Danger! Bitcoin breaks through key support, is it a bear market warning or adjustment pain?

Bitcoin at 7 Heads Again, recently the price of Bitcoin has continued to decline, dropping 34% from a high of nearly 110,000, the funding rates of mainstream CEX and DEX have turned bearish across the board, and market sentiment has plunged to freezing point.

But is this decline an early warning of a crypto bear market, or a painful period of structural adjustment in the U.S. economy? The answer may be more complex than it appears.

From a technical perspective, Bitcoin has broken through multiple key support levels, institutional holdings have decreased for four consecutive weeks, and the VIX fear index briefly surpassed 30. However, the deeper reasons may be directly related to the "uncertainty" of U.S. economic policy. After Trump's return to the White House, U.S. economic policy has "never been so uncertain." This uncertainty has caused investors to waver between "buying the dip" and "cutting losses," exacerbating market volatility.

The correlation between U.S. stocks and Bitcoin is undergoing subtle changes. In February 2025, the S&P 500 index retraced all gains made after the election, while Bitcoin fell over 15% during the same period. This reflects an overall withdrawal of investors from "risk assets": as recession expectations rise, both dollar assets (U.S. stocks) and "digital gold" (Bitcoin) are sold off simultaneously, forming a "double kill" pattern for stocks and Bitcoin.

The Pain Period of U.S. Economic Adjustment: Three Major Challenges of Trump's New Policy

The core of Trump's administration's policy has always revolved around "America First," but the implementation of its economic agenda is facing multiple complex challenges, which may trigger short-term market turbulence and reshape the long-term financial landscape.

1. The Double-Edged Sword Effect of Trade Wars and Tariff Policies

Trump has restarted the tariff increase policies against China, the EU, and other economies, attempting to revive U.S. manufacturing through trade barriers. However, this policy has directly led to increased uncertainty in global supply chains, a sharp decline in U.S. Treasury yields, and accelerated capital outflows from risk assets. For example, in February 2025, Bitcoin fell over 7% in a single day after Trump announced a 25% tariff on Mexico. The side effects of the trade war not only impact traditional markets but may also force capital to flow into "safe-haven assets" like Bitcoin, yet short-term panic often triggers a sell-off, creating a vicious cycle of "policy good news turning into bad news."

2. The Tug-of-War Between Fiscal Deficits and Dollar Credit

Trump has continued tax cuts and fiscal stimulus policies, with U.S. national debt nearing $40 trillion, raising concerns about the long-term value of the dollar. If the Federal Reserve is forced to restart quantitative easing (QE), excessive liquidity may benefit crypto assets; however, if interest rate cuts are delayed, Bitcoin could retract to $70,000. This policy contradiction makes the crypto market a "thermometer" for the dollar's credit.

3. The Swing of Dollar Strategy and the Pragmatism of Crypto Policy

On one hand, Trump attempts to consolidate dollar hegemony through a Bitcoin strategic reserve; on the other hand, disappointment arises from the underwhelming execution of policies (such as designating only the confiscated 200,000 Bitcoins as reserves instead of new purchases). This swing of "wanting a strong dollar while also trying to seize the crypto high ground" leads to mixed policy signals.

Recently, in an interview with Fox News, Trump ruled out the possibility of the U.S. economy shrinking and entering a recession this year, acknowledging that his comprehensive economic agenda may cause short-term turbulence, but he believes it will drive future prosperity.

However, last week's White House summit, which carried the expectations of the crypto community, only heard the crypto leaders' praises for Trump and self-proclaimed industry experience without any substantial discussion results or clear policies, instead receiving "an increase in Bitcoin reserves without any cost to taxpayers." The government has no extra budget, and being able to secure a reserve of 200,000 Bitcoins is already good news.

Overall, Trump's strategic Bitcoin reserves are definitely a long-term positive. As long as Trump's executive orders do not change frequently, the next few years will at least be in a friendly policy environment. Although there is no federal plan to increase BTC by a million, if state proposals pass, there could be real investments. The U.S. government's confiscated Bitcoins being deposited into the strategic Bitcoin reserve and not being sold reduces the selling pressure of Bitcoin in the market; on the demand side, the U.S. government's strategic Bitcoin reserve decision may attract more investors' interest in Bitcoin, including some traditional financial institutions and large enterprises, which could alleviate their concerns about engaging in crypto business and even trigger more countries to establish strategic Bitcoin reserves.

Conclusion

The U.S. economy and crypto market under Trump's new policy are experiencing the pain period of "creative destruction." In the short term, policy swings, tightening liquidity, and market sentiment vulnerability may lead to a bear market; in the long term, institutional breakthroughs and global financial changes may open up trillion-dollar opportunities for cryptocurrencies. The establishment of Bitcoin reserves in the U.S. is not only a stopgap measure to maintain dollar hegemony but may also plant the seeds for disrupting the traditional financial system.