talked-about stablecoin payment fields, such as the PYUSD launched through a collaboration between Coinbase and Paypal, Coinbase's support for the Euro stablecoin EURC by Circle that complies with EU MiCA regulatory requirements, or the USD1 launched through a collaboration between Binance and WIFL. In the increasingly crowded trading field, many CEXs have shifted their focus from just the trading market to the application field.
The golden age of transaction fees has quietly ended, and the second half of the crypto exchange platform game has silently begun.
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Key Market Intelligence on May 14th, how much did you miss out on?
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4.Current Bitcoin Rally Possibly Driven by Institutions, Retail Traders Yet to Join
5.Binance Wallet's New TGE Privasea AI Participation Requires a 198 Point Threshold, with a Point Consumption of 15
Source: Overheard on CT (tg: @overheardonct), Kaito
PUMP: Today's discussions about PUMP focus on its new creator revenue-sharing model: the platform will allocate 50% of PumpSwap revenue to token creators, sparking varied reactions from users. Some criticize the move as insufficient or even misleading, while others view it as a positive step the platform is taking to reward creators. Meanwhile, PUMP faces market pressure from emerging competitors like LetsBONKfun and Raydium, which are rapidly gaining market share. Users also express concerns about PUMP's sustainability and potential regulatory risks in the U.S., with discussions extending to the platform's impact on the entire memecoin ecosystem.
COINBASE: Today, Coinbase became the first crypto company to join the S&P 500 Index, replacing Discover Financial Services, sparking widespread industry attention. The entire crypto community views this milestone as a significant development, signaling that crypto assets are further integrating into the mainstream financial system. The news has sparked lively discussions on Twitter, with many users pointing out that this may attract more institutional investors to enter the Bitcoin and other cryptocurrency markets.
XRP: XRP became the focal point of today's crypto discussion, with its significant market movements and strategic advances drawing attention. XRP has surpassed USDT to become the third-largest cryptocurrency by market capitalization, sparking market excitement and discussions about its future potential. The surge in market capitalization and price is believed to be related to increasing institutional interest, deepening strategic partnerships, and its role in the crypto ecosystem. Additionally, XRP's integration into multiple financial systems and its potential as a macro asset class are also seen as key factors driving the current market sentiment.
DYDX: Today's discussions about DYDX mainly focused on the dYdX Yapper Leaderboard launched by KaitoAI. The leaderboard aims to identify the most active community participants, with a total of $150,000 in rewards to be distributed over the first three seasons. This initiative has sparked broad community participation, with many users discussing the potential rewards and the incentive effect on the DYDX ecosystem. Meanwhile, progress on the ethDYDX to dYdX native chain migration and historical airdrop events have also been topics of discussion.
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