The main factors affecting the consolidation or decline of the cryptocurrency industry are as follows: Let's first review the factors contributing to the recent decline in the cryptocurrency market ▫️ DeepSeek's impact on the AI foam has not subsided, ▫️ At the same time, the trade war is resurfacing, ▫️ Trump's tariff increase policy led to high prices and inflation, ▫️ Thereby reducing or even suspending the expectation of interest rate cuts, ▫️ This ultimately triggered the recent dual decline in the US stock market and cryptocurrency market. ▫️ The core is still: it is liquidity and bad mood that lead to the implementation of Trump's tariff increase policy next week. What impact will it have on the liquidity of the encryption market? Today, I will make an in-depth analysis. one ️⃣ Trump's Main Political Proposition As I said before, Trump's political ideas mainly focus on "America First", covering many fields such as economy, immigration, diplomacy, military, social culture, etc. 🟨 Economic Policy: Protectionism+Tax Reduction 1) Trade protectionism: Protecting US manufacturing through tariffs and reducing external dependence. 2) Enterprise tax reduction: In 2017, the "Tax Reduction and Employment Act" was implemented to reduce corporate income tax (from 35% to 21%). During the 24 year campaign, he publicly promised to extend the 17 year tax reform bill, further reduce taxes for the US manufacturing industry, and proposed replacing federal corporations with tariffs. 3) Reduce environmental and labor regulations, alleviate the regulatory burden faced by enterprises, and attract manufacturing companies to return to the United States. On January 31, 2025, Trump signed an executive order requiring that every new regulation must repeal at least 10 existing regulations. 4) Energy independence: Support the development of traditional energy sources (oil, coal, natural gas) and reduce subsidies for green energy. 🟨 Immigration Policy: Restricting Illegal Immigration and Strengthening Border Security 1) Restricting illegal immigration: increasing border patrol personnel; Expand the rapid deportation process for illegal immigrants, allowing for the swift deportation of illegal immigrants without due process; Strengthen southern border control and reduce illegal immigration into the United States. 2) Restricting legal immigration: tightening visa issuance; End the DACA program, which protects illegal immigrants brought to the United States during childhood from deportation. 3) Abolish "birthright citizenship": restrict the automatic acquisition of US citizenship by immigrant children. 🟨 Diplomacy and National Security: Isolationism+Trade Protection 1) Economic and trade policies: impose tariffs on foreign products (especially China) to protect domestic industries in the United States. 2) Military and Defense Policy: Reduce overseas military intervention, cut foreign aid, and require allies to bear more military expenses. 3) Regarding international relations and foreign policy: withdrawing from the Paris Climate Agreement, the Iran nuclear deal, etc., emphasizing "unilateral action". two ️⃣ What is the background of tariff policy? 🟨 Trade deficit issue Fact: The United States has long had trade deficits with countries such as China, the European Union, Japan, Mexico, etc. (i.e. imports exceed exports). Trump's opinion: A trade deficit means that the United States is "losing", with factories and employment flowing to other countries, and the United States being taken advantage of. Tariffs can increase the prices of imported goods, encourage American consumers to purchase domestic products, and thus reduce the trade deficit. 🟨 Manufacturing industry decline Fact: Since the 1990s, the manufacturing industry in the United States has gradually shrunk due to outsourcing, automation, and international competition, resulting in a significant loss of jobs. Trump's opinion: Low tariffs and free trade have led to manufacturing jobs flowing to countries such as China and Mexico, resulting in unemployment for blue collar workers in the United States. We need to use measures such as increasing tariffs, renegotiating trade agreements, and reducing taxes to encourage factories to return to the United States. 🟨 Political demands Target voters: Mainly blue collar workers in Rust Belt states (Rust Belt states refer to some states in the Midwest and Northeast of the United States, which used to be the industrial heartland of the country, with heavy industries such as steel, automobiles, coal, etc., such as Pennsylvania, Michigan, Wisconsin, etc.), these areas experienced economic decline due to factory relocation. Political Strategy: Through protectionist policies, show voters that they are "saving American manufacturing". Trade wars and tariffs have become part of his campaign slogans, such as' Make America Great Again '(MAGA). 🟨 National security considerations Trump's opinion: Reliance on foreign supply chains, especially China, poses a threat to US national security. For example, steel and aluminum are key materials for military and infrastructure industries, and the United States cannot rely on imports. The competition in technology fields such as 5G and semiconductors also involves national security (such as the Huawei issue). three ️⃣ What are the impacts of tariff policies? 🟨 Economic aspect: Rising inflation&affecting economic growth. The essence of tariffs is to impose taxes on imported goods, ultimately leading to an increase in commodity prices, pushing up inflation (suppressing consumption, increasing business costs), and affecting economic growth. 1) Inflation is rising. Tariffs increase the cost of imported goods, which companies usually pass on to consumers, leading to price increases. Typical case: Tariffs imposed on China in 2018-2019 → US companies forced to raise prices → US households pay an average of $1000-1300 more per year. 2) Affects economic growth. 🟨 Trade aspect: Global supply chain restructuring&trade war. 1) Weakening the global supply chain and promoting industrial transfer. Tariffs increase the cost of imported goods, leading companies to readjust their supply chains and seek lower cost production bases. For example: Part of Apple's production has been transferred from China to Vietnam and India. In 2018, the Trump administration launched a trade war between China and the United States, imposing tariffs on Chinese made electronic products such as iPhones and MacBook. Tesla builds factories in China to avoid high tariffs. After the 2018 Sino US trade war, China imposed a 25% tariff on imported cars made in the United States, leading to a significant increase in the price of American made Tesla in China and affecting market competitiveness. Vietnam and Mexico have become the main beneficiary countries, attracting some industries to transfer. 2) Triggering a trade war, resulting in retaliatory tariffs. For example: On February 1, 2025, the US government imposed a 10% tariff on all Chinese goods imported to the US, citing issues such as fentanyl. Subsequently, the Tariff Commission of the State Council of China announced that starting from February 10, 2025, tariffs will be imposed on some imported goods originating in the United States (a 15% tariff will be imposed on goods such as coal and liquefied natural gas, and a 10% tariff will be imposed on goods such as crude oil, agricultural machinery, large displacement vehicles, and pickup trucks). In 2025, the US government announced a 25% tariff on goods imported from Canada. As a countermeasure, the Canadian government announced a 25% tariff on goods imported from the United States, involving a total of 155 billion Canadian dollars. 🟨 Financial aspect: Capital flow&US dollar hegemony. Tariffs affect global capital markets and may have long-term impacts on the international status of the US dollar. 1) The volatility of the stock market and cryptocurrency market has intensified. The uncertainty brought about by tariff policies has increased market volatility, leading to frequent fluctuations in the US stock market, global stock market, and cryptocurrency circle. For example, in 2018, the China US trade war broke out, and the US stock market experienced multiple rounds of severe fluctuations. 2) Affects the hegemony of the US dollar. The long-term trade deficit of the United States supports global liquidity of the US dollar, and if tariff policies reduce the trade deficit, it may weaken the international settlement status of the US dollar. (Reference can be made to historical article: US Dollar Hegemony: Decoding the Manipulators of the Global Economy (Part 2)) For example, the use of RMB and Euro has increased, and some countries have attempted to de dollarize (such as China and Russia using their own currencies for settlement) (but the United States still controls financial sanctions and SWIFT systems, and the US dollar hegemony remains stable in the short term). 🟨 Geopolitical level: Global competition intensifies. Tariffs are not only economic tools, but also used in geopolitical games, affecting international relations. 1) The trade war has accelerated the decoupling of the Chinese and American economies, leading to the restructuring of global supply chains. 2) After 2023, the trade war will evolve into a technology war, restricting China's access to key technologies and chip equipment. The United States is suppressing China's high-tech industries (such as Huawei and the semiconductor industry) and promoting the localization of the chip supply chain. four ️⃣ conclusion The impact of the US tariffs is multi-layered and can be seen from the following main lines: 1. Economic aspect: Boosting inflation and affecting economic growth. 2. At the trade level: changing the global supply chain and triggering a trade war. 3. Financial aspect: The intensification of stock market volatility has affected the international status of the US dollar. 4. At the geopolitical level: intensifying the US China confrontation and affecting international relations. 5. I would like to say a few more words about the impact of the cryptocurrency industry: 🔴 Liquidity level: capital outflow and market depth decline Capital outflow: The market uncertainty caused by tariff policies has increased, and the risk appetite of cryptocurrency players has decreased. As a high-risk asset class, the pressure of capital outflow has increased in the cryptocurrency market. Investors are more inclined to transfer funds to safe haven assets in traditional financial markets, such as the US dollar and US Treasury bonds, leading to a decrease in liquidity in the cryptocurrency market. For example, when the China US trade war broke out in 2018, the price of Bitcoin fell sharply and a large amount of market funds flowed out. 🔴 Market depth decline: The depth of the cryptocurrency market is relatively shallow Large scale capital outflows will lead to a further decline in market depth and intensified price fluctuations. In the case of insufficient market depth, a small number of buy and sell orders can cause significant price fluctuations, increasing market instability. 🔴 On the market sentiment level: the spread of panic and the setback of investor confidence Panic spreads: The macroeconomic uncertainty brought about by tariff policies has raised concerns among investors about the prospects of the cryptocurrency market, causing panic to quickly spread. This panic can trigger irrational selling behavior among investors, further exacerbating the downward trend in the market. For example, after the United States announced tariffs on Chinese goods on February 1st, there was a large-scale sell-off in the cryptocurrency market, and the price of Bitcoin fell below $90000 at one point. 🔴 Investor confidence has been undermined: The confidence of investors in the cryptocurrency market is already fragile, and market turbulence caused by tariff policies will further undermine investor confidence. Players are concerned about the uncertainty of the market, leading to reduced investment or withdrawal from the market, resulting in a decrease in market activity. 🔴 Linkage with the US dollar index: Tariff policies may affect the trend of the US dollar index, and changes in the US dollar index will have an impact on the cryptocurrency market. For example, when tariff policies cause the US dollar index to rise, the cryptocurrency market may face greater selling pressure as investors tend to hold safe haven assets such as the US dollar. However, I still think that the risk aversion brought by Trump's tariff policy has been reflected this week, but if there is no further extreme operation policy after the implementation of the policy, the Bitcoin market will gradually absorb the impact of the policy, the mood will become stable, liquidity will recover, and the pessimistic environment will improve, and the long-term value support of Bitcoin will remain strong. Therefore, brothers, Bitcoin is likely to gradually stabilize and begin to rise, and buying on dips is still an opportunity.