Author: ChandlerZ, Foresight News
On the evening of March 3 to the morning of March 4, against the backdrop of global macroeconomic clouds, Trump's announcement to include crypto assets in the U.S. strategic reserves failed to reverse the overall market downturn. The news of Trump incorporating crypto assets into strategic reserves triggered a brief market frenzy, but soon returned to calm. Bitcoin, after a brief rise, fell by 13%, almost completely giving back its gains; Ethereum dropped to nearly $2,000 after soaring to $2,550, even dipping below recent lows. Other tokens that had previously led the gains, such as SOL, also retraced most of their increases.
At the same time, the three major U.S. stock indices also saw significant declines, with the S&P 500 index down 1.76%, the Nasdaq down 2.64%, and the Dow Jones turning from a nearly 200-point gain to a drop of over 600 points. Tech stocks, as representatives of risk assets, faced even more severe selling pressure, with Nvidia's stock price plummeting nearly 9%, while the Magnificent 7 index, composed of the seven major U.S. tech giants, fell by 3.45%. Funds quickly withdrew from high-risk assets and shifted towards traditional safe-haven assets, forming a typical risk-off trading pattern.
According to CoinMarketCap data, the total market capitalization of crypto assets fell below $3 trillion again, reaching a new low since November 2024. The scale of liquidations in the derivatives market significantly expanded, with Coinglass statistics showing that the total liquidation amount across the network reached $1.068 billion in 24 hours, including $38.6 million in Bitcoin contracts and $20.7 million in Ethereum contracts.
Tariff Turmoil Triggers Market Panic
Trump reiterated that starting March 4, a 25% tariff would be imposed on Canada and Mexico, clearly stating that "there is no room for negotiation." He also mentioned that countries imposing tariffs on U.S. products from April 2 would face equivalent retaliatory tariffs. Canada is prepared to impose retaliatory tariffs on $155 billion worth of U.S. goods. Buffett rarely publicly opposed this policy, stating that tariffs "are, in a sense, an act of war," which would trigger inflation and harm consumers.
The U.S. economy is currently facing a rare state of macroeconomic fragility. The Atlanta Fed's GDPNow model significantly revised down its first-quarter GDP contraction forecast from 1.5% to 2.8%, a nearly doubling of the downward adjustment far exceeding the normal range of economic forecast revisions, indicating that the economic fundamentals are deteriorating rapidly. At the same time, manufacturing activity is nearly stagnant, while raw material price indicators have reached a two-year high, constituting a typical precursor to stagflation. This combination of stagnant economic growth and inflationary pressure has historically been a nightmare for macroeconomic policymakers, as it undermines the effectiveness of conventional monetary policy tools. In this context, Bridgewater founder Dalio warned that if the U.S. does not reduce its deficit, it will face a debt crisis within three years.
U.S. Suspension of Military Aid to Ukraine Increases Uncertainty
According to reports from Xinhua citing U.S. media, Trump has ordered a suspension of all military aid to Ukraine until Ukrainian leaders demonstrate a willingness to "reach a peace agreement between Russia and Ukraine."
This decision came after a heated argument between Trump and Zelensky in the Oval Office. The Wall Street Journal reported that the Trump administration has stopped funding for new arms sales to Ukraine and is considering freezing the transportation of weapons from U.S. stockpiles, which could severely impact Ukraine's combat capabilities at a critical moment in its fight against Russian forces.
In response to the change in U.S. policy, European leaders agreed at a summit in London to form a "volunteer alliance" to draft a peace plan for Ukraine to be submitted to Trump, which will include the provision of ground troops and military assets. The UK also announced a new military aid plan, including £1.6 billion in support for air defense missile procurement and a £2.26 billion defense loan agreement.
This policy shift may signal a fundamental change in U.S. policy towards Ukraine and a potential restructuring of the international security landscape, with market expectations rising for future geopolitical conflicts, prompting investors to withdraw funds from U.S. stocks and crypto assets, chasing safe-haven assets, leading to simultaneous declines in these two major markets.
At the same time, this change in the security landscape suggests that traditional macro crises may intertwine with international political risks, forming a multi-layered risk system. The decision to suspend military aid to Ukraine may trigger more defensive measures within the region, and the resulting political and economic uncertainties will further impact global financial markets. Investors, facing a deteriorating external environment, find it difficult to determine which asset class can better hedge against risks, leading to a wait-and-see approach, which reduces market liquidity and further exacerbates the simultaneous decline of U.S. stocks and the crypto market.
Market at a Critical Point
The current market is at a critical point where multiple policy storms and uncertainties intertwine, with investors' expectations of global risks significantly rising under the influence of tariff turmoil and the U.S. suspension of military aid to Ukraine. This expectation has generated a risk-averse sentiment, causing traditional risk assets such as U.S. stocks and the crypto market to decline in unison, severely damaging market confidence. Meanwhile, the escalation of geopolitical tensions has raised doubts about the macroeconomic outlook, suppressing liquidity and causing risk premiums to rise, thus casting a shadow over the short-term trends in the crypto asset market.
In this context, there are various possibilities for the future direction of the crypto market. On one hand, the U.S. is set to hold its first crypto asset summit on March 7, where Trump's speech and further elaboration on the future national strategic Bitcoin reserve plan are expected to reignite market enthusiasm, bringing positive signals for some crypto assets. On the other hand, while Trump's proposal for a "national strategic Bitcoin reserve" last year attracted attention, it remains unclear how the U.S. government will specifically implement it, and its internal logic and operability are still widely questioned. If the U.S. were to establish reserves by retaining Bitcoin from confiscated assets in the future, its supportive role for the market may gradually become apparent, but whether this model can balance political maneuvering and spontaneous market development remains to be seen, depending on policy details and implementation strength.
Overall, the future trends of the crypto market will seek a balance between policy shifts, international security situations, and the global macroeconomic environment. In the medium to long term, if the global economic situation stabilizes and policies are implemented with clear direction, crypto assets may gradually recover from the current turbulence. However, at this stage, the market still faces high uncertainty, with risk premiums and volatility remaining elevated.
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