The Helm of the Fate of the Global Financial Market: Controlled by One Person

As the global trade war intensifies, market expectations for an economic recession in the United States are rising. On March 10, U.S. stocks faced a Black Monday, with all three major indices suffering significant losses. The Dow Jones Industrial Average fell by 2.08%, the Nasdaq Composite dropped by 4%, and the S&P 500 index decreased by 2.7%.

The cryptocurrency market has also not been spared, with Bitcoin dropping below $77,000, hitting $76,560, a single-day decline of over 8%. Ethereum performed even weaker, briefly falling below $1,800 to around $1,760, bringing prices back to levels seen four years ago.

However, the market seems to have started to warm up, with Bitcoin recovering to $82,000, correcting its downward trend, and Ethereum also rising to over $1,900. The external environment is unpredictable, and there are many doubts in the market about whether this growth is a short-term rebound or a reversal signal.

In the months leading up to the election, global financial markets actively responded to this trading theme, with investors betting on policies such as deregulation, tax cuts, and immigration. U.S. stocks, the dollar, and Bitcoin all surged, with the yield on ten-year U.S. Treasuries rising rapidly by 60 basis points. Small-cap stocks performed particularly well, with the Russell 2000 index soaring 5.8% on the second day after the election, marking the largest single-day gain in nearly three years. From election day to the inauguration, the dollar index rose by about 6%, and in the first month after the inauguration, the S&P 500 index increased by 2.5%, while the Nasdaq index rose by 2.2%.

The market has high expectations for the new government, but it turns out that what it brings is not only a surge but also signals of economic recession.

U.S. domestic indicators are complex. In February, non-farm payrolls added 151,000 jobs, slightly below expectations; the unemployment rate is 4.1%, compared to the previous value of 4%. The unemployment situation is manageable, but inflation remains high, with the final value of the one-year inflation rate in February recorded at 4.3%, the highest since November 2023. The New York Fed's February consumer expectations survey shows that inflation expectations one year from now have risen to 3.1%; the proportion of people expecting their household financial situation to worsen in the next year has increased to 27.4%, the highest since November 2023.

Multiple institutions have provided forecasts for a U.S. recession. The Atlanta Federal Reserve Bank predicts that GDP will contract by 2.4% in the first quarter of this year. A certain investment bank's predictive model shows that as of the 4th, the probability of a U.S. economic recession has risen from 17% at the end of November last year to 31%.

These data are closely related to the policy proposals adopted by the government. On February 1, an executive order was signed to impose a 10% tariff on U.S. goods and a 25% tariff on Mexico and Canada. On February 27, it was announced that the 25% tariff on Canadian and Mexican products would take effect as scheduled, with an additional 10% tariff on China.

Canada and Mexico have strongly responded, stating that they will take retaliatory measures. On March 6, an executive order was signed to adjust the tariffs imposed on the two countries, exempting imported goods that meet the preferential conditions of the US-Mexico-Canada Agreement from tariffs. Yesterday, the government's stance wavered again, initially announcing a 25% additional tariff on Canadian steel and aluminum, but then stating that no additional tariffs would be imposed.

Faced with numerous challenges, the government had to carry out bold reforms, and increasing revenue while cutting costs became key. Firstly, cut internal government spending; secondly, raise tariffs to generate income and reform; thirdly, promote the EU to increase military spending.

In the long run, these measures may produce the desired effects, but reforms often come with growing pains, and the market has already begun to feel overwhelmed.

On March 10th, when asked whether a recession was expected this year, the government stated that it "was unwilling to predict such things," and mentioned that it was "bringing wealth back to America," but that "it will take some time." These remarks quickly triggered turmoil in the financial markets. The three major U.S. stock indices fell across the board, with technology stocks dropping significantly by 4%, and the stock price of a certain electric vehicle company plummeting over 15%.

The cryptocurrency market has also suffered a heavy blow, with Bitcoin down 8%, reaching $76,000, Ethereum dropping below $2,200, and falling back to $1,800. The altcoin market has plummeted, and the total market capitalization of the cryptocurrency market has fallen below $2.66 trillion. Institutions have entered emergency refuge mode, with Bitcoin spot ETFs seeing net outflows for six consecutive days, and Ethereum spot ETFs experiencing net outflows for four consecutive days.

Currently, cryptocurrency is gradually warming up, with the total market value slightly rising to $2.77 trillion, a 24-hour increase of 2.5%, and Bitcoin returning above $83,000. The question arises: is this warming a short-term rebound or a precursor to a reversal?

The price trend of Bitcoin is closely related to US economic indicators, and the current market is at the juncture of bull and bear. The balance sheets of the private sector in the US are robust, household leverage is at historically low levels, and the unemployment rate is acceptable; however, the CPI remains high, with rising costs of food, housing, and other items becoming major economic issues. The momentum for US economic growth is insufficient, AI is being repriced, and the tech stock craze continues to recede.

The crypto market is also facing a dilemma: the price of Bitcoin exceeding $80,000 and the anticipated regulatory easing cannot easily be considered a bear market, but the undeniable fact is that the market's growth momentum is declining and liquidity is retreating, with the altcoin market in disarray.

There are viewpoints suggesting that the government is artificially creating a recession to force the central bank to cut interest rates, with the aim of reducing borrowing costs. Although there are elements of conspiracy theory, it is undeniable that the current economic recession warnings have indeed raised expectations for interest rate cuts, with the market generally believing that a rate cut will occur in June. If successful in cutting rates and moving towards quantitative easing, coupled with relatively strong balance sheet fundamentals, the United States may reshape the economic cycle, though the possibility of recession cannot be ruled out.

In the short term, tariff policies and economic uncertainties will continue to strengthen, making it difficult for the crypto market to experience a real reversal before macro market improvements. Currently, favorable policies have little impact on the crypto market, and the market's self-sustaining ability is weak, requiring external liquidity injection.

In a non-recession scenario, the maximum possible decline for Bitcoin could be around 70,000; if a recession occurs, the price could drop significantly. Currently, the BTC market's concentrated chip area has not been damaged and remains between 90,000 and 95,000, indicating that regional investors are not frequently trading.

The likelihood of significant positive events is expected to decrease in the next three months. Unless the macro environment improves, the market will lack growth momentum. Considering Bitcoin's safe-haven property, it may enter a large-scale oscillating growth trend on an annual cycle. The outlook for the altcoin market is not optimistic; apart from leading coins and specific narratives, other coins are unlikely to see growth.

In the long run, most industry professionals remain optimistic about the market. A well-known figure predicts that Bitcoin could drop to $70,000, but firmly believes it will reach $1 million in the long term. A researcher believes that Bitcoin may eventually reach $1 million, but it will need to go through a severe bear market. Buying data shows that whales have accumulated more than 65,000 BTC in the past 30 days. An executive from a trading platform stated that Bitcoin is close to bottoming out and expects a rebound in the second quarter.

In a market dominated by external economic conditions, tariffs, inflation, and geopolitical factors will all affect the cryptocurrency market. For investors, apart from waiting, perhaps it is still just waiting.