SignalPlus Macro Analysis Special Edition: Gradually, Then Suddenly

After years of concerns and expectations, cryptocurrency has finally welcomed a milestone moment. The new Trump administration has continuously brought positive policy news to the market, and this president has left a distinct mark right from the start of his second term.

Although Trump did not mention cryptocurrency in his inauguration speech, which left the community somewhat disappointed, a series of very direct and precise executive orders quickly made up for it. Here is a brief summary of the executive orders related to cryptocurrency:

• Trump established a task force composed of AI and cryptocurrency overseer David Sacks, SEC official Hester Pierce, the Treasury Secretary, and other senior members, which is considered a very supportive team for cryptocurrency.

• The task force has the authority to lead discussions and propose regulatory policy recommendations that go beyond the federal government's professional scope.

• The order aims to support the growth of digital assets, allow blockchain to be used for legitimate purposes, and require relevant agencies to maintain neutrality towards technology in regulation.

• The task force will assess the feasibility of establishing a national digital asset reserve.

• The order requires opening banking services to legitimate cryptocurrency participants.

• The order supports the private sector in issuing dollar stablecoins but prohibits the issuance or promotion of CBDCs (central bank digital currencies).

• The order effectively repeals the previous digital asset framework of the Biden administration.

Overall, compared to the situation in recent years, this is a quite comprehensive and impressive executive order.

Furthermore, shortly after the executive order was issued, some industry details gradually emerged, showing significant progress in institutional participation:

• The SEC overturned the controversial accounting rule "SAB 121," which will allow banking institutions to begin holding cryptocurrency assets on their balance sheets in the future. The existing rules require cryptocurrencies held to be marked as liabilities, significantly worsening the corporate debt/equity ratio and making the cost of holding cryptocurrencies excessively high.

• Blackrock applied to amend its $IBIT BTC ETF filing to allow "physical settlement," meaning investors can choose to receive ETF returns in BTC instead of USD fiat currency, indicating that Wall Street is preparing to support BTC settlement.

• In terms of blockchain applications, it is rumored that Elon Musk is exploring the use of blockchain technology to track government spending and efficiency, very DOGE-style.

• Over the weekend, Eric Trump "confirmed" that a plan would be implemented for 0% capital gains tax on domestic cryptocurrency projects (such as XRP), while all other offshore projects would be taxed at 30%.

• Additionally, Senator Ted Cruz pledged to introduce a new resolution to overturn the IRS rule requiring DeFi brokers to report total income and user data, arguing that the rule undermines the spirit of decentralization and hinders cryptocurrency innovation.

• Although the market failed to set a new historical high, cryptocurrency rebounded strongly from last week's sharp decline, with BTC rising 4% and XRP increasing by 6% due to being considered for inclusion in strategic cryptocurrency asset reserves.

The underlying data is also favorable. According to a report from CCData, the trading volume of centralized exchanges in both spot and derivatives reached a historical high in 2024, surpassing the peak before the FTX incident. Meanwhile, on-chain data shows that large wallet addresses (such as institutional investors and ETF buyers) have been net buyers of BTC, offsetting the sell-off from smaller addresses. This is a "position exchange" that typically occurs when mainstream institutions begin to accumulate BTC, which is a positive signal for continued capital inflow and accumulation in the current political context.

Last week, market sentiment was so optimistic that even the struggling ETH saw a rebound. Vitalik published a detailed blog post responding to community criticisms regarding the growth handling of Layer 2, stating that Layer 2 will continue to exist while also striving to improve the user experience of Layer 1 to reduce excessively high Gas fees. Although not everyone agrees, Vitalik's detailed explanation this time was more accepted than before, at least showing that he is informed and cares about the complaints regarding Ethereum's current state. We hope this can mark the beginning of a rebound in Ethereum sentiment, especially considering its potential as a settlement layer for future financial institutions.

Returning to the traditional financial macro field, several executive orders from President Trump provide a wealth of content worthy of in-depth analysis. He signed 26 executive orders on his first day in office, breaking all records and far exceeding the total of all previous U.S. presidents.

In summary, here are some key policy highlights from Trump's new term:

Trade Policy:

"Produce in the U.S. or pay tariffs."

Trade with China:

The attitude is milder than expected, stating that U.S.-China relations are "very good," and trade needs to be "fair," but not necessarily "excellent."

Tariffs on China:

"China has already paid a lot of tariffs because of me."

"I would rather not have to use [tariffs], but this is a huge bargaining chip for China."

Geopolitics:

"Ukraine is ready to reach an agreement to end the war."

Threatening to impose taxes and sanctions on Russia if a peace agreement is not reached soon.

Energy:

Hopes OPEC will lower oil prices.

Needs to double U.S. energy production to "scale AI to the level [the U.S.] wants."

Monetary Policy:

"I will demand an immediate interest rate cut."

With only 3 days until the next Federal Reserve meeting, market pricing shows almost no possibility of a rate cut.

Macroeconomic market participants often feel confused by the market's reactions. The prevailing trading consensus before Trump's inauguration was to go long on both the dollar and U.S. stocks, expecting that general tariff policies would boost the dollar, while if tariffs were not implemented, the stock market might rise. The final outcome was closer to the latter, with weakened enforcement of tariffs (especially against China), leading to a general rise in risk assets and a weaker dollar.

In terms of economic data, this week will feature many important data releases and schedules, including consumer confidence data on Tuesday, the FOMC meeting on Wednesday, the ECB meeting and U.S. GDP data on Thursday, and core PCE data on Friday. Additionally, this week will see a series of important earnings reports from companies including Apple, Tesla, Microsoft, Meta, ASML, UPS, Caterpillar, Visa, and Mastercard.

Considering the various heavyweight news from Trump 2.0 policies over the past week, the numerous macroeconomic schedules this week, and the earnings reports from major tech companies, along with the end-of-month effect, we advise readers to watch the developments this week. It is expected that this week will be filled with turbulence, noise, and uncertainty, and the trading for the new year has just begun.

The cryptocurrency market is not the only field witnessing key turning points. With the simultaneous release of DeepSeek's R 1 and ByteDance's Doubao 1.5 training models, generative AI (Gen-AI) may be experiencing its "Sputnik Moment."

Despite claims of limited operating budgets constrained by chip supplies, DeepSeek's R 1 open-source model has still reached performance levels comparable to OpenAI's o 1 model, with very low operating costs. Notable venture capitalists and practitioners have praised this as an incredible engineering breakthrough and a significant victory for open-source models, coinciding with OpenAI's announcement of its $500 billion "Stargate" capital expenditure plan, creating a stark contrast between the two.

Of course, there remains much uncertainty about whether AI models are being commoditized and what this means for the high valuations of AI companies and their expensive infrastructure expenditures. However, the more critical question is whether it is finally time to sell Nvidia / Nasdaq / AI VC? This is undoubtedly a multi-trillion-dollar question that exceeds our expertise but is certainly worth close attention from macro investors in the future.

The SignalPlus team will pause our market commentary during the Lunar New Year holiday next week. We thank everyone for their steadfast support over the past year and wish all readers good health, smooth sailing, and prosperity in the Year of the Snake!