The Impact of Trump's Policies on the Global Financial and Cryptocurrency Markets and Future Outlook

JuCoin Research Institute

1. Introduction

Since Trump took office again in 2024, a series of "America First" policies have continued to impact the global financial system. Recently, Trump has implemented tough policies in trade, tariffs, immigration, and fiscal expansion. These policies have not only caused significant volatility in traditional financial markets—U.S. stocks have seen substantial pullbacks, and the dollar index weakened at times—but have also affected the cryptocurrency market, with several indicators of crypto assets hitting new lows. Meanwhile, the Federal Reserve's interest rate cut cycle is slowing down, and the global economy faces multiple challenges. This article will analyze the sustainability of Trump's policies, the potential for market turning points, and future trends from various perspectives, including macroeconomics, financial markets, the crypto market, and technological cycles, providing data-driven strategic advice for crypto investors.

2. Continuation of Trump's Policies and Changes in the Global Financial Landscape

1. Policy Background and Core Measures

Since early 2025, the Trump administration has adhered to the "America First" strategy, with key policy measures including:

• Tariff escalation: Imposing tariffs on imported goods from major trading partners such as China, the EU, Canada, and Mexico, raising global supply chain costs and indirectly affecting inflation expectations.

• Immigration restrictions: Tightening work visa policies, exacerbating labor shortages in the U.S., and further increasing wage levels in the service sector.

• Fiscal expansion: Stimulating short-term economic growth through corporate tax cuts and large-scale infrastructure investments, despite leading to a debt/GDP ratio exceeding 135%, it has boosted corporate profit expectations in the short term (e.g., AI technology applications).

At the same time, on March 7, 2025, Trump signed an executive order officially incorporating Bitcoin into the national strategic reserve assets, aiming to enhance Bitcoin's status as "digital gold" and provide a new asset hedging tool for financial markets. Additionally, regulators (such as the OCC) have recently relaxed restrictions on U.S. banks participating in crypto business, further promoting traditional financial institutions' involvement in digital assets.

2. Chain Reactions in Global Finance and Trade

Trump's policies have had a profound impact on the global financial and trade landscape:

• Asset diversification trend: Central banks and large institutions worldwide are beginning to experiment with allocating digital assets like Bitcoin to diversify risks, as traditional reserve assets face challenges from digital assets.

• Trade friction and supply chain restructuring: The tough trade policies have led to a reconfiguration of global supply chains, with countries accelerating technological innovation and multilateral cooperation to reduce uncertainties brought by unilateral tariffs.

• Deepening integration of financial institutions and the digital economy: Major U.S. banks and hedge funds are gradually entering the crypto market, promoting liquidity replenishment in the global financial system in the new digital asset domain.

3. Significant Pullback in the U.S. Stock Market and Market Signals

1. Overview of Market Pullback Data

Recently, the U.S. stock market has experienced significant adjustments:

• S&P 500 Index: Dropped from around 6000 points to about 5670 points, a decline of over 5%.

• Nasdaq 100 Index: Dragged down by tech stocks, falling from 22000 points to 19660 points, a decline of about 10%.

• Dow Jones Industrial Average: Fluctuated with a decline between 7%-8%.

• Volatility Index (VIX): Recently rose to around 23, indicating a trend towards panic in market sentiment, with a noticeable increase in trading volume.

1. Reasons for Stock Market Pullback and Policy Expectations

The pullback in U.S. stocks is mainly influenced by the following factors:

• Weakening macroeconomics: Recent employment data, consumer confidence, and manufacturing PMI have all fallen short of expectations, revealing insufficient economic growth momentum.

• Weakened expectations for interest rate cuts: Although the Federal Reserve has previously cut rates by about 100 basis points, future expectations for rate cuts have narrowed, increasing market doubts about the sustainability of low-rate benefits.

• Uncertainty in trade policies: The tough measures taken by the Trump administration in trade have intensified market uncertainties regarding global economic recovery.

The overall market performance reflects a cautious attitude among investors towards the economic outlook and policy sustainability in the short term, waiting for improvements in future economic data and corporate earnings, which may present structural rebound opportunities in the stock market.

4. Crypto Market Data Indicators Hit New Lows and Cycle Analysis

1. Overall Downward Trend in the Market

Against the backdrop of significant pullbacks in traditional financial markets, the crypto market has also not been spared, showing clear signs of sluggishness:

• Bitcoin price: Recently fell below previous support levels, dipping below $80,000 at times, indicating signs of cyclical adjustment.

• Global crypto market cap: Dropped from the previous $3 trillion to about $2.63 trillion, a decline of approximately 12%.

• Trading volume and leverage data: The average daily trading volume on major exchanges has significantly decreased, and leverage trading data indicates a strong wait-and-see sentiment among institutions.

• Fear and Greed Index: The crypto market's fear index has fallen into the extreme fear zone, showing a severe lack of investor confidence.

1. Historical Cycles and Dollar Index Dynamics

• Bitcoin Dollar Index Cycle: Historical data shows that during the 2015 bear market, extreme declines in the dollar index preceded Bitcoin's bottom rebound; while the current dollar index has fluctuated recently, with renewed expectations for Fed rate cuts, the dollar may face depreciation risks in the medium to long term, providing inflows of safe-haven funds into Bitcoin.

• Dollar Index (DXY): Recently, the DXY has remained in the 102-106 range, strengthening at times before retreating, with overall performance closely related to macroeconomic data and safe-haven demand. Although the current dollar index exerts short-term pressure on Bitcoin, in the long run, especially since Trump's return to power, the two have shown a weak positive correlation.

5. Federal Reserve's Interest Rate Cut Trends and Economic Interpretation

1. Review of Federal Reserve Policies

Since the end of 2024, the Federal Reserve has cumulatively cut rates by about 100 basis points, bringing the benchmark interest rate down to historical lows. However, the latest economic data indicates:

• Core PCE inflation rate rose to 3.1% in January 2025, far exceeding the target of 2%;

• Economic growth indicators are disappointing, with some data suggesting GDP growth of only about 2.8% (Q1 2025 data);

• Future rate cut expectations have been reduced from the original plan of four adjustments to an anticipated two in July and December, with the policy rate expected to remain in the 4.25%-4.5% range.

1. Dual Impact of Rate Cuts on the Market

• Traditional financial markets: Rate cuts lower financing costs, but if market confidence does not recover sufficiently, it may lead to capital outflows and increased asset price volatility.

• Crypto market: A low-interest-rate environment typically benefits risk assets, especially Bitcoin's appeal as "digital gold" will increase in the medium to long term. The current low data in the crypto market indicates that the market is influenced by macroeconomic uncertainties and institutional wait-and-see sentiment in the short term.

6. Impact on the Crypto Market and Trader Strategy Recommendations

1. Deep Impact on the Crypto Market

The combination of Trump's policies and the Federal Reserve's interest rate cuts forms an important backdrop for the current crypto market:

• Long-term benefits: Recognition of national strategic reserves, institutional capital inflows, and low-rate expectations will gradually drive Bitcoin and other digital assets to recover;

• Short-term risks: Significant pullbacks in U.S. stocks and new lows in crypto market data indicate that the market still faces high volatility and panic sentiment in the short term. Data shows that the funding rate for BTC perpetual contracts has dropped to 0.004%, an 85% decrease from its peak, increasing the risk of short squeezes; the fear index (CMC Fear and Greed Index) has fallen to extreme fear territory, all signaling that the market is at a phase bottom.

1. Trader Operation Recommendations

Based on the current market environment, traders are advised to adopt the following strategies:

• Bottom verification and low-position layout

• Monitor the fear index and on-chain data: When the fear index (such as CMC Fear and Greed Index) remains below 40, and BTC and ETH on-chain data (such as miner surrender rates, perpetual contract funding rates) show clear signs of adjustment, consider entering the market in batches and strictly implement stop-loss settings.

• Diversified asset allocation

• Simultaneously allocate mainstream coins (Bitcoin, Ethereum) and some quality project tokens (such as DeFi and Layer 2 projects with substantial application scenarios) to reduce the volatility risk of a single asset.

• Strict position management and risk control

• Use stop-loss, take-profit, and position management strategies, utilizing technical indicators like RSI and MACD to determine whether the market is in an oversold or overbought state, adjusting positions in a timely manner to prevent losses from market volatility.

• Reference to cyclical and technical indicators

• Integrate Bitcoin cycle theory and historical trends of the dollar index, focusing on cyclical turning point signals; simultaneously monitor VIX, CMC Fear and Greed Index, etc., in conjunction with macroeconomic and policy dynamics to assess market risks and capital flows.

7. Future Outlook and Turning Point Predictions

1. Policy and Market Turning Points

The dual role of Trump's policies—stimulating trade and inflation in the short term while promoting asset diversification and institutional layout in the long term—will continue to influence market direction. In the next 3-6 months, U.S. economic data, corporate earnings improvement, and Federal Reserve policy dynamics will determine whether a market turning point is on the horizon:

• If U.S. economic data improves, corporate earnings recover, and institutions gradually increase their holdings of digital assets, the stock and crypto markets are likely to experience structural rebounds;

• Conversely, if global trade frictions escalate and macroeconomic risks intensify, market panic sentiment may deepen further, leading to a second bottom risk.

1. The Symbiotic Relationship Between the Dollar and Bitcoin

As the scale of U.S. national debt rises (expected to exceed $40 trillion) and the end of policy rate cuts approaches, the dollar's "hegemony" is facing some loosening. In the medium to long term, Bitcoin's attributes as an anti-inflation tool will become more prominent, and its long-term weak negative correlation with the dollar index may strengthen. Investors should note:

• In the short term, a strong dollar may suppress Bitcoin prices, but if Trump's crypto and economic tariff policies dominate the market narrative, the short-term positive correlation between the dollar index and Bitcoin will also strengthen;

• In the long term, as global dependence on the dollar decreases, Bitcoin and other digital assets may gain more institutional capital favor, becoming an important part of asset allocation.

1. Promotion of Regulation and Technological Innovation

The U.S. SEC is expected to approve more Bitcoin ETFs in the second quarter of 2025, attracting institutional capital (estimated to add $20 billion); at the same time, breakthroughs in Layer 2 and modular blockchain technology will further enhance trading efficiency in the crypto market and reduce Gas fee volatility risks. The gradual improvement of the regulatory framework will promote greater market transparency and compliance, creating conditions for long-term capital inflows.

4. Economic Structural Adjustments and Market Volatility Under U.S. Policy Transformation

Trump has repeatedly emphasized that his primary task is to build a strong America, leaving little room for short-term stock market fluctuations. He stated, "Building a strong America is what I must do; I have no time to care about the stock market's feelings. China has a hundred-year plan, while America has a quarterly plan, which doesn't work; I must do the right thing." In a Fox News interview on March 9, he pointed out that tariffs and trade policies might bring "some turbulence," even hinting at a potential recession this year, emphasizing that this is a massive reform that will inevitably go through a transition period, with the core goal of bringing wealth back to America.

Deutsche Bank analyst Jim Reid also noted that while the weekend market was relatively calm, comments from Bessent and Trump indicate they are prepared for the pain of economic adjustments. Bessent mentioned that as public spending shifts to private spending, the market will undergo a "withdrawal period," while Trump added that stock market performance does not fully reflect the reform process.

Overall, these statements suggest that the U.S. is preparing for a painful economic adjustment period. For investors, despite significant short-term market volatility, attention should be paid to the potential positive impacts of long-term structural reforms.

8. Conclusion

The policies following Trump's return to power—including designating Bitcoin as a national strategic reserve asset, promoting bank participation in crypto business, and implementing accommodative monetary policies in conjunction with Federal Reserve rate cuts—have injected positive signals into the global financial and crypto markets in the long term. However, the recent significant pullback in the U.S. stock market and new lows in crypto market data indicate that the market still faces considerable uncertainty and volatility risks in the short term.

For crypto investors, we are currently on the eve of a critical turning point. Although the market is experiencing severe short-term fluctuations, in the long run, the low-interest-rate environment, national strategic support, and institutional capital inflows will create new upward space for digital assets. Investors are advised to remain rational, seek opportunities through low-position layouts, diversify allocations, and implement strict risk control strategies, while closely monitoring macroeconomic data, Federal Reserve statements, and changes in the cyclical signals of the dollar index and Bitcoin to adjust investment strategies in a timely manner.

In summary, seeking structural opportunities amid uncertainty, the sustainability of Trump's policies and the emergence of future economic turning points will provide investors with a fresh investment perspective. At this stage, it is essential to comprehensively utilize macroeconomic, technical indicators, and market sentiment data to formulate flexible and robust investment plans, aiming to preserve and increase asset value amid volatility.

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