Apr 11, 2025
ETH, SOL, BTC, Trade wars, Bonds, Treasuries, The Orange Swan.
We have indeed entered that very reality where Ethereum has firmly settled below the $2,000 mark. It is no coincidence that we begin this month’s letter with this fact. Throughout the past year, we observed the following structure:
BTC
Higher High – Higher Low
Correction
Higher High – Higher Low
ETH
Lower High – Higher Low
Correction
Higher High – Lower Low – Lower High
Many respected private holders and institutional investors continued to accumulate ETH. The rationale seemed straightforward: at some point, ETH must rally. It was inconceivable that the second-largest cryptocurrency, and the leading asset in DeFi, would continue to underperform Bitcoin indefinitely. Moreover, some level of institutional acceptance has occurred, as flows into and out of ETH ETFs remain relatively balanced. Nonetheless, ETH has become the central concern of the crypto market.
One month ago, we posed the following question:
"Technical analysis of ETH suggested that if the price falls below 1800, the next target would be 1,600, followed by 1,400. While such levels may seem unlikely, who could have predicted a drop from 2,800 to 1,800 in just 9½ weeks?"
At present, we have seen 1,400 play out. Do we like it? No. Can we profit on it? Yes.
Let us now turn to the fundamental drivers of the past month and the tremendous start of April, as President Trump might put it.
Internally we call him now “the Orange Swan” (c)
March was marked by trade wars that triggered significant corrections across both equity and crypto markets. Yet at every new downturn, retail investors, and not only retail, rushed to buy the dip. What did we observe at the end of March and the beginning of April?
President Trump’s tariff initiatives led to the sharpest four-day decline in markets since the Great Depression. We have not verified the exact comparative depth, but it may have surpassed prior crises. The market reaction exceeded that of the COVID crisis, the original Black Monday of 1987, and even the events of 2008. While there are populist theories suggesting that Trump and his inner circle sought to reenter equities at a lower level after massive crypto gains, we see a different, more pragmatic explanation.
The tariff episode bears a resemblance to the "Bonnie Situation" in Pulp Fiction — and those who have seen the film will recognize the analogy.
Despite various populist narratives, including the one just mentioned, there is a straightforward rationale behind the tariff strategy.
First and foremost, President Trump has long been committed to bringing manufacturing back to the United States. This especially applies to Apple, a symbolic cornerstone of American consumer culture. We will not delve into the “Rust Belt” or the specifics of tariff policy on metals, but from a strategic standpoint, the logic is there, albeit controversial. From a macroeconomic perspective, repatriating FMCG manufacturing from low-cost labor markets to the U.S. is unlikely to be a net benefit. Still, the administration may be operating with variables that are not immediately visible to the broader public.
Let us now consider what is visible and analyzable.
U.S. Treasury bonds, the 2- and 10-year notes in particular, are the clearest representation of America’s external sovereign debt. These instruments are auctioned monthly, with yields set at issuance.
There is a belief that the administration is less focused on the Federal Reserve's base rate and more concerned with the 10-year yield, as it serves as a proxy for the cost of debt. For instance, a drop in auction yield from 4.5% to 4.0% represents a savings of $50 billion in debt servicing. Contrary to popular belief, market trading of Treasuries does not impact the official debt calculation — only new issuances do, since the coupon yield is fixed and unrelated to market speculation.
The February and March plans appeared designed to lower Treasury yields and thereby reduce interest payments on sovereign debt. That plan was working — until it wasn’t. The idea was to spark a flight to safety into Treasuries by orchestrating a controlled market downturn. The plan succeeded too well. The equity markets dropped so hard that funds were forced to liquidate Treasuries, which serve as collateral for a wide range of instruments. Within hours, the Bank of Japan also began offloading T-bonds.
The result was the opposite of what was intended. Equities crashed, Treasury yields spiked instead of falling, and intervention became necessary. The administration responded with a 90-day delay on new tariffs to help bring yields back down.
This pause triggered a remarkable single-day rally in equity markets, with major indices surging more than 10%. But the core objective (lowering Treasury yields) remains unmet. Yields continue to hover around 4.5%, showing no typical inverse relationship with equity markets. In formal terms, the administration had a sound plan, but the market proved as unpredictable and forceful as ever twice.
Did insider activity occur around the tariff delay? Almost certainly. Reports suggest call options were purchased just 20 minutes before the announcement.
Let us now move from macro dynamics to portfolio outcomes and forward views.
ETH concern #1:
Technical analysis that predicted a move to 1,400 now suggests that, irrespective of Bitcoin’s recovery, ETH may continue repricing downward to levels such as 800, 300, or even 150. This may seem implausible now, just as sub-2,000 levels did in January. We are not forecasting this scenario, but we must remain hedged against its possibility.
ETH concern #2:
The ETH/BTC chart appears poised to test the historic 0.016 ratio. Should that occur, a fresh round of repricing may be triggered, even among long-term believers.
Despite these warnings, we continue to view Ethereum as a viable long-term holding. The above scenarios are simply risks to manage, not convictions.
SOL:
In contrast, the SOL/ETH chart looks robust. We have consistently emphasized Solana as a strategic allocation and believe it will continue to outperform ETH. Recall that not long ago, SOL staged a dramatic recovery from the $7–8 range. Fundamentally, the project remains strong. Its core contributors are actively involved, and liquidity pools in its ecosystem are markedly more dynamic than what we observe in few Ethereum restaking activists.
BTC:
Bitcoin, remarkably, remains unchanged from last month. Same levels, same numbers, same volatility. Despite external shocks like the sharp declines in U.S. equity indices, BTC held its ground. It did dips, but quickly recovered. The price action suggests strong support. Either we consolidate before a move higher, or we rally to the 88–90k range followed by consolidation.
Our trading continues to be short-term focused, but we currently prefer long setups over short ones.
The next black swan?
In case of “the Orange swan" resumes tariff escalation, and the EU finalizes a zero-tariff trade deal with China, Treasuries yield could rally aggressively. In that case, the government may be forced to inject liquidity, thereby weakening the dollar further. Despite recent inflation fears, we could see the Fed move to raise rates instead of cutting them — contrary to current market hopes and political pressure. That would align with Chair Powell’s recent hawkish comments. He made it clear that a market correction alone is not a valid reason for policy action.
Should this scenario materialize, crypto may test new lows. However, with Treasury Secretary Bessent demonstrating sound judgment (notably recommending the tariff pause), we assign this scenario a low probability of 5%.
In March, our strategies generated approximately 4% for participants. This may appear modest compared to previous months, cycles and meme-driven gains, but it was consistent, protected and positive. We had expected March to outperform February. That did not happen, but the result was still net positive. Past performance is not necessarily indicative of future results.
As for April, we will refrain from making projections of the great and tremendous profits we expect. Just in case.
Join us and stay tuned.