Global Financial Markets Under the Influence of a Single Figure

In a market dominated by external economic conditions, tariffs, inflation, and geopolitical tensions all have an impact on the cryptocurrency market. For investors, aside from waiting, perhaps all that remains is more waiting. The global financial markets are being manipulated by one individual.

Trump's Tariff War and the Looming Recession

As the global tariff war initiated by Trump intensifies, expectations of a U.S. economic recession are rising. On March 10th, local time, the U.S. stock market experienced a Black Monday, with all three major indices plummeting. The Dow Jones Industrial Average fell by 2.08%, closing nearly 900 points lower; the Nasdaq Composite Index dropped by 4%, and the S&P 500 Index declined by 2.7%.

Cryptocurrency Markets in the Crossfire

When one's lips are gone, the teeth will feel the cold. The cryptocurrency market was also not spared. Bitcoin fell below $77,000, touching $76,560, with a single-day drop of over 8%. Ethereum (ETH) performed even worse, briefly falling below $1,800 and reaching a low of around $1,760. In terms of price alone, it returned to levels seen four years ago.

Signs of a Market Recovery

However, as we move to the present, the market appears to be warming up. Bitcoin has recovered to $82,000, reversing its downward trend, and ETH has also risen above $1,900.

Is This a Temporary Rebound or a Reversal Signal?

With the external environment being highly unpredictable, there is much skepticism about whether this upsurge is a temporary rebound or a signal of a reversal.

Trump's Dual Impact on the Market

Trump's influence is not limited to the cryptocurrency market; it extends to the global financial markets. To discuss the recent downturn in the crypto market, we must start with Trump.

The Pre-Election Market Frenzy

I can still recall that in the months leading up to the election, the global financial markets were actively responding to the "Trump" trading theme. Investors were aggressively betting on Trump's policies of deregulation, tax cuts, and immigration. U.S. stocks, the dollar, and Bitcoin all soared, with the yield on 10-year U.S. Treasury bonds rising rapidly by 60 basis points. Small-cap stocks reacted significantly, with the Russell 2000 Index, representing U.S. small-cap stocks, surging by 5.8% on the second day after the election, marking its largest single-day gain in nearly three years. From Election Day to Trump's inauguration, the U.S. Dollar Index rose by about 6%, and in Trump's first month in office, the S&P 500 Index increased by 2.5%, while the Nasdaq Composite Index, dominated by tech stocks, rose by 2.2%.

Mixed Signals from Trump's Policies

It is evident that the market had high expectations for Trump's presidency. However, it has been proven that Trump's impact on the financial markets has not been solely positive; it has also brought signals of economic recession.

Domestic Indicators in the U.S.

The domestic indicators in the U.S. are complex and varied. In February, the non-farm payroll increased by 151,000, slightly below market expectations, while the unemployment rate stood at 4.1%, compared to the previous value of 4%. Although unemployment is still manageable and can even be considered relatively good, inflation remains stubbornly high. The U.S. one-year inflation rate expectation for February reached a final value of 4.3%, the highest since November 2023. Observing the consumer market, data from the New York Federal Reserve's February Consumer Expectations Survey showed that consumers' inflation expectations for the next year increased by 0.1 percentage points to 3.1%. The proportion of households expecting their financial situation to worsen in the next year rose to 27.4%, the highest level since November 2023.

Recession Forecasts on the Horizon

Against this backdrop, several institutions have already begun to forecast a U.S. recession. The Atlanta Federal Reserve Bank's latest forecast on March 6th showed that the U.S. GDP is expected to contract by 2.4% in the first quarter of this year. JPMorgan's predictive model indicated that as of March 4th, the probability of a U.S. recession has risen from 17% at the end of November last year to 31%.

Trump's Tariff Policies and Their Consequences

The series of data is closely related to Trump's policy propositions. After all, the president's recent method of generating revenue has been simple yet overly aggressive—tariffs. As early as February 1st, Trump signed an executive order imposing a 10% tariff on U.S. goods and a 25% tariff on goods from Mexico and Canada, signaling the beginning of a tariff war. However, as Mexico and Canada showed signs of compliance, Trump decided to postpone the tariffs by one month. Just when the world thought there was room for negotiation, on February 27th, Trump announced on social media that the 25% tariff on Canadian and Mexican products would take effect as scheduled on March 4th, and an additional 10% tariff would be imposed on Chinese goods.

International Reactions and Tariff Adjustments

This time, not only China but also Canada and Mexico were provoked. On February 27th, the Canadian Prime Minister strongly responded by announcing retaliatory tariffs on the U.S. Mexico's President, also stated that Mexico would take countermeasures. On March 6th, Trump once again signed an executive order to adjust the tariffs on the two countries, exempting imports that meet the preferential conditions of the USMCA from tariffs. Just yesterday, the absurd White House rhetoric resurfaced, with Trump announcing an additional 25% tariff on Canadian steel and aluminum, only to later backtrack and state that no additional tariffs would be imposed, truly putting negotiations on display.

Trump's Inheritance of a Messy Situation

In reality, Trump's inauguration was not a favorable timing, at least for the president. The predecessor, Biden, left behind a significant mess. In addition to the long-standing historical baggage, there were $36 trillion in national debt, a federal budget deficit of $1.8 trillion, 42,000 federal employees working from home, a large number of illegal immigrants, an unsustainable judicial reform, and the ongoing expansion of sanctions against Russia.

Trump's Reforms and Strategies

Faced with this mess, Trump had no choice but to implement sweeping reforms, with revenue generation and cost-cutting being key. First, he appointed his confidant, Elon Musk, to aggressively cut internal government expenditures. Second, he used tariffs to generate revenue and drive reforms. Third, he aimed to prevent "poor relatives" from siphoning off resources, which also pointed to a ceasefire in Ukraine and an increase in EU military spending.

Long-Term Prospects and Short-Term Pains

In the long run, these combined measures are expected to yield tangible results. Streamlining government agencies can reduce government spending, border control can expand the boundaries of national security, and tariffs can reduce trade deficits and bring funds back to the U.S. However, reform often means bloodshed, and the existence of a painful transition period is inevitable. The pain has just begun, and the market cannot withstand it.

Market Turmoil on March 10th

On March 10th, when asked whether he expected a U.S. recession this year, Trump said he "didn't want to predict such a thing." He claimed that the U.S. government was "bringing wealth back to America," but "it takes a little time." This brief statement quickly sent the financial markets into a tailspin. The Dow Jones Industrial Average fell by 890.01 points, a drop of 2.08%; the S&P 500 Index declined by 155.64 points, a drop of 2.70%; and the Nasdaq Composite Index fell by 727.90 points, a drop of 4.00%. FAANG stocks all plummeted by 4%, and Tesla's share price fell by more than 15%.

The Cryptocurrency Market Crash

The cryptocurrency market also experienced a significant decline. Bitcoin fell by 8%, touching $76,000, while Ethereum (ETH) broke below the $2,200 mark, which had been jokingly referred to as a four-year stronghold, and returned to $1,800. The altcoin market also suffered a major downturn, with the total market capitalization of the cryptocurrency market falling below $2.66 trillion. Wall Street institutions initiated an emergency flight-to-safety mode. On March 10th, the total net outflow from Bitcoin spot ETFs reached $369 million, marking six consecutive days of outflows; Ethereum spot ETFs saw a total net outflow of $37.527 million, continuing for four days.

The Current Recovery and Its Implications

However, the good news is that all cryptocurrencies are gradually recovering. The total market capitalization of cryptocurrencies has slightly rebounded to $2.77 trillion, with a 24-hour increase of 2.5%, and Bitcoin has returned above $83,000. The question arises: Is this recovery a short-term rebound or a prelude to a reversal?

Bitcoin's Price Movement and the U.S. Economic Indicators

It is evident that Bitcoin's price trend and the cryptocurrency market as a whole are closely related to U.S. economic indicators. The current market situation is also quite similar to the state of the U.S., being at a crossroads between a bull and a bear market. On one hand, the U.S. has a robust private sector balance sheet, with household leverage at historically low levels and unemployment still relatively low. On the other hand, the CPI remains high, with the costs of food, housing, and other items becoming the most significant economic issues in the U.S. The recent surge in egg prices threatens the entire nation. The U.S. economic growth momentum also appears insufficient, with AI re-pricing and the FAANGs' fervor gradually subsiding.

The Cryptocurrency Market's Similarities

The cryptocurrency market is also in a similar situation. On one hand, Bitcoin's price above $80,000, its strategic reserves, and the anticipated regulatory relaxation make it hard to consider this a bear market. On the other hand, the decline in market growth momentum and liquidity is real, with the altcoin market in distress.

Looking to the U.S. and Trump for Price Direction

There is a market theory that Trump is intentionally creating a recession to force the Federal Reserve to lower interest rates, thereby reducing interest payment costs. This theory has a conspiratorial tone, as the president would naturally dislike a recession more than liking one. However, it cannot be denied that the current recession warnings have increased expectations for interest rate cuts, with the market generally anticipating a rate cut in June. If a successful rate cut leads to quantitative easing, combined with a relatively strong balance sheet, the U.S. could reshape its economic cycle after a period of turmoil. Of course, a recession is still a possibility.

Short-Term Outlook for the Cryptocurrency Market

In the short term, the tariff stick and economic uncertainty will continue to strengthen. Before macroeconomic conditions improve, the cryptocurrency market is unlikely to see a true reversal. Given the current situation, despite frequent positive news, statements from Trump and others have little impact on the cryptocurrency market. The market's self-sustaining ability is weak and requires external liquidity injections rather than verbal policy benefits.

Bitcoin's Potential Price Movements

In a non-recession scenario, Bitcoin's maximum potential drop might return to the price level before Trump's inauguration, around $70,000, which was the entry point for many institutions. However, in a recession scenario, there is a possibility of a significant price decline. If we look at the S&P 500, which typically falls by 20%-50% during a recession, Bitcoin could also experience an extreme downturn. Of course, for now, there is no need for panic. The concentrated trading range of BTC has not been disrupted yet, remaining between $90,000 and $95,000, indicating that regional investors have not been frequently trading.

Market Outlook and Future Trends

Based on the current situation, since the White House Crypto Summit and Bitcoin strategic reserves have not ignited market sentiment, the likelihood of significant positive events in the next three months is significantly reduced. Unless the macroeconomic environment gradually improves, the market will lack growth momentum. Considering Bitcoin's safe-haven attribute, it may transition from minor fluctuations to a larger, multi-year oscillating growth trend. However, the altcoin market is likely to face difficulties. Apart from top-tier coins and those with periodic narratives created by the U.S., other coins are unlikely to see growth.

Long-Term Market Optimism

In the long run, most industry insiders remain optimistic about the market. For example, Arthur Hayes, despite his repeated statements that Bitcoin could fall to $70,000, has always insisted that Bitcoin will eventually reach $1 million in the long term. Messari researcher Mikey Kremer also wrote that Bitcoin could ultimately reach $1 million, but a severe bear market must be weathered first. The buying data is also quite optimistic. CryptoQuant analyst Cauê Oliveira revealed that whales have accumulated over 65,000 BTC in the past 30 days. Joel Kruger from LMAX Digital is even more optimistic, stating that Bitcoin is close to bottoming out and is expected to rebound in the second quarter.

The Reality for Investors

Nevertheless, in a market dominated by external economic conditions, tariffs, inflation, and geopolitical tensions will all impact the cryptocurrency market. For investors, aside from waiting, perhaps all that remains is more waiting.