The global financial market is being manipulated by one person.
As the global tariff war ignited by Trump intensifies, expectations for a recession in the U.S. economy are rising. On March 10, local time, U.S. stocks faced a black Monday, with all three major indices suffering significant losses. The Dow Jones Industrial Average fell by 2.08%, closing down nearly 900 points; the Nasdaq dropped by 4%, and the S&P 500 fell by 2.7%.
With the loss of one, the other suffers; the crypto market is no exception, with Bitcoin dropping below $77,000, hitting $76,560, a single-day decline of over 8%. ETH performed even worse, briefly falling below $1,800, reaching a low of around $1,760, returning to levels seen four years ago in terms of price.
However, as time has passed, the market seems to have started to warm up again, with Bitcoin recovering to $82,000, reversing its downward trend, and ETH rising above $1,900.
The external environment is unpredictable, and whether this wave of growth is a short-term rebound or a reversal signal remains a matter of doubt in the market.
Success and failure both stem from Trump, not only in the crypto market but also in the global financial market, which carries the same weight. To discuss the recent decline in the crypto market, one must start with Trump.
I vaguely remember that in the months leading up to the election, the global financial market was actively responding to the "Trump" trading theme. Investors were betting wildly on Trump's policies of deregulation, tax cuts, and immigration reform, causing U.S. stocks, the dollar, and Bitcoin to soar across the board, with the yield on the 10-year U.S. Treasury bond once rapidly increasing by 60 basis points. Small-cap stocks reacted significantly; on the day after the election, the Russell 2000 index, representing U.S. small-cap stocks, surged by 5.8%, marking the largest single-day gain in nearly three years. From election day to Trump's inauguration, the dollar index roughly increased by 6%, and in Trump's first month in office, the S&P 500 rose by 2.5%, while the tech-heavy Nasdaq index climbed by 2.2%.
It is evident that the market had strong optimistic expectations for Trump's presidency, but the facts have proven that Trump brought not only significant gains to the financial market but also signals of economic recession.
From a domestic perspective, the indicators are complex. In February, non-farm payrolls increased by 151,000, slightly below market expectations; the unemployment rate was 4.1%, down from 4%. While unemployment may be manageable and even seen as a positive, inflation remains high, with the U.S. February year-on-year inflation rate expected to reach 4.3%, the highest since November 2023. Observing the consumer market, the New York Federal Reserve's February consumer expectations survey showed that consumers' inflation expectations for a year later increased by 0.1 percentage points to 3.1%; the proportion of those expecting their household financial situation to worsen in the coming year rose to 27.4%, the highest level since November 2023.
Against this backdrop, several institutions have begun to predict a recession in the U.S. The latest forecast released by the Atlanta Federal Reserve on the 6th indicates that U.S. GDP is expected to contract by 2.4% in the first quarter of this year. JPMorgan's predictive model shows that as of the 4th, the probability of a recession in the U.S. has risen from 17% at the end of November last year to 31%.
The reasons behind this series of data are closely related to the policies advocated by Trump. After all, the president's recent method of making money is simple yet overly crude—tariffs. On February 1, Trump signed an executive order imposing a 10% tariff on U.S. goods and a 25% tariff on products from Mexico and Canada, signaling the start of the tariff war. However, as Mexico and Canada softened their stance, Trump announced a one-month delay, and just when the world thought there was room for negotiation, on February 27, Trump declared on social media that the decision to impose a 25% tariff on Canadian and Mexican products would take effect on March 4, with an additional 10% tariff on China.
This time, not only China but also Canada and Mexico were thoroughly provoked. On February 27, Canadian Prime Minister responded strongly, stating that Canada would impose retaliatory tariffs on the U.S., and Mexican President López Obrador also indicated that Mexico would take countermeasures. On March 6, seeing that things were spiraling out of control, Trump signed another executive order adjusting the tariff measures on the two countries, exempting imports that met the preferential conditions of the USMCA from tariffs. Just yesterday, the absurd rhetoric from the White House echoed again, with Trump announcing a 25% additional tariff on Canadian steel and aluminum, only to later state that no additional tariffs would be imposed, truly demonstrating what it means to put negotiations on the table.
In reality, Trump's timing in taking office was not ideal, at least for the president, as his predecessor Biden left behind a significant mess. In addition to the long-standing historical burdens, there is a $36 trillion national debt, a $1.8 trillion federal budget deficit, 420,000 federal employees working from home, a large number of illegal immigrants, unsustainable judicial reforms, and ongoing external sanctions against Russia.
Faced with this mess, Trump had no choice but to implement drastic reforms, with cost-cutting becoming key. First, he had his confidant Musk publicly slash internal government spending; second, he raised tariffs to generate revenue and reform; and third, he could not allow "poor relatives" to suck blood from him, which also pointed to the need for a ceasefire in the Russia-Ukraine conflict and increased military spending by the EU.
In the long run, a series of combined measures may yield predictable results. Streamlining government agencies can reduce government spending, managing the border can expand national security boundaries, and raising tariffs can reduce trade deficits and bring money back to the U.S. However, reforms often mean bleeding, and the existence of a period of pain is unavoidable; the pain has just begun, and the market cannot bear it.
On March 10, when asked if he expected a recession in the U.S. this year, Trump said he "did not want to predict such things." He stated that the U.S. government is "bringing wealth back to America," but "it takes a little time." A single sentence quickly caused a collapse in the financial market. All three major U.S. stock indices fell sharply, with the Dow Jones Industrial Average dropping 890.01 points, a decline of 2.08%; the S&P 500 index fell by 155.64 points, a decline of 2.70%; and the Nasdaq Composite Index dropped by 727.90 points, a decline of 4.00%. The FANG stocks also plummeted by 4%, with Tesla's stock price falling by over 15%.
The crypto market also faced a significant drop, with Bitcoin falling by 8%, hitting $76,000, and ETH dropping below the long-held $2,200, returning to $1,800. The altcoin market plummeted, and the total market capitalization of the crypto market fell below $2.66 trillion. Wall Street institutions entered emergency shelter mode, with a total net outflow of $369 million from Bitcoin spot ETFs on March 10, continuing a six-day streak of net outflows; Ethereum spot ETFs saw a total net outflow of $37.527 million, continuing a four-day streak of net outflows.
The good news is that currently, all cryptocurrencies are gradually warming up, with the total market capitalization of cryptocurrencies slightly rebounding to $2.77 trillion, a 24-hour increase of 2.5%, and Bitcoin returning above $83,000. However, this raises the question: is this rebound a short-term bounce or a precursor to a reversal?
It is evident that the price movements of Bitcoin and the crypto market are closely related to U.S. economic indicators, and the current market is actually quite similar to the state of the U.S., being at the intersection of bull and bear markets. On one hand, the U.S. has a solid private sector balance sheet, with household leverage at historically low levels and a relatively good unemployment rate; on the other hand, CPI remains high, with the costs of food, housing, and other items becoming the most significant economic issues in the U.S., and the recent surge in egg prices threatening the nation; the momentum for U.S. economic growth also appears insufficient, with AI re-pricing and the fervor for the "seven sisters" of U.S. stocks waning.
The crypto market is similar; on one hand, the price of Bitcoin exceeding $80,000 and its strategic reserves, combined with anticipated regulatory easing, make it hard to believe this is a bear market. On the other hand, the decline in market growth momentum and liquidity is very real, and the altcoin market is in distress.
Therefore, to assess the price, one must return to the U.S. and Trump. There is a voice in the market suggesting that Trump is artificially creating a recession to force the Federal Reserve to cut interest rates, aiming to lower interest payment costs. This theory has elements of conspiracy, as the president would certainly dislike a recession more than he would like it. However, it must be acknowledged that the current recession warning has raised expectations for interest rate cuts, with the market generally believing that a cut will come in June. If successful, moving towards quantitative easing, combined with a relatively strong asset-liability fundamental, the U.S. may experience a restructuring of the economic cycle after the chaos, though the possibility of recession cannot be ruled out.
In the short term, the stick of tariffs and economic uncertainty will continue to strengthen, making it difficult for the crypto market to experience a true so-called reversal before macro market improvements. From the current situation, despite the frequent positive news, voices including Trump’s have already had a hard time influencing the crypto market, which needs external liquidity injection rather than any verbal policy benefits.
In a non-recession scenario, the maximum possible decline for Bitcoin could return to the levels before Trump took office, which is around $70,000, the entry price for most institutions. However, in a recession scenario, there is a significant possibility of a sharp decline in price. If we look at the S&P 500, during a recession, it typically falls between 20%-50%, and Bitcoin may also face extreme declines. Of course, for now, there is no need to panic; the densely held areas in the BTC market have not been broken, remaining between $90,000 and $95,000, indicating that regional investors have not frequently changed hands.
Based on the current situation, predictions indicate that since the White House crypto summit and Bitcoin's strategic reserves have not ignited market sentiment, the likelihood of significant positive events in the next three months has clearly decreased. Unless the macro environment gradually improves, the market will lack growth momentum. Considering Bitcoin's safe-haven attributes, it may transition from small-scale fluctuations to large-scale growth cycles over the years. However, the altcoin market is likely to struggle; aside from leading coins and those with a narrative tied to U.S. manufacturing, other coins are unlikely to see growth.
Of course, in the long term, most industry professionals remain optimistic about the market. For example, Arthur Hayes, despite consistently stating that Bitcoin may drop to $70,000, also firmly claims that Bitcoin will reach $1 million in the long run. Messari researcher Mikey Kremer also stated that Bitcoin may eventually reach $1 million, but before that, a severe bear market must be faced. Buying data is also quite optimistic, with CryptoQuant analyst Cauê Oliveira revealing 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.
However, regardless of the situation, under the influence of external economic conditions, tariffs, inflation, and geopolitical factors will all impact the crypto market. For investors, aside from waiting, perhaps the best course of action is still to wait.
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