Weekly Top Stories - 4/11

This week in the newsletter, we write about a wild week in markets fueled by tariff uncertainty, Paul Atkins’ confirmation by the Senate to lead the SEC, and vote buying in Arbitrum governance.

Markets Whipsaw on Tariff Volatility

In a whirlwind week for global trade, President Donald Trump announced a surprise 90-day suspension of newly announced tariffs on dozens of U.S. trade partners, offering a brief reprieve from sweeping duties that had only just taken effect. However, the concession was accompanied by a dramatic escalation in tariffs on Chinese imports, which were hiked to a staggering 145%—a move that prompted swift retaliation from Beijing, which raised its own tariffs on U.S. goods to 125%.

The temporary tariff pause sparked a momentary rally on Wall Street, with the S&P 500 posting its biggest daily gain since 2008, jumping 9.5%, and the Nasdaq 100 soaring 12%. Yet, the relief was short-lived. Market optimism quickly gave way to renewed fears of a global recession as attention returned to the rapidly intensifying trade war between the world's two largest economies.

Global financial markets reacted with turbulence. U.S. bond markets sold off, gold surged to a record high, and stocks in Europe and Asia fell sharply. European officials warned that the new tariffs could shrink the region’s GDP by up to 1%, possibly tipping the EU into a recession. French President Emmanuel Macron called the 90-day pause “fragile,” noting that significant duties—like the 10% blanket tariff on nearly all U.S. imports and levies on steel, aluminum, and cars—remain in place, fueling uncertainty for businesses across the globe.

China condemned the U.S. tariff hikes as “unilateral bullying,” and President Xi Jinping called for stronger ties between China and the EU to resist such measures. Trump, meanwhile, expressed hope for a potential deal with China, referring to President Xi as a “friend” and indicating that negotiations could resume despite the mounting strain.

Amid the chaos, U.S. Treasury Secretary Scott Bessent insisted that over 75 countries were eager to begin trade talks, and the U.S. formally announced negotiations with Vietnam. Japan also signaled its intent to engage, setting up a task force and planning a visit to Washington.

Still, volatility dominated trading as recession risks rose sharply, with analysts warning that the economic environment is now among the most uncertain since the early days of the COVID-19 pandemic. Despite the momentary pause, the global trading system faces its most significant disruption in decades.

OUR TAKE:

The economic stakes are massive. The U.S. and China trade about $700 billion worth of goods annually, including key exports like smartphones, laptops, soybeans, and gas turbines. Without a deal to de-escalate tensions, higher tariffs will likely disrupt supply chains, raise consumer prices, and strain already fragile global markets.

This will be the first real increase in tariffs under the current monetary regime and the first major departure of the United States from neo-liberal trade policy to mercantilism in most of our lifetimes. The last material increase in US tariffs was with the Smoot-Hawley Tariff Act in 1930, and at that time, the US dollar was on the gold standard and Keynes had yet to publish his General Theory .

Global trade as % of GDP has been steadily rising for decades as most trade barriers have fallen, bringing the broad global gains from trade between countries with differing specializations, but at the cost of self-sufficiency, the focus of the current administration. Sheltering national industries, either through tariffs or capital controls, is not an uncommon strategy in developing countries, but with varying results: broad success in China’s case and numerous failures in Latin America. It is a less common strategy from a leading developed country and is broadly a sign of weakness, not strength.

If the US’ industries were competitive or innovative enough, they wouldn’t need the government’s help to keep them on their feet. This is not to brush aside criticism of other countries’ unfair policies that put the United States at a disadvantage, such as China dumping solar panels on the US , but we have broadly abandoned the global rules-based infrastructure we helped build to resolve them in an ordered way, in favor of blanket tariffs and bilateral diplomacy.

Furthermore, trade imbalances are a direct result of the Triffin Dilemma , a concept identified in the 1960s by economist Robbert Triffin, which postulates that the country with the global reserve currency must become a net exporter of their national currency, naturally resulting in a trade deficit. Imposing tariffs on exporters to the United States, who themselves “buy” dollars when they sell goods to us, makes it harder to export dollars and thus could jeopardize the global reserve status of the U.S. dollar. Stablecoins can be a powerful countervailing force here, which Treasury Secretary Scott Bessent acknowledged at the March 7 crypto roundtable at the White House, in which he said , “we are going to keep the U.S. the dominant reserve currency in the world and we are going to use stablecoins to do that.” While tariffs and mercantilism may reduce dollar demand from foreign governments or sovereigns, stablecoins can be a force to put dollars directly in the hands of global citizens. Can the White House outsmart the Triffin Dilemma? It seems they plan to try. – Thad Pinakiewicz & Alex Thorn

Paul Atkins Confirmed as SEC Chair

On Wednesday, the U.S. Senate confirmed Paul Atkins as Chair of the Securities and Exchange Commission by a 52-44 vote. Atkins, who previously served as an SEC Commissioner from 2002 to 2008, brings deep institutional experience and a reputation for advocating market-driven solutions to regulatory questions. Following his tenure at the SEC, Atkins founded Patomak Global Partners, a financial services consultancy that has advised major banks, asset managers, exchanges, and digital asset companies on risk management, compliance, and regulatory strategy.

Atkins inherits an SEC that is rapidly moving in a different direction from the prior administration under Gary Gensler. The agency has begun providing guidance and clarity on topics long mired in uncertainty, including memecoins , stablecoins , and bitcoin mining pools . It has also halted several pending enforcement actions against crypto firms, signaling a shift away from regulation by enforcement. Commissioner Hester Peirce’s “Crypto Task Force” has met with dozens of industry stakeholders in recent months, including Coinbase, Kraken, Uniswap Labs, Circle, and the Ethereum Foundation.

On April 10, the SEC’s Division of Corporation Finance released a public statement outlining how crypto firms can register offerings and comply with securities laws. The statement emphasized a willingness to work with issuers to develop tailored disclosure frameworks while reiterating that many token distributions likely constitute securities offerings. It also highlighted the importance of post-offering decentralization and clarified that tokens could transition from securities to non-securities over time.

OUR TAKE:

Paul Atkins’ confirmation represents a true changing of the guard at the SEC. After years of adversarial posturing toward digital assets under Gary Gensler, the Commission is engaging in a sharp pivot toward constructive engagement. Atkins brings a market-oriented philosophy and deep regulatory experience to the role, and under his leadership, the SEC appears committed to fostering innovation while ensuring investor protection. This new approach is a much-needed course correction that could unlock meaningful capital formation and infrastructure development within the U.S.

We expect the SEC to establish a workable pathway for token issuances—one that acknowledges the investment contract nature of many public offerings while also allowing tokens to evolve into non-securities as networks decentralize. A new disclosure regime will likely build on Commissioner Hester Peirce’s “Safe Harbor 2.0” proposal, which envisioned a time-bound framework under which developers could build and grow decentralized networks without running afoul of securities laws. While that proposal was never adopted, it laid an important conceptual foundation that the current leadership appears poised to develop further, incorporating lessons learned from recent market dynamics and industry feedback.

We also hope the SEC will eventually permit staking within Ethereum and Solana ETFs. Doing so would allow ETF holders to earn yield, significantly enhancing the attractiveness of these products for long-term investors. However, the operational requirements for ETF sponsors will be substantial. They’ll need to manage validator infrastructure (or select trusted partners), implement robust delegation frameworks, and ensure that staking rewards are properly accounted for and distributed—all while maintaining strong custodial protections and regulatory compliance. Despite the complexity, allowing staking in ETFs would represent a major step forward in integrating crypto’s unique features into mainstream financial products.

There's still a great deal for the SEC to figure out. The prior SEC left behind a patchwork of inconsistent policies, unresolved litigation, and regulatory confusion. Key issues—such as the licensing of crypto broker-dealers, standards for digital asset custody, frameworks for token issuance, and how traditional finance intersects with DeFi—remain murky and contested. Untangling this regulatory mess will take time and care. Encouragingly, the SEC’s Crypto Task Force has already been meeting extensively with a wide array of market participants to help clarify the landscape. These include firms like Galaxy , Coinbase , Securitize , BlackRock , Wintermute , Cumberland , Chainlink , and many more , signaling a willingness to collaborate and listen. As Hester Peirce wrote on February 21, there must be some way out of here – out of the mess left by the prior SEC. But there are still many miles to go before we sleep. – Alex Thorn

Arbitrum DAO Vote Ends in Controversy with Bought Votes Swaying Outcome

Late last week, an Arbitrum decentralized autonomous organization (DAO) vote ended in controversy when a user purchased votes to sway the outcome of a proposal. While similar to other governance attacks—such as the recent incident with Compound Finance—in which users acquire large amounts of voting power to influence proposal outcomes, this Arbitrum attack was unique. Specifically, the attacker purchased voting power at a significant discount and in a relatively risk-minimized manner through the voting marketplace Lobby Finance.

Typically, attackers must either 1) purchase voting power off the market by swapping into a DAO’s governance token or 2) borrow the voting power (in the form of a DAO’s governance token) from lending applications to obtain a substantial enough number of votes. This requires significant upfront capital and bears the market risk of asset prices in both cases. When swapping in the market, they risk losing money and/or not acquiring enough votes after slippage. When borrowing, they run the risk of liquidation, not being able to redeem 100% of their collateral without additional capital contributions, and must pay interest on the loan (if the asset can even be borrowed or if there is enough liquidity supplied to the lending market). In either case, the barrier to manipulating the vote is relatively high and comes with direct risk to the attacker. However, during this Arbitrum vote, the attacker was able to use Lobby Finance’s full 19.26 million ARB ($6.4 million) worth of voting power for a one-time cost of just 5 ETH ($9,138) at the time the votes were purchased. The attacker then used the acquired voting power to elect a new member of Arbitrum’s OpCo committee who could receive up to 66 ETH of incentives over the next year. It is still unclear if the attacker’s motive was financial or rooted in something more abstract. The individual who received the bought votes, CupOJoseph, stated that they did not ask for them.

OUR TAKE:

Discourse around the situation on X has been centered on entities like Lobby Finance being problematic for DAO governance and how votes coming through such channels can be censored or punished. Even the Arbitrum DAO itself had a discussion on whether or not it should “permit people to explicitly purchase, and compete to purchase, votes.” Some ideas that have been floated in the community include disqualifying bought votes and enforcing penalties when bought votes are detected in a proposal. Lobby Finance and bought votes, however, are downstream of the real problem, being token-weighted governance voting, and are a result of misaligned incentives built within the system and governance token economics. Attempting to censor votes acquired through external channels or to tamper with proposal outcomes is a never-ending pursuit, as the epicenter of the issue is the underlying voting process itself (where 1 coin = 1 vote) and the lack of utility and lack of value accrual of any kind to governance tokens. If a proposal provides sufficient incentive and votes can be purchased or gamed, they inevitably will be. Censorship may block known avenues temporarily, but new ones will always emerge. Additionally, the absence of clear incentive for owning DAO tokens can lead to fewer users demanding them (resulting in poor distribution) and/or delegating them to properly vetted delegates and “non-malicious” entities (i.e., if users can get the best yield renting their tokens out for others to vote with, they are incentivized to do so).

Instances such as this, and the countless others that have come before it, highlight the need for DAO governance to be rearchitected. Projects across Solana, in addition to Optimism and Uniswap in the EVM world, have acknowledged this and begun experimenting with alternative governance mechanisms, namely Futarchy. While Futarchy is still working to prove itself in DAO governance, it fundamentally solves the problem of 1 token = 1 vote in traditional voting processes. This is due to its “marketization” of voting, where the process of settling on a vote outcome (collective belief of a voter base) is separated from the process of evaluating the means to achieve it (which is settled through “prediction markets”). Effectively, it more substantially separates the size of an entity’s position in a governance token from its ability to influence the outcome of votes. More on the state of Futarchy and how it works can be found in this Galaxy Research report . On the tokenomics front, the industry has been asking more questions on value accrual and token “fundamentals.” However, until more revenue-generating businesses emerge onchain, the tokenomics part of the governance problem is difficult to solve. – Zack Pokorny

Charts of the Week

This week saw the highest daily liquidations on Aave V3 on Ethereum mainnet since President Trump initially announced tariffs against Mexico, Canada, and China in early February. Over the three days after the president’s initial tariff threats between February 1 and February 3, around $211.2 million of user collateral was liquidated, $113 million (53%) of which was ETH and $44.5 million (21%) of which was wrapped bitcoin tokens. Between April 6 and April 7, more than $98.6 million of user collateral was liquidated as market volatility spiked; $66.9 million (68%) of this collateral was ETH, and $9.8 million (9.8%) included wrapped bitcoin tokens.

Despite ETH being the most liquidated collateral asset on these days, it only makes up 21% of collateral with borrows actively levied against it on Aave V3 on Ethereum mainnet. The relative underperformance of ETH as the market has grinded lower has been a contributing factor to this dynamic, in addition to the possible aggressiveness of borrowers using the asset as collateral.

Other News

• SEC approves options trading on Ethereum ETFs from BlackRock, Grayscale, and Bitwise

• Magic Eden pivots into crypto trading with Slingshot app acquisition

• 21Shares to list Dogecoin ETP backed by foundation on SIX Swiss Exchange

• 'Aavegotchi' will migrate to Base and sunset its layer-3 gaming network

• Ripple buying prime brokerage Hidden Road for $1.25 billion

• BlackRock taps Anchorage Digital as bitcoin, ethereum ETF custodian