The global financial market is controlled by one person

Recently, as the trade war intensifies, market expectations for a recession in the U.S. economy are rising. On March 10, U.S. stocks suffered heavy losses, with all three major indices experiencing significant declines. The Dow Jones Industrial Average fell by 2.08%, the Nasdaq Index dropped by 4%, and the S&P 500 Index decreased by 2.7%.

The crypto market has also not been spared, with Bitcoin dropping below $77,000, reaching $76,560, a daily decline of over 8%. Ethereum performed even worse, briefly falling below $1,800, hitting a low of around $1,760, bringing the price back to levels seen 4 years ago.

However, the market seems to have started to warm up. Bitcoin has recovered to $82,000, and Ethereum has also risen above $1,900. But under the current complex external environment, it remains uncertain whether this wave of growth is a temporary rebound or a reversal signal.

Looking back, in the months leading up to the election, the global financial markets actively responded to the "Trump" trade theme. Investors bet on Trump’s deregulation, tax cuts, and immigration policies, leading to a broad increase in U.S. stocks, the dollar, and Bitcoin. The yield on the 10-year U.S. Treasury bond rose sharply by 60 basis points. The reaction in small-cap stocks was particularly pronounced; on the second day after the election, the Russell 2000 index, which represents U.S. small-cap stocks, surged by 5.8%, marking the largest single-day increase in nearly three years. From election day to the inauguration, the dollar index rose by about 6%. In the first month of Trump's presidency, the S&P 500 index climbed by 2.5%, and the Nasdaq index increased by 2.2%.

However, the impact of Trump on the financial markets has not only been an increase but also signals of economic recession. From a domestic perspective in the United States, the economic indicators are complex. In February, the non-farm payrolls added 151,000 jobs, slightly below expectations; the unemployment rate is 4.1%, down from 4%. Although the unemployment situation is manageable, inflation remains high. The expected final value of the one-year inflation rate in the U.S. for February is 4.3%, the highest since November 2023. Consumer expectation surveys show that the inflation expectation for one year later has risen to 3.1%, and the proportion of households expecting financial deterioration in the coming year has increased to 27.4%, the highest level since November 2023.

Against this backdrop, multiple institutions have begun to predict a recession in the U.S. A certain Federal Reserve Bank forecasted that GDP will contract by 2.4% in the first quarter of this year. A certain large investment bank's predictive model shows that the probability of a recession in the U.S. has risen from 17% at the end of November last year to 31%.

These economic data are closely related to Trump's policy proposals, especially his tariff policies. On February 1st, Trump signed an executive order imposing a 10% tariff on U.S. goods and a 25% tariff on Mexico and Canada. Although Mexico and Canada temporarily softened their stance, Trump delayed the tariffs for a month, but on February 27th he announced that the tariffs would be imposed as scheduled, and an additional 10% tariff would be added on China.

This decision has sparked a strong reaction from Canada and Mexico. The Canadian Prime Minister stated that retaliatory tariffs would be imposed, and the Mexican President also declared that countermeasures would be taken. On March 6, Trump adjusted the tariff measures again, exempting qualifying imported goods from tariffs. However, the White House's stance has been erratic, one moment announcing additional tariffs on Canadian steel and aluminum, and the next indicating that no additional tariffs would be imposed, completely putting the negotiations on the table.

When Trump took office, he faced numerous challenges, including a $36 trillion national debt, a $1.8 trillion federal budget deficit, a large number of federal employees working from home, a massive illegal immigration problem, difficulties in judicial reform, and sanctions against Russia.

In the face of these issues, Trump had to implement drastic reforms. His strategy includes cutting government spending, increasing tariffs to raise revenue, and pushing the European Union to increase military spending. In the long run, these measures may have an effect, but in the short term, the market is unlikely to bear this kind of pain.

On March 10, when asked whether he expected an economic recession in the U.S. this year, Trump said he was unwilling to make predictions but stated that the government was "bringing wealth back to America," which takes time. These remarks quickly triggered a downturn in the financial markets. The three major U.S. stock indexes fell sharply, with technology stocks experiencing significant declines.

The cryptocurrency market has also plummeted, with Bitcoin falling by 8%, Ethereum dropping below $2200, and the altcoin market experiencing an even larger decline. The total market capitalization of the cryptocurrency market has fallen below $2.66 trillion. Institutional investors are beginning to withdraw their investments, with Bitcoin and Ethereum spot ETFs seeing net outflows for several consecutive days.

Currently, the cryptocurrency market is gradually warming up, with the total market capitalization slightly rebounding to $2.77 trillion. Bitcoin is back above $83,000. However, the market is still questioning whether this warming is a temporary rebound or a genuine reversal.

The price trend of Bitcoin is closely related to U.S. economic indicators. The current market is at the intersection of a bull and bear phase, and the U.S. economy also shows a complex situation. On one hand, the private sector balance sheets in the U.S. are robust, household leverage is at a historically low level, and the unemployment rate is acceptable; on the other hand, inflation is high, and economic growth momentum is insufficient.

The crypto market is facing a similar situation. The high price of Bitcoin and the potential easing of regulations make it hard to view this as a bear market, but the decline in market growth momentum and liquidity is evident.

The future market trends still need to pay attention to the US economy and Trump’s policies. Some believe that Trump may be engineering a recession to force interest rate cuts, but this claim is controversial. The market generally expects a rate cut in June. If the rate cut is successful and leads to quantitative easing, the US may reshape its economic boom-bust cycle, but the possibility of recession cannot be ruled out.

In the short term, tariff policies and economic uncertainty will continue to affect the market. The cryptocurrency market finds it difficult to achieve a genuine reversal solely based on verbal good news; it requires an injection of external liquidity. In a non-recession scenario, Bitcoin could drop to around $70,000; if a recession occurs, a larger decline may be expected.

Currently, the Bitcoin market chips are still concentrated in the $90,000 to $95,000 range, indicating that investors have not withdrawn on a large scale. In the next three months, unless the macro environment improves, the market may lack growth momentum. Bitcoin may enter a long-term oscillating growth trend, while the outlook for most altcoin markets is not optimistic.

In the long term, many industry professionals remain optimistic about the market. Some analysts predict that Bitcoin could eventually reach a million dollars, but it may experience a severe bear market before that. Data shows that large holders have recently accumulated more than 65,000 Bitcoins. An analyst from a trading platform stated that Bitcoin may be nearing a bottom and expects a rebound in the second quarter.

In the current market dominated by external economic conditions, tariffs, inflation, and geopolitics will all impact the cryptocurrency market. For investors, patiently waiting may be the best option.