The "new direction" of capital after tariff increases: Where is the final destination of encryption funds?

In September 2025, at this moment full of uncertainty, the global economy is undergoing an unprecedented test. Before the important Node in November, the economic and trade game between China and the United States has escalated again. On October 10 local time, U.S. President Trump stated on social media that starting from November 1, 2025, he would impose an additional 100% tariff on all goods imported from China and implement export controls on all critical software. The sudden events have significantly disrupted major global assets, and the storm has not settled, requiring attention to subsequent developments.

As a result of the aforementioned events, global equity assets and commodities generally declined, while U.S. Treasury bonds and gold rose. Specifically, last Friday the NASDAQ index in the U.S. fell by 3.6%, and the S&P 500 index dropped by 2.7%, marking the largest single-day decline since April 10. Chip stocks like AMD and Qualcomm led the declines, and the VIX index surged; last Friday, China's Sci-Tech Innovation 50, ChiNext Index, and Hang Seng Tech Index fell by 5.6%, 4.6%, and 3.3%, respectively; Europe's STOXX 600 index closed down 1.25%, with major European country stock indices all closing lower; in terms of commodities, U.S. oil and New Copper fell by 4.8% and 3.7%, respectively, with intraday declines exceeding 5%; the 10-year U.S. Treasury bond plummeted by over 10 basis points, and New York gold futures rose by nearly 2%.

It is worth noting that the “reciprocal tariff” suspension agreement initiated by the Trump administration against China in April will also expire on November 10, and subsequent developments will need to be closely followed.

With the implementation of a new round of reciprocal tariffs, the flow of capital is no longer simply from one traditional market to another, but instead, it is rushing towards an emerging digital safe haven—cryptocurrency—with a posture of “defensive plus offensive.” We will comprehensively analyze the logic behind the new direction of capital from four dimensions: macro uncertainty, geopolitical financial risks, regulatory evolution, and investment strategies.

1. Tariff Uncertainty: The “Bridge” Mechanism from Physical Trade to Digital Hedging

Since the implementation of the reciprocal tariffs on August 7, the “pulling effect” of global trade has completely faded. U.S. imports have significantly decreased, and the global manufacturing PMI has entered a contraction zone, indicating that the real economy is facing challenges. However, it is noteworthy that the “trade diversion” effect caused by the tariffs is becoming apparent: China's exports to the U.S. have declined, but exports to ASEAN are rapidly increasing.

This uncertainty is amplifying the pressure of capital outflows, mainly reflected in the following aspects:

• Price and Consumption Transmission:

• Although the overall CPI in the United States is stable, the core CPI is rising, with particularly noticeable price increases in imported goods. The pharmaceutical tariffs, which will take effect on October 1st (with rates as high as 100%), are expected to further increase the prices of related goods and put pressure on consumer spending.
• Employment and Confidence Spillover:
• Although the manufacturing new orders index has slightly rebounded, the employment growth rate has slowed down, and the consumer confidence index continues to decline. Concerns about tariffs have become an important factor affecting the sentiment in the capital markets, leading to capital flowing out of the higher-risk stock market and turning towards high liquidity assets.
• The role of encrypted “bridging”:

• In the face of payment delays caused by tariff friction and concerns over the depreciation of the dollar, businesses and investors are accelerating their shift towards cryptocurrencies. Stablecoins (such as USDT/USDC) **are used by enterprises for cross-border trade settlements to avoid exchange rate fluctuations and the limitations of traditional payment systems. Meanwhile, **Bitcoin (BTC) ** is seen as “digital gold” for hedging against inflation and geopolitical risks.

Data from September shows that although the total market capitalization of the crypto market has shrunk, stablecoin inflows of 2.5 billion dollars and Bitcoin ETF net inflows of 1.5 billion dollars clearly indicate that capital is making a “defensive” shift rather than a panic sell-off.

2. The “Offensive Strategy” of the US Dollar: The New Defense Line for Stablecoins under the GENIUS Act

In the face of the growing trend of de-dollarization (such as the BRICS countries promoting local currency settlement), the United States is actively adjusting its strategy. The signing of the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) marks a “180-degree turn” for the U.S. in the stablecoin sector.

The bill aims to incorporate stablecoins into regulation through a federal framework and requires them to be pegged 1:1 to the US dollar/US Treasury, transforming stablecoins from a potential “monetary threat” into a “digital bulwark” that consolidates the dollar's hegemony.

• Regulatory Framework Details:

The GENIUS Act places stablecoins under a more lenient CFTC regulation and prohibits the Federal Reserve from issuing CBDCs (central bank digital currencies) to protect privacy and promote innovation in the private sector. This provides a clear compliance path for companies like Circle and attracts traditional financial giants like JPMorgan and Citibank to explore tokenized deposits.

• Tariff Synergy Effect:

Tariff hikes have accelerated the adoption of stablecoins. Companies use USDC for cross-border payments, which not only avoids foreign exchange fluctuations but also bypasses the cumbersome processes of the traditional SWIFT system. On social media, many see “tariffs + GENIUS Act” as the ultimate combination to solidify “digital dollar hegemony.”

The bill is not a zero-sum game with gold or emerging sovereign currencies, but rather aims to attract traditional capital into the cryptocurrency space by providing clear regulations, thereby further solidifying the global position of the US dollar.

3. Defense and Offense in Parallel: The “Dual Anchor Point” Strategy of Gold and Crypto

Despite the macro uncertainty brought by tariffs, the global central bank rate cuts in the second half of the year and the explosion of artificial intelligence (AI) are mitigating their negative impact. This provides a new investment opportunity window for capital, prompting them to adopt a strategy of “defense and offense in parallel.”

1. Defense Layer: Gold

Gold, as a traditional safe-haven asset, continues to play an important role in the current environment. Although the amount of gold purchased by global central banks slowed down in the third quarter, countries like China and Poland are still continuously increasing their holdings to hedge against geopolitical risks. Particularly, the executive order on September 5 exempted gold bars from tariffs, further benefiting the physical gold market.

Investment Path: For investors seeking stability, gold ETFs (such as GLD, IAU) are the ideal choice.

2. Offensive Layer: Bitcoin and Stablecoins

In the early stages of tariff hikes, Bitcoin experienced a significant drop, but the subsequent rebound demonstrated its resilience as “digital gold.” With the opening of 401(k) pension plans for Bitcoin/Ethereum investments, as well as positive regulatory signals such as Ripple's victory, the crypto market is attracting a broader range of capital.

• The explosion of artificial intelligence (AI) has also injected new vitality into the cryptocurrency market. AI giants like NVIDIA have gained tariff exemptions, driving up the prices of related crypto tokens (such as FET). Trump's “Crypto Project” also signals the possibility of more on-chain applications.

October Fund Flow “Pyramid”

4. Investment Strategies and Risk Management: Track high-frequency indicators to capture Q4 “risk”

In the face of market complexity, investors need a clear strategy.

• Defensive Strategy: It is recommended to allocate 40% of the position in gold ETFs to hedge against rising prices and geopolitical risks. Follow the changes in global central banks' gold reserves, especially the trends in emerging economies like China.
• Offensive Strategy: Allocate the remaining 60% of the position to crypto assets. Of this, 30% can be invested in stablecoin infrastructure (such as payment networks like Circle) to bet on its application in cross-border trade;
• An additional 30% can be used for Bitcoin and AI-related cryptocurrencies, seizing the growth opportunities brought by interest rate cuts and technological upgrades in the second half of the year.

Risk: Although the outlook is optimistic, risks still exist. The implementation of tariffs in October may increase the probability of a recession, and market volatility remains high. It is advisable to set stop-loss points and maintain a diversified position, with no single investment exceeding 10% of the total position.

Tracking Tools: Closely follow the central bank's monthly gold purchase reports, Bitcoin RSI, and other high-frequency indicators to capture the latest market dynamics.

Five, From the “Post-Dollar Era” to “Digital Anchoring” - Strategic Opportunities in Cryptocurrency

Although the increase in tariffs has amplified the uncertainty of the global economy, as the data shows, capital has not completely fled the dollar system, but has found a new home in a “digitally anchored” manner. In the short term, gold and Bitcoin provide the necessary hedging function; in the medium to long term, stablecoins and AI crypto tokens have become the new engines betting on future growth.

With the arrival of the “risk season” in the fourth quarter, the dual catalysts of interest rate cuts and emerging technologies will further reduce the risk of recession, and the cryptocurrency market is expected to become the “new anchor point” for the global economy in the second half of the year. The ultimate flow of capital is likely to point towards a new era dominated by digital assets that transcends traditional financial frameworks.