The fate of the global financial market is in the hands of one person

The financial markets have been turbulent recently, with the actions and words of a political figure becoming a key factor in determining market direction. As the global tariff war intensifies, concerns about a recession in the U.S. economy are also growing. On March 10, the U.S. stock market suffered a heavy blow, 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 cryptocurrency market has also not been spared from difficulties, with Bitcoin briefly falling below $77,000, hitting $76,560, and a single-day drop of over 8%. Ethereum performed even weaker, briefly dropping below $1,800, reaching lows around $1,760, bringing prices back to levels seen four years ago.

However, the market seems to have begun showing signs of recovery. The price of Bitcoin has returned to $82,000, and Ethereum has also regained the $1,900 mark. However, amid increasing uncertainty in the external environment, investors remain skeptical about whether this rebound signifies a trend reversal.

Looking back at history, the financial markets had very high expectations for the inauguration of a certain political figure. In the months following his election, investors eagerly bet on his policies of deregulation, tax cuts, and immigration, driving a broad rise in US stocks, the dollar, and Bitcoin. The yield on the 10-year US Treasury bonds once quickly rose by 60 basis points. Small-cap stocks performed particularly well, with the Russell 2000 Index, which represents US small-cap stocks, soaring by 5.8% the day after the election, marking the largest single-day gain in nearly three years. From election day to his official inauguration, the dollar index rose by about 6%. In his first month in office, the S&P 500 Index increased by 2.5%, while the tech-heavy Nasdaq Index rose by 2.2%.

However, it turns out that this politician has brought not only an increase to the financial markets but also concerns about economic recession.

From the perspective of domestic economic indicators in the United States, the situation is complex and variable. In February, the non-farm payrolls increased by 151,000, slightly below market expectations; the unemployment rate is at 4.1%, down from 4%. Although the employment situation is acceptable, the inflation issue remains prominent. The expected final value of the one-year inflation rate in the U.S. for February recorded 4.3%, the highest since November 2023. From the perspective of consumer expectations, the February consumer expectations survey released by the New York Federal Reserve shows that consumers' expectations for inflation a year from now have increased by 0.1 percentage points to 3.1%; the proportion of those expecting a deterioration in their household financial situation over the next year has risen to 27.4%, the highest level since November 2023.

Against this backdrop, several institutions have begun to predict that the United States may fall into recession. The Atlanta Federal Reserve Bank predicts that the U.S. GDP may contract by 2.4% in the first quarter of this year. A large financial institution's forecasting model indicates that by early April, the probability of an economic recession in the U.S. has risen from 17% at the end of last November to 31%.

The changes in these economic indicators are closely related to a series of policy measures taken recently. Among them, the tariff policy is particularly noteworthy. On February 1, an executive order announced a 10% tariff on U.S. goods and a 25% tariff on Mexico and Canada. Although its implementation was postponed for a month, it was suddenly announced on February 27 that the tariffs would be implemented as scheduled, and an additional 10% tariff on China would be imposed.

This move has provoked strong reactions from Canada and Mexico. The Canadian Prime Minister stated that retaliatory tariffs would be imposed on the United States, and the Mexican President also announced that countermeasures would be taken if necessary. In the face of worsening situations, an executive order was signed on March 6 to adjust the tariff measures imposed on the two countries, exempting imported goods that meet the preferential conditions of the US-Mexico-Canada Agreement from tariffs. However, news emerged yesterday about an additional 25% tariff on Canadian steel and aluminum, followed by a statement that no additional tariffs would be imposed, causing confusion in the market due to this erratic attitude.

In fact, the current economic situation is not optimistic. In addition to historical legacy issues, it faces challenges such as a $36 trillion national debt, a $1.8 trillion federal budget deficit, a large number of federal employees working from home, a large-scale illegal immigration problem, difficulties in judicial reform, and the continuously expanding sanctions against Russia.

In the face of these issues, the government had to take a series of reform measures. These include cutting government spending, increasing tariffs to raise revenue, and reassessing foreign aid policies, among others. In the long run, these measures may have positive effects, but in the short term, they are bound to cause some pain.

On March 10, when asked whether he expected a recession in the United States this year, the political figure stated that he "was unwilling to predict such things" and mentioned that the government was "bringing wealth back to America," but "it will take a little time." These remarks quickly triggered turmoil in the financial markets. All three major U.S. stock indices fell sharply, and the share prices of tech giants plummeted.

The cryptocurrency market was also not spared, with Bitcoin dropping 8% and Ethereum falling below $2200. The total market capitalization of the crypto market briefly fell below $2.66 trillion. Institutional investors have also started to withdraw, with Bitcoin spot ETFs experiencing net outflows for six consecutive days, and Ethereum spot ETFs also seeing net outflows for four days.

However, the market has begun to stabilize and recover. The total market capitalization of cryptocurrencies has slightly risen to $2.77 trillion, with a 24-hour increase of 2.5%, and Bitcoin has returned above $83,000. However, investors are still questioning whether this rebound is temporary or a turning point in the trend.

Clearly, the price trend of Bitcoin and the entire cryptocurrency market is closely related to U.S. economic indicators. The current market situation is quite similar to the U.S. economic landscape, being at the intersection of a bull and bear market. On one hand, the private sector balance sheets in the U.S. are robust, household leverage is at historically low levels, and the unemployment rate is relatively manageable; on the other hand, inflation remains high, with rising prices for food, housing, and other goods becoming the most pressing economic issues in the U.S.

The cryptocurrency market also faces a similar dilemma. The price of Bitcoin has exceeded $80,000 and the expectations for related policies seem to make it difficult to define the current situation as a bear market. However, the decline in market growth momentum and liquidity is an undeniable fact, and small-cap coins are performing poorly.

Therefore, to judge the future trend, attention must also be paid to the direction of U.S. economic policy. There are viewpoints in the market suggesting that the current recession warning may be aimed at forcing the Federal Reserve to cut interest rates to lower the government's interest payment costs. Although this notion has a conspiratorial tone, it is undeniable that the current economic situation has indeed raised expectations for interest rate cuts, with the market generally anticipating a rate cut in June. If a rate cut is successfully implemented and moves towards quantitative easing, combined with a relatively strong balance sheet, the U.S. economy may reshape the business cycle, though the possibility of recession cannot be ruled out.

In the short term, tariff policies and economic uncertainties will continue, making it difficult for the crypto market to experience a real turnaround before the macro environment improves. Despite the continuous positive news, factors including policy statements have had a hard time significantly impacting the crypto market. The market's own capacity to generate funds is insufficient and requires the injection of external liquidity, rather than merely relying on verbal policy benefits.

In a non-recession scenario, Bitcoin's maximum possible drop may revert to around $70,000, which is the entry price for most institutions. However, in the event of a recession, prices could plummet significantly. Considering the S&P 500's 20%-50% drop during recessions, Bitcoin may also face extreme downside risks. However, there is no need for excessive panic at the moment, as the BTC market's concentrated area (between $90,000 and $95,000) has not been damaged, indicating that investors in this area have not been frequently trading.

Based on the current situation, due to the reduced likelihood of major positive events in the near term, the market will lack growth momentum unless the macro environment gradually improves. Considering Bitcoin's safe-haven attribute, it may enter a large-scale oscillating growth trend on an annual cycle. However, the market outlook for small-cap cryptocurrencies is not optimistic; aside from leading cryptocurrencies and specific thematic coins, other coins are unlikely to see growth.

In the long term, most industry professionals remain optimistic about the market. Some analysts predict that Bitcoin could ultimately reach a million dollars, but it may need to go through a severe bear market before that happens. Data shows that over the past 30 days, large holders have accumulated more than 65,000 BTC. Some analysts believe that Bitcoin is nearing its bottom and expect a rebound in the second quarter.

In summary, under the market situation dominated by external economic conditions, factors such as tariffs, inflation, and geopolitical issues will affect the direction of the cryptocurrency market. For investors, maintaining patience and caution may be the wisest choice at present.