The global financial market is being manipulated by one person.
As the global tariff war launched by Trump intensifies, market expectations for a US recession are also rising. On March 10, local time, the US stock market suffered a Black Monday, and the three major US stock indexes collectively plummeted. The Dow Jones Industrial Average fell 2.08%, closing down nearly 900 points; the Nasdaq fell 4%, and the S&P 500 fell 2.7%.
The lips and teeth are cold, and the crypto market is not immune. Bitcoin fell below 77,000, hitting $76,560, with a single-day drop of more than 8%. ETH performed even worse, falling below $1,800 in a short period of time, and the lowest was around $1,760. In terms of price alone, it has returned to the level of four years ago.
However, as time goes by, the market seems to have started to pick up. Bitcoin has recovered to $82,000, repairing its decline, and ETH has also risen by more than $1,900.
The external environment is treacherous, and the market is also full of doubts about whether this wave of growth is a short-term rebound or a reversal signal.
Trump is both a success and a failure. This is not only effective in the crypto market, but also has the same value in the global financial market. To talk about the decline of this round of crypto markets, we must start with Trump.
I vaguely remember that in the months before the election, the global financial market was actively responding to the "Trump" trading theme. Investors were betting wildly on Trump's deregulation, tax cuts, immigration and other policies. U.S. stocks, the U.S. dollar and Bitcoin soared across the board, and the 10-year U.S. Treasury yield once rose rapidly by 60 basis points. Small-cap stocks reacted significantly. On the second day after the election, the Russell 2000 index, which represents small-cap stocks in the United States, rose 5.8%, the largest single-day increase in nearly three years. From election day to before Trump's inauguration, the US dollar index rose by about 6%, and in Trump's first month in office, the S&P 500 rose by 2.5%, and the Nasdaq index, which is dominated by technology stocks, rose by 2.2%.
It can be seen that the market has a strong optimistic expectation for Trump's inauguration, but the facts have proved that Trump has brought more than a big rise to the financial market, and also a signal of economic recession.
From the perspective of the United States, the indicators are complicated. In February, the number of non-agricultural employment increased by 151,000, slightly lower than market expectations; the unemployment rate was 4.1%, compared with 4% in the previous value. Unemployment is still controllable and can even be considered good, but inflation remains high. The final value of the expected one-year inflation rate in the United States in February was 4.3%, the highest since November 2023. From the perspective of the consumer market, the February consumer expectations survey data released by the Federal Reserve Bank of New York showed that consumers' expectations for inflation in one year increased by 0.1 percentage point to 3.1%; the proportion of households expecting a deterioration in their financial situation in the next year rose to 27.4%, the highest level since November 2023. Against this background, many institutions have begun to give expectations of a recession in the United States. The latest forecast released by the Federal Reserve Bank of Atlanta on the 6th showed that the US GDP is expected to shrink by 2.4% in the first quarter of this year. The JPMorgan Chase forecast model shows that as of the 4th, the probability of an economic recession in the United States has risen from 17% at the end of November last year to 31%.
The reason for this series of data has a lot to do with the policy propositions adopted by Trump. After all, the president's recent way of making money is simple and too crude - tariffs. As early as February 1, Trump signed an executive order to impose a 10% tariff on American goods and a 25% tariff on Mexico and Canada, indicating the beginning of the tariff war. But as both Mexico and Canada gave in, Trump waved his hand and said that it would be postponed for one month. Just when the world believed that there was room for negotiation on tariffs, on February 27 local time, Trump announced on social media that the decision to impose a 25% tariff on Canadian and Mexican products would take effect as scheduled on March 4, and an additional 10% tariff would be imposed on China.
This time, in addition to China not being spoiled, Canada and Mexico were also completely irritated. On February 27, the Canadian Prime Minister responded strongly that he would impose retaliatory tariffs on the United States, and Mexican President Sheinbaum also stated that Mexico must take countermeasures. On March 6, Trump, who was about to get out of his rut, signed an executive order again to adjust the tariffs imposed on the two countries, exempting imports that meet the preferential conditions of the US-Mexico-Canada Agreement from tariffs. And just yesterday, the absurd White House call sounded again. Trump announced that he would impose an additional 25% tariff on Canadian steel and aluminum, and then he said that he would not impose an additional tariff. It really showed what it means to put negotiations on the table.
In fact, Trump's inauguration was not a good time. At least for the president, what his predecessor Biden left behind was indeed a big mess. In addition to the historical burden accumulated over the years, the $36 trillion national debt, the high federal budget deficit of $1.8 trillion, there are also 42,000 federal employees working from home, a large number of illegal immigrants, unsustainable judicial reforms, and external sanctions against Russia that continue to expand.
Faced with the mess, Trump had to make drastic reforms, and increasing revenue and reducing expenditure became the key. First, let Musk, your confidant, be the red-faced one to drastically cut internal government spending. Second, hold high tariffs to generate revenue and reform. Third, don't let the "poor relatives" lie on you and suck your blood. This also points to the ceasefire between Russia and Ukraine and the increase in EU military spending.
In the long run, a series of combined punches have foreseeable results. Streamlining government agencies can reduce government spending, managing borders can broaden the borders of national security, and imposing tariffs can reduce the trade deficit back to the United States. But reforms often mean bloodshed, and the existence of a painful period is inevitable. The pain has just begun, and the market can't stand it.
On March 10, when asked if he expected a recession in the United States this year, Trump said he "didn't want to predict such a thing." Trump said that the US government is "bringing wealth back to the United States," but "it will take a little time." A short sentence quickly brought down the financial market. The three major U.S. stock indexes fell across the board. The Dow Jones Industrial Average fell 890.01 points from the previous trading day, a drop of 2.08%; the S&P 500 fell 155.64 points, a drop of 2.70%; and the Nasdaq Composite fell 727.90 points, a drop of 4.00%. Fanng fell sharply by 4%, and Tesla's stock price fell by more than 15%. The crypto market also ushered in a big drop. Bitcoin fell 8%, hitting 76,000, and ETH fell below the $2,200 that was jokingly maintained for 4 years, returning to $1,800. The cottage market fell sharply, and the total market value of the crypto market fell below $2.66 trillion. Wall Street institutions have started emergency shelter mode. On March 10, the total net outflow of Bitcoin spot ETFs was $369 million, and it has been a net outflow for six consecutive days; the total net outflow of Ethereum spot ETFs was $37.527 million, and it has been a net outflow for 4 consecutive days.
But the good news is that all currencies are gradually recovering. The total market value of cryptocurrencies has slightly rebounded to 2.77 trillion US dollars, a 24-hour increase of 2.5%, and Bitcoin has returned to above 83,000 US dollars. The question also arises from this. Is this recovery a short-term rebound or the eve of a reversal?
It is enough to see that the price trend of Bitcoin and even the encryption market are closely related to US economic indicators, and the current market is actually quite similar to the state of the United States, which is at the junction of bulls and bears. On the one hand, the United States has a solid private sector balance sheet, the leverage ratio of the US household sector is at a historically low level, and the unemployment rate is still good; but on the other hand, the CPI remains high, and the cost of food, housing and other items has become the most important economic issue in the United States. The recent surge in egg prices threatens the entire United States; the momentum of US economic growth is also insufficient, AI is being repriced, and the craze of the seven sisters in the US stock market continues to ebb.
The same is true for the crypto market. On the one hand, the price of Bitcoin exceeding $80,000 and the strategic reserve of Bitcoin, coupled with the expected relaxation of regulations, make it difficult for people to think that this is a bear market. On the other hand, the decline in market growth momentum and liquidity is real, and the cottage market is wailing.
Therefore, to see the price, we still have to go back to the United States and Trump. There is a voice in the market that Trump is artificially creating a recession because he forces the Federal Reserve to cut interest rates to achieve the purpose of reducing interest payment costs. This statement also has conspiracy theory elements. After all, as a president, he certainly hates economic recession more than he likes it. But it has to be admitted that the current economic recession warning still raises the expectation of interest rate cuts, and the market generally believes that there will be a rate cut in June. If the interest rate cut is successful and quantitative easing is adopted, combined with relatively strong asset-liability fundamentals, the United States will usher in a reshaping of the business cycle after the collapse of rituals and music. Of course, the possibility of recession is not ruled out.
In the short term, tariffs and economic uncertainty will continue to increase. Before the macro market improves, it is difficult for the crypto market to usher in a real so-called reversal. From the current situation, despite the frequent positive news, it is difficult for Trump and other voices to affect the crypto market, and the market's self-sustaining ability is weak, requiring the injection of external liquidity rather than any verbal policy benefits.
In a non-recessionary scenario, the maximum possible decline of Bitcoin is to return to the price before Trump took office, which is the entry price of most institutions before, at around $70,000, but in a recessionary scenario, the price may fall sharply. If we look at the S&P 500, when a recession occurs, the S&P 500 falls between 20%-50%, and Bitcoin may also usher in an extreme decline. Of course, for now, there is no need to panic. The area where BTC market chips are dense has not been destroyed, and it is still between $90,000 and $95,000, indicating that regional investors have not frequently changed hands.
Based on the current situation, since the White House Crypto Summit and the Bitcoin Strategic Reserve have not ignited market sentiment, the possibility of major positive events in the next three months has been significantly reduced. Unless the macro environment gradually improves, the market will lack growth momentum. Considering the safe-haven properties of Bitcoin, Bitcoin may move from a small level to a large-scale volatile growth market with a year-long cycle. However, the altcoin market is likely to be difficult. Except for the head currencies and the staged narrative of American manufacturing, other currencies are difficult to grow.
Of course, in the long run, most industry insiders are still optimistic about the market. For example, Arthur Hayes, although he has been making remarks that Bitcoin may fall to $70,000, he has always insisted that Bitcoin will reach $1 million in the long run. Messari researcher mikeykremer also published an article saying that Bitcoin may eventually reach $1 million, but before that, it needs to face a severe bear market. The buying data is also quite optimistic. CryptoQuant analyst Cauê Oliveira revealed that whales have accumulated more than 65,000 BTC in the past 30 days. Joel Kruger of LMAX Digital is more optimistic, saying that Bitcoin is close to bottoming out and is expected to rebound in the second quarter.
But no matter what, under the market dominated by the external economic situation, tariffs, inflation and geopolitics will affect the crypto market. For investors, there is nothing to do but wait.
Aaron
Clement
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Jixu
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Hui Xin
Catherine