Yang Ge Gary: Trump's tariff policy will trigger the end of the Kondratiev wave and a qualitative change in Bitcoin
In many panels and meetings, people often ask and ponder how Trump's tariff policy will affect the crypto market and the direction of Bitcoin prices.Author: Yang Ge Gary
Kondratiev Wave Nodes, Bitcoin's Transformation.
Trump's tariff policy has triggered turmoil and strong unease in global markets, with the VIX index reaching 52 on April 8. However, it is clear that this is far from resolving the overly complex superposition of contradictions at this stage. Fiscal and monetary policies currently seem only capable of providing temporary emotional value, and in an environment where bonds, stocks, and currencies are all suffering, asset allocation issues have also fallen into a deadlock. What should one hold now? It seems to have become a question that everyone is concerned about in Q2 2025.
When will Bitcoin rebound and rise again? This was probably the most frequently asked question during the first two weeks of April at the Web3 Festival in Hong Kong. In many panels and meetings, people would ask and ponder how Trump's tariff policy would affect the crypto market and the direction of Bitcoin prices. To be honest, this simple question is not easy to explain, which is why I returned to write this article for everyone's reference.
tl;dr
The issue of simultaneous declines in bonds, stocks, and currencies and the failure of the Merrill Lynch Clock
The Thucydides Trap and the comparison with the historical end of the 5th Kondratiev Wave cycle
The significance of Greenspan's prophecy and the intersection of the Kondratiev cycle with Crypto
What is the real Thucydides Trap this time?
The shift in the correlation between Bitcoin and chaos: the change in inertia cognition and similarities with the Merrill Lynch Clock issue
The essential reasons for the sustained growth of the second curve of Crypto growth
The issue of simultaneous declines in bonds, stocks, and currencies and the failure of the Merrill Lynch Clock
Why did Trump adopt extreme tariff policies? Simply put, it seems very MAGA, as it can reduce import dependence, boost employment, and mobilize political sentiment. Unfortunately, the American public is not simply a bunch of small pinks; high inflation and a $1.3 trillion fiscal deficit do not provide a good soil for everyone to buy into "Made in America." The reality of survival issues has become urgent and irreconcilable. Under the conditions where fiscal and monetary policies are no longer effective, it can be said that tariff policies have become a last resort. Buffett pointed out in a recent interview: "They (Tariffs) are an act of war to some degree." Although many of Buffett's ideas are outdated from the perspective of the next era's paradigm, this judgment based on experience is still very accurate. The world is at a new intersection of the Kondratiev cycle, where the post-war peace and credit system has largely collapsed, and the reshaping of new mechanisms in this chaotic era has already begun.
In addition to the high VIX index, the simultaneous decline of bonds, stocks, and currencies at this stage is a relatively obvious signal. During the Hong Kong Web3 Festival, I was pleased to discuss with Dr. Yi the historical similarities of the simultaneous decline of bonds, stocks, and currencies in 1929 and 1971. The economic indicators and external environment at these two points in time are very similar to those in 2025. Ultimately, whether we follow a script of Great Depression + localized wars, a script of Cold War confrontation, or a brand new independent script depends on (or should be said to be reflected in) the performance of safe-haven financial assets, especially gold. The saying "store gold in chaotic times" reflects the characteristics of this intersection of the Kondratiev cycle. It is important to note that the properties of gold at this time are completely different from the commodity properties during the overheating phase of the Merrill Lynch Clock.
According to the standard view of the Merrill Lynch Clock, the transition from stagflation to recession is a process of moving from cash being king to bonds being king, and everyone is waiting for the subsequent recovery phase, which is a new round of growth where stocks are king. Clearly, we are not in such a state; the external environment does not have the conditions to enter a recovery phase, and the Merrill Lynch Clock cannot continue to operate downward. At this time, gold repeatedly breaks historical highs, indicating that it has clearly escaped the logic of the Merrill Lynch Clock. We can also compare this with other major commodities: crude oil, silver, copper, soybeans, rubber, cotton, rebar, etc., all maintain levels that are flat or slightly higher than those before the pandemic, widening the gap with gold's increase.
The failure of the Merrill Lynch Clock indicates that the economic policies and market experiences at this stage will deviate from conventional expectations. Trump's introduction of tariff policies at this time is, from a macro perspective, merely a passive driver of historical laws.
Three points worth adding: ① The failure of the Merrill Lynch Clock only occurs under conditions that do not meet its existence at the intersection of Kondratiev cycles, but the objective laws of the Merrill Lynch Clock still hold under the right external environment; ② During the crossing of Kondratiev cycles, there are still other types of safe-haven financial assets besides gold. For example, the recent global search for quantitative funds and CTA strategies is not coincidental. Of course, whether Bitcoin will prove itself as "digital gold" in this opportunity, breaking away from the positive correlation with other financial assets and developing independently, remains to be seen; ③ At different historical stages of the crossing of Kondratiev cycle nodes, the step at which the Merrill Lynch Clock fails is not necessarily the same, and from a regulatory perspective, it is not particularly important. However, if certain asset management companies and family offices continue to use previous inertia strategies, they must pay attention and make timely adjustments.
- The Thucydides Trap and the comparison with the historical end of the 5th Kondratiev Wave cycle
In 2020, I summarized a chart to describe the changes in industries and geopolitical environments during the five historical Kondratiev cycles. However, very few people have experienced the intersection of two Kondratiev cycles, so until today, when personally feeling the impact from the economic and policy sides, it has become more intuitive.
Historically, the intersection of Kondratiev cycles usually brings about the intensification of contradictions related to the Thucydides Trap or its hypothetical enemy, and this time is no exception. However, this time it falls between China and the United States, two countries with a significant historical and civilizational path gap. Trump's tariff policy fermenting into this result at this time is also quite reasonable.
The table below provides a comparison of various indicators at the end points of the five historical Kondratiev cycles:
(Note: The Thucydides Trap parties are expressed in the order of Ruling Power -- Rising Power)
As long as we extend our perspective, the failure of the Merrill Lynch Clock and economic policies appears very natural, because the energy confrontation at the intersection of Kondratiev cycles is clearly much greater than the changes in economic cycles under the Merrill Lynch Clock. Therefore, this intersection node will directly shatter the operating Merrill Lynch Clock and plunge it into a chaotic era.
A direct comparison shows that our situation and the future we face over the next decade will be very clear. The similarities in paradigms are no longer discussed; we must also consider several paradigm leap questions: ① Will the new technological paradigm of digitization and AI bring about a revolution in global production relations and governance methods? ② Is the relationship between China and the U.S. truly a Thucydides Trap? ③ What role do Bitcoin and Crypto play in the above two questions?
- Greenspan's prophecy and the significance of Crypto at the intersection of the Kondratiev cycle
Similar to the tariff policies at the intersection of historical Kondratiev cycles, Trump's current tariff policy may also trigger a butterfly effect to some extent. Whether it is the internal economic issues in the U.S. or the handling of U.S.-China relations, if it is not smooth and reasonable enough, it will inevitably trigger a transmission effect leading to the outbreak of a chaotic era.
However, the potential failure may not only be the Merrill Lynch Clock at the intersection of the Kondratiev cycle mentioned above. From a longer-term perspective, the new paradigms of digitization and AI are gradually changing the essential structure of production units and labor organization that have existed for the past two hundred years since the Industrial Revolution. The Fed's governance of the U.S. economy through traditional monetary and fiscal policies, which also affects the management of global economic and trade stability during this historical phase, will face severe challenges of failure or at least transformative change.
In his reflective work "The Map and the Territory: Risk, Human Nature, and the Future of Forecasting" published in 2013, Greenspan mentioned:
"We must accept that monetary and fiscal policy cannot permanently boost economic growth in the presence of deeply rooted structural constraints."
I guess most people have already recognized or at least felt that the world is currently facing very "deep structural constraints." The global pattern and economic policy methods that have evolved since the Industrial Revolution increasingly cannot match the rapid development needs of digitization and AI. Since entering the rapid explosion of the digital and AI era, production tools have been changing exponentially. Coupled with the emergence of Bitcoin in 2009, which has led to the development of the Crypto Market and Degen's four cycles over the past 16 years, the energy accumulated in productivity and production relations will undoubtedly erupt into qualitative changes at this fragile intersection of the Kondratiev cycle.
It is difficult to assert that Crypto and Blockchain Protocol Management will quickly take over all economic policy governance tasks corresponding to the previous paradigm from this node. However, it is clear that this is an unavoidable trend. It is highly likely that in the coming decades, the world will continue to exist in a dualistic parallel governance structure, where Crypto and Blockchain Protocol Management will increasingly grow or dominate parts of global economy, finance, trading, settlement, and even social governance, while state sovereignty management of society and economy, including monetary and fiscal policies, will still be managed in parallel according to existing cultural methods and interest demands in certain regions. This also responds to the direction of solving the current "main contradiction in the global world" mentioned in the previous article "The Pattern Change After Trump's Victory."
In summary, the significance of Crypto at this intersection and turning point is immense and will comprehensively change the global economic and social landscape.
4. What is the real Thucydides Trap this time?
I do not believe that the Thucydides Trap at this stage lies between China and the U.S. It is not to say that the economic scale between China and the U.S. does not constitute competition, nor is it like Huntington said in "The Clash of Civilizations" that future greater power confrontations will unfold between the West and Islam. This paradigm leap is clearly a change that transcends national and racial boundaries.
I remember back in 2014, a well-known Korean investor friend who invested in Kakao told me that he believed that global megacities are not much different, and the civilizational consensus among them has surpassed that of many domestic cities within countries. In recent years, the formation of consensus among Digital Nomads and Degen has further proven this point.
When considering historical patterns like the Thucydides Trap, one must compare the similarities of historical paradigms while also adopting a perspective that considers the changes in technology and production. Especially at this intersection node that breaks the "deep structural constraints," the differences in management positions between China and the U.S. are not necessarily greater than the essential differences between TradFi and DeFi, nor are they greater than the differences between the maritime law system and Crypto Protocol, or the cultural ideological differences between conservatives and Degen.
As I mentioned in a previous article: "Most countries and interest groups globally remain in a semi-feudal, semi-decentralized state capitalism environment, and the current main contradiction is pushing it towards a semi-decentralized state capitalism and semi-decentralized digital information management environment." The current intersection point of the global Kondratiev cycle, along with the accumulated transformative energy of contradictions, will inevitably point towards the latter.
Looking back at the changes after the past five intersection points, chaos and reconstruction, the surge of safe-haven assets, and the rapid development of a new generation of production technologies in the midst of transformation are all inevitable trends. Unlike before, although the energy accumulation this time is stronger and more globalized, the direction of change is decentralized and abstracted. Therefore, in response to the question in the first paragraph, I believe that this time (the energy explosion at this node) is more likely to face a brand new independent script, where the level of global chaos will be high, but the focus of confrontation will not be particularly concentrated.
- The shift in the correlation between Bitcoin and chaos: the change in inertia cognition and similarities with the Merrill Lynch Clock issue
In such a background environment, Bitcoin has clearly prepared to claim its title as "digital gold." However, the development of history is always tortuous. As of Q2 2025, in an environment where chaos and panic are continuously increasing, Bitcoin's safe-haven ability is still slightly inferior to gold. During times of increased chaos, it still exhibits similar downward performance to bonds, stocks, and currencies, meaning its price is negatively correlated with chaos to a certain extent.
I won't elaborate on how to define chaos here. The VIX can be an important factor indicator, and in addition, the MOVE index, hidden volatility of various assets, the Libor-OIS spread, gold price volatility, the divergence of Fed and central bank interest rates, the proportion of countries with negative interest rates, war risk index, and the degree of global trade disruption can all serve as reference points.
The reason for the continued negative correlation with chaos is primarily determined by the mindset of holders. This indicates that Bitcoin holders still have at least half or more who hold it with the mindset of asset appreciation or simply as speculative gambling (the reason I say it might be close to half is that a significant proportion of Bitcoin is long-term locked or lost private keys, and there are also those who are unwilling to sell due to laziness; these two categories irrationally provide positive correlation), and the turnover rate of these individuals is quite high.
Nevertheless, from the data of the past six months, Bitcoin and all other altcoins have shown significant differences in performance. Although Bitcoin and various altcoins do not exhibit negative correlation, Bitcoin's ability to resist declines in various environments has gradually become evident, especially in the current environment where chaos is expected to increase after the end of 2024. This also indicates that the correlation between Bitcoin and chaos is quietly changing, with the negative correlation weakening and the positive correlation increasing.
Since Trump took office for his second term, he has signed over 100 executive orders and continuously implemented lenient policies towards the Crypto industry. Coupled with the recent ignition of this tariff policy, these actions are macroscopically pushing the occurrence of this intersection of the Kondratiev cycle, leading to a strong confrontation between the old and new cycles. Of course, this will also help accelerate the reversal of the correlation between Bitcoin and chaos. As of mid-April 2025, the SEC has officially withdrawn lawsuits against multiple Crypto projects, including Uniswap, Gemini, OpenSea, Kraken, Consensys, Cumberland, Coinbase, and Ripple. Additionally, the FDIC and OCC have made significant adjustments to the regulation of banks participating in Crypto businesses, eliminating the requirement for banks to obtain approval and report for developing Crypto businesses. However, these positive developments have still not been digested by the public in the current chaotic environment, and the $2.6 trillion market still has many factors that have not been priced in (not including the rapidly developing RWA and PayFi markets that will be mentioned later).
At the end of this historical garbage time, we need to consider two questions: ① Before forming a positive correlation with chaos, will there be another round of emotional decline? ② How long will it take for Bitcoin to form a strong positive correlation with chaos like gold and become a safe-haven asset? The catalyst that ignites this trend usually requires a shift in market and public inertia cognition, and this transformation process, if achieved smoothly, typically requires a considerable amount of time, which is clearly not allowed at the current historical intersection. Of course, Bitcoin has always educated the market and participants in a counter-cognitive manner, so in the near future, there may be extreme or counterintuitive market conditions.
Similar to the Merrill Lynch Clock, Bitcoin has also formed a four-year bull-bear transition cycle in the Crypto market due to its halving, and from the perspective of changes in sentiment and asset class preference, the process is very similar, just 2.5 times faster. However, after experiencing the development of four cycles over 16 years, this year has shown irregular characteristics, leading many to believe that the current situation is a bull market in name only, attributing the failure of strategies to the entry of ETFs and the collapse of meme confidence. In essence, I believe this is related to the energy intervention at the intersection of the Kondratiev cycle, which has disrupted the original rules of the Crypto market due to the current level of global chaos. The past four cycles have familiarized people with the operational rules of Bitcoin and the Crypto Market, successfully establishing them as strategic reserves and professional institutional allocations in various countries. At this moment, cleverly breaking the rules through the intersection of the Kondratiev cycle may be the best timing for Bitcoin to stand out and undergo a qualitative transformation into digital gold.
In summary, as a historical intersection point of drastic changes in the Kondratiev cycle, 2025 may witness a brief decline that breaks the original four-year cycle experience, but we will soon see Bitcoin undergo a qualitative change positively correlated with the level of chaos, which will drive the significant development of the entire Crypto market in the next stage, namely the second curve of Crypto growth.
- The essential reasons for the sustained growth of the second curve of Crypto growth
At the Web3 Festival in Hong Kong in early April 2025, the RWA topic has actually become exceptionally hot, successfully breaking the colored glasses some Native Degens had towards it in the previous cycle.
Seeking Real Yield and sustainable development has gradually become a new consensus in the Crypto Market this year. History is often forced; after experiencing the baptism of the frenzied meme and BTCFi narratives in 2024, it has become increasingly difficult to convince people solely through storytelling and preaching without integrating Real Yields and Real Applications.
In my previous article "The Second Curve of Crypto Growth," I mentioned and discussed some phenomena and initial reasons for the rise of RWA and PayFi. Through this article's description of the intersection of the Kondratiev cycle, we can understand that the more essential reason for this trend is the irreversible demand for the establishment of new cycles and new paradigms under chaotic changes.
Many people at this stage are concerned about whether RWA and PayFi will be fleeting like other narratives and never return. It is clear that, unlike narrative renewals and empty pledges, long-term institutional matters will continue to hold value.
As of Q1 2025, a large number of actual PayFi application scenarios and RWAFi funds have begun to emerge rapidly. The rapid development of new-generation projects, protocols, and public chains like CICADA.Finance and Plume will bring overall changes to the market in 2025 and lay a solid foundation for the sustained growth of the second curve of Crypto.
Trump's tariff policy is merely a butterfly effect, but the historical-level opportunities that will arise at the intersection of the Kondratiev cycle will be significant. The expectation and realization of the reversal of the correlation between Bitcoin and chaos will become an important factor driving the growth of various Crypto second curve industries, including RWA and PayFi, representing the beginning of the gradual integration of Crypto and Blockchain Protocol Management into global economy, finance, trading, settlement, and various social governance tasks after entering the new Kondratiev cycle.
