When tariffs meet national debt: Why is the crypto market the first to be affected as global capital is being re-priced?

Recently, the market has experienced some volatility. Let’s start from a distant place: Greenland. Denmark, Norway, and six other countries held a joint military exercise there, which directly triggered the U.S. strategic nerves in the Arctic.

The market immediately saw a typical “maximum pressure” drama: the U.S. proposed that either an agreement be reached on the purchase or control of Greenland, or a 10% tariff be imposed on the eight European countries participating in the military exercise starting February 1, with a possible increase to 25% in June.

This is not ordinary trade friction. Its core demand is not about economic accounts but sovereignty and strategic depth. Europe’s response was equally tough, with Denmark reaffirming that sovereignty is non-negotiable, and the EU launching a countermeasure list worth 93 billion euros.

Subsequently, the situation took a dramatic turn. The U.S. announced a cooperation framework with NATO and withdrew the tariff threat. But the market has already received a key signal: the trigger conditions for conflict are clear, but the end point is ambiguous; implementation could be quick, but negotiations might take a long time.

This approach of escalating economic issues into intractable political problems forces the market to pay a higher risk premium for “uncertainty” itself. When uncertainty becomes the main variable, price fluctuations shift from emotional disturbances to structural premiums that must be factored into asset prices.

Almost simultaneously, the global bond market responded more directly. The yield on Japan’s 30-year government bonds soared by over 30 basis points in a single day, reaching 3.91%, a 27-year high. The U.S. 10-year Treasury yield also rose to 4.27%, hitting a four-month high.

The synchronized rise in long-term rates in the U.S. and Japan is a systemic signal. Japan has long been a global anchor of low-cost liquidity, and its bond yield surge indicates that the most stable and cheapest funding sources are loosening.

Global carry trade structures relying on yen financing are under pressure, with rising financing costs and exchange rate risks amplifying simultaneously. This will first lead institutions to reduce leverage and cut exposure to high-volatility assets, causing risk assets to come under “indiscriminate pressure.”

Meanwhile, potential U.S.-EU tariff conflicts have heightened expectations of imported inflation. The current tariffs target high-end manufacturing, precision instruments, and other sectors with limited substitution, with costs easily passing through to end prices, shaking the previous market logic of “inflation central bank easing.”

Additionally, the U.S. fiscal deficit and debt scale issues provide a backdrop for long-term rate increases. Geopolitical safe-haven demand and inflationary debt concerns are tugging in opposite directions, resulting in rising yields and volatility.

These three forces together push up the global risk-free rate center, leading to a passive tightening of financial conditions. Rising discount rates compress valuations, higher financing costs suppress leverage, and liquidity uncertainty amplifies tail risks.

The crypto market is under pressure within this macro chain. $BTC and other mainstream cryptocurrencies are not targeted individually but, due to their high liquidity and elasticity, become the “valves” prioritized for reduction when institutions adjust risk exposure.

As offshore dollar funding costs rise due to trade financing risks and margin requirements tighten, institutions will first reduce holdings of assets that can be quickly liquidated. Cryptocurrencies perfectly fit this criterion.

This also explains why $BTC has not shown safe-haven properties similar to gold. Currently, $BTC is more akin to a macro risk asset highly dependent on dollar liquidity, with prices extremely sensitive to changes in global liquidity, interest rates, and risk appetite.

In contrast, the strength of gold and silver stems from central bank demand, physical attributes, and the “de-sovereignization” risk premium. This is not a failure of $BTC but a market recalibration of its role: it is an amplifier in liquidity cycles, not a crisis safe haven.

Structurally, although prices have retreated, the market has not repeated the systemic risks of 2022. There are no signs of major exchange credit crises or stablecoin de-pegging, and on-chain liquidity has not frozen. Long-term holders’ behavior remains relatively orderly, more like a rebalancing under macro shocks.

In summary, the current volatility is not driven by the fundamentals of $BTC or $ETH but is a global systemic re-pricing. Cryptocurrencies are gradually entering a more mature pricing framework, with prices beginning to internalize macro liquidity, interest rate structures, and risk appetite changes.

Short-term pressure may not have ended; as long as the trend of interest rates and liquidity does not fundamentally reverse, the market will remain highly sensitive to macro signals. The true directional choice depends on observing marginal changes in this round of interest rate shocks.

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