Market Reaction to Policy Drivers: From ETF to Tariffs

In recent discussions with industry veterans, there is a general sense of uncertainty regarding market changes in 2024/2025, making it difficult for many experienced traders to profit. One viewpoint suggests that 2017/2018 was the "community-driven market," where new asset issuance models created a wealth effect; 2020/2021 was the "technology-driven market," where new asset applications (such as DeFi and NFT) led to wealth growth; and 2024/2025 is seen as a "policy-driven market," where market direction primarily depends on policy changes.

This article will focus on recent policy-driven events, particularly the extent to which public policy information affects cryptocurrency prices. It is worth noting that people often become desensitized to signals that appear consistently over the long term, which may stem from the adjustment of various strategies or dulled perception.

Since the approval of the ETF in 2024, in addition to traditional technical indicators, the daily net inflow/outflow data of the ETF has become an important reference for predicting the next day's price trend. Taking ETH as an example, its price shows a positive correlation with the fund flow of the ETF. However, the price trend of BTC does not show a significant correlation with the fund flow of the ETF, particularly after the election of a certain candidate in November, where this correlation further weakened.

Overall, the market's sensitivity to public information will gradually decrease, but that does not mean that this information becomes completely ineffective.

Recently, a certain candidate has spoken multiple times about tariff issues, including imposing tariffs on goods from Canada and Mexico, increasing tariffs on foreign steel and aluminum products, and imposing new tariffs on Canadian dairy products and lumber.

Analyzing the impact of these statements on the market, we find that the market reactions triggered by the first (February 1) and third (March 4) tariff topics were the most pronounced, while the effects of the second (February 13) and fourth (March 7) were relatively minor, with even a slight rise in the market by the fifth (March 11). Does this mean the market has developed immunity to the tariff issue?

Combining the analysis of ETF capital flows, we found that before March 1, there was already a large-scale capital outflow from BTC ETF, which may have been to avoid risks or exit the market. This explains why current ETF holders are less sensitive to tariff issues—possibly because investors inclined to withdraw their investments have already exited.

The market reaction on March 4 was within expectations, but it was more intense due to the impact of the Bank of Japan's interest rate hike. The remarks on tariffs on March 7 were overshadowed by other significant events, such as the Bitcoin summit and news about strategic reserves.

Although people may feel numb to the continuous stream of information, the tariff issue has not yet reached the point of causing true "desensitization". The positive market reaction on March 11 may be superficial; a deeper reason could be that risk-averse funds have already withdrawn, and the traders remaining in the market have taken the "tariff" factor into consideration.

The market is not truly numb or desensitized; rather, it is reacting after carefully calculating the risks. Therefore, the key lies in how we interpret and respond to this policy information, rather than simply ignoring it.