Author: Huobi Growth Academy

summary

In early 2026, the crypto market entered a period of volatility, but it was undergoing a stress test driven by escalating macroeconomic conflicts and global liquidity disturbances. The tariff threats erupted between the US and Europe over the sovereignty of Greenland, which Trump subsequently softened and withdrew, leading to a repeat of the Trump-style TACO trade. Simultaneously, the rising yields on long-term Japanese and US government bonds were suppressing global risk assets through interest rates, liquidity, and risk appetite. Bitcoin failed to demonstrate its "safe-haven" characteristics during this shock, instead bearing the brunt due to its high dependence on dollar liquidity. It's important to emphasize that this decline was more of a temporary repricing against the backdrop of rising macroeconomic uncertainty, rather than a systemic deterioration of the crypto market's fundamentals. From the perspectives of the macroeconomic environment, capital structure, and market institutions, the crypto market is not experiencing a "collapse," but rather a revaluation process interrupted by exogenous shocks.

I. From Greenland to Global Markets: The Trump-Style Taco Deal Re-enacted

Unlike previous tariff disputes revolving around trade deficits, industrial subsidies, or currency conflicts, the core of this round of US-EU friction lies not in economic accounts, but in sovereignty and geopolitical control: tariffs are merely a means, while territory and strategic depth are the goals. The immediate trigger was the joint military exercises held in Greenland by eight countries—Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland. The Trump administration defined this as a challenge to US Arctic strategic interests and quickly instrumentalized, politicized, and politicized tariffs—using a binary threat of "either sell the island or pay the tariffs" to link trade measures with territorial claims, and proposing a clear and tough timetable: a 10% punitive tariff on the aforementioned European countries starting February 1, potentially rising to 25% by June 1, with the only exemption condition being an agreement on the US purchasing or maintaining long-term control of Greenland. The subsequent responses from Europe further amplified this uncertainty. Denmark reiterated that Greenland's sovereignty is non-negotiable, prompting the EU to swiftly initiate emergency consultations and prepare reciprocal countermeasures. Crucially, the EU possesses a €93 billion list of retaliatory measures—not a temporary emotional outburst, but a systematized "anti-coercion toolbox." Thus, the market is no longer facing a single point of friction, but a potentially rapidly escalating transatlantic confrontation: both sides are "playing cards," but the stakes are not short-term trade interests, but rather alliance order, resource control, and strategic presence.

However, Trump then stated on Wednesday that he had reached a framework agreement with NATO on Greenland and withdrew his tariff threats against eight European countries. Simultaneously, in his keynote speech at the World Economic Forum in Davos, Switzerland, Trump called for "immediate negotiations" on acquiring Greenland, a territory of Denmark, and stated that only the United States could guarantee its security. However, he also hinted that he would not use force to control the island. This triggered another classic Trump-style TACO deal, leading to a broad rebound in US stocks and a slight rebound in the cryptocurrency market, though it did not fully recover its previous losses.

However, what truly amplifies market volatility is not the 10% or 25% tariffs Trump imposes on several European countries, nor the repeated threats of tariffs followed by compromises, but rather the institutional uncertainty it represents: the triggering conditions for the conflict are clear (the tariff timetable), but the endpoint is unclear (there is no "reasonable price" for sovereignty issues); implementation may be swift (executive orders can be implemented), but the negotiation cycle may be lengthy (alliance coordination and domestic politics require time); simultaneously, there is a recurring rhythm of "maximum pressure—partial compromise—re-pressure," forcing asset pricing to incorporate a higher risk premium. For global markets, such events first raise volatility through expectations: businesses and investors reduce risk exposure and increase cash and safe-haven asset allocations, then observe whether the policies are actually implemented; once the conflict continues, supply chain costs and inflation expectations further transmit to interest rates and liquidity, ultimately spreading pressure to all "risk-sensitive" sectors such as stocks, credit, foreign exchange, and crypto assets. In other words, this is not a trade friction in the traditional sense, but a geopolitical sovereignty conflict leveraging tariffs. Its greatest harm to the market is that it escalates a negotiable economic issue into a political issue that is difficult to compromise on. When uncertainty becomes the main variable, price fluctuations will change from "emotional disturbances" to "structural premiums," which is precisely the pricing background that global assets are currently facing.

II. The starting point of the interest rate shock: the synchronized rise in US and Japanese government bond yields

As geopolitical risks were rapidly repriced, the global bond market was the first to respond with the most direct and "systemic signal." In mid-January, the yield on Japanese 30-year government bonds surged by more than 30 basis points in a single day, reaching a high of 3.91%, a 27-year high; almost simultaneously, the yield on US 10-year Treasury bonds climbed to 4.27%, a four-month high. For the global market, this combination of "synchronized rises in long-term interest rates in the US and Japan" was not a short-term emotional fluctuation, but a structural shock sufficient to change the foundation of asset pricing, with an impact far exceeding the bond market itself. First, it needs to be clarified that Japan has long played a role in the global financial system that is not merely that of an ordinary sovereign bond issuer, but rather an anchor for global low-cost liquidity. Over the past two decades, through sustained ultra-loose monetary policies, Japan has exported a massive amount of low-cost yen funds to the world, becoming a fundamental source of global carry trade and cross-border capital allocation. Whether it's emerging market assets, European and American credit products, or high-risk stocks and crypto assets, they all more or less incorporate an implicit financing structure of "borrowing yen to invest in high-yield assets." Therefore, when the yield on Japanese long-term government bonds rises sharply in a short period of time, it doesn't simply mean that "Japanese bonds are more attractive," but rather sends a deeper signal: the most stable and cheapest source of funds in the global financial system is loosening.

Once Japan ceases to provide a stable supply of low-cost funds, the risk-reward ratio of global carry trades will rapidly deteriorate. Highly leveraged positions previously established using yen financing will face the dual pressures of rising financing costs and amplified exchange rate risks. This pressure often doesn't initially manifest as asset collapse, but rather prompts institutional investors to proactively reduce leverage and lower their exposure to high-volatility assets. It is during this phase that global risk assets exhibit a characteristic of "indiscriminate pressure"—not due to deteriorating fundamentals, but rather a systemic rebalancing triggered by changes in funding sources. Secondly, the overlapping of US-EU tariff conflicts further fuels expectations of imported inflation, providing a "rational narrative" for rising interest rates. Unlike previous trade frictions surrounding consumer goods or low-end manufacturing, this round of potential tariffs affects high-value-added sectors such as high-end manufacturing, precision instruments, medical equipment, and the automotive supply chain—areas with extremely high substitutability. The US has a structural dependence on European countries in these areas, and tariff costs will almost inevitably be passed on to end prices through the supply chain. At the market expectation level, this means that the interest rate pricing logic previously based on a "declining inflation center" is beginning to be re-examined. Even if tariffs are not fully implemented in the short term, the risk of inflation that "may occur and is difficult to reverse quickly" is enough to raise the risk premium of long-term interest rates.

Secondly, the US's own fiscal and debt problems provide a structural backdrop for the rise in long-term US Treasury yields. In recent years, the US fiscal deficit and national debt have continued to expand, and market concerns about the sustainability of long-term debt have not truly dissipated. If the tariff conflict escalates further, it may not only raise inflation expectations but also be accompanied by more fiscal subsidies, industrial support, and security spending, thereby increasing the fiscal burden. In this environment, long-term US Treasury bonds are caught in a typical "tug-of-war": on the one hand, geopolitical uncertainty and market risk aversion drive funds into the bond market; on the other hand, inflation and debt concerns require higher term premiums to compensate for risk. The result is that yield levels and volatility rise simultaneously, making the risk-free rate itself "no longer risk-free." The ultimate result of these three forces is a systemic upward shift in the global risk-free rate center and a passive tightening of financial conditions. For risky assets, this change has a high degree of pervasiveness: rising discount rates will directly compress valuation space, rising financing costs will inhibit new leverage, and liquidity uncertainty will amplify the market's sensitivity to tail risks.

The crypto market is under pressure precisely against this macroeconomic backdrop. It's important to emphasize that Bitcoin and other mainstream crypto assets are not being "targeted in isolation," but rather, they have assumed the role of high-volatility, high-liquidity risk assets amidst rising interest rates and tightening liquidity. When institutional investors face margin pressures or risk exposure constraints in traditional markets, the first assets to be sold off are often not those with poor liquidity or high adjustment costs, but rather those that can be quickly converted into cash and have the greatest price elasticity. Crypto assets possess precisely this characteristic. Furthermore, the upward shift in the risk-free interest rate is also changing the relative attractiveness of crypto assets. In a low-interest-rate, high-liquidity environment, the "opportunity cost" of assets like Bitcoin is lower, and investors are more willing to pay a premium for its potential growth. However, when long-term interest rates in the US and Japan rise simultaneously, and safe-haven assets themselves begin to offer more attractive nominal returns, the allocation logic for crypto assets inevitably needs to be reassessed. This reassessment does not imply a long-term bearish outlook, but rather that in the short term, prices need to correct to re-align with the new interest rate environment. Therefore, from a macro perspective, the simultaneous rise in US and Japanese government bond yields is not a "negative story" for the crypto market, but rather the starting point of a clear transmission chain: rising interest rates → tightening liquidity → declining risk appetite → pressure on highly volatile assets. In this chain, the crypto market's pullback reflects more the result of changes in global financial conditions than a deterioration in its own fundamentals. This also determines that as long as interest rate and liquidity trends do not fundamentally reverse, the crypto market will remain highly sensitive to macroeconomic signals in the short term, and the true directional choice will depend on marginal changes in this round of interest rate shocks.

III. The true state of the crypto market: not a collapse, but rather temporary pressure.

Rising interest rates themselves don't directly "hit" the crypto market, but they create a clear and repeatable transmission chain through changes in liquidity and risk appetite: tariff threats raise inflation expectations, inflation expectations push up long-term interest rates, rising interest rates increase credit and financing costs, financial conditions tighten, and ultimately force funds to systematically reduce risk exposure. In this process, price volatility is not the starting point, but the result; the real driving force is the change in funding sources and constraints. The offshore dollar market plays a crucial but often underestimated role. With the US-EU tariff conflict compounded by geopolitical uncertainty, the risk premium for global trade finance and cross-border settlement has increased, raising the cost of obtaining offshore dollars. This change isn't necessarily reflected in explicit policy rates, but more in interbank lending, cross-currency basis, and financing availability. For institutional investors, this means stricter margin requirements, more conservative risk exposure management, and a decreased tolerance for highly volatile assets. When traditional markets experience volatility and increased correlation, institutions typically do not prioritize selling assets with poor liquidity, high exit costs, or complex regulatory structures. Instead, they tend to reduce their holdings in assets with **high volatility, high liquidity, and the most "portfolio-friendly" characteristics.** Under the current structure, crypto assets possess precisely these two characteristics, thus playing a major "regulatory" role during macroeconomic shocks.

It is against this backdrop that Bitcoin failed to exhibit safe-haven properties similar to gold during this shock. This phenomenon itself is not abnormal, but rather a natural result of the evolution of its asset attributes. Unlike its earlier narrative as "digital gold," Bitcoin at its current stage is closer to a macro-risk asset highly dependent on dollar liquidity. It cannot operate independently of the dollar credit system, and its price is highly sensitive to changes in global liquidity, interest rate levels, and risk appetite. When offshore dollars tighten, long-term interest rates rise, and institutions need to quickly replenish margin or reduce portfolio volatility, Bitcoin naturally becomes a priority target for selling. In stark contrast, gold and silver have continued to strengthen during this shock, driven not by short-term profit expectations, but by the safe-haven premium brought about by central bank demand, physical attributes, and "de-sovereignization" characteristics. In an environment of escalating geopolitical competition and repricing of sovereign risks, such "stateless" assets are more likely to attract capital. It is important to emphasize that this is not a "failure" of Bitcoin, but rather a market recalibration of its role. Bitcoin is not a safe haven during crises, but rather an amplifier in the liquidity cycle; its advantage lies not in hedging extreme risks, but in its high sensitivity to the recovery of risk appetite during periods of liquidity expansion. Understanding this helps avoid unrealistic expectations of it during macroeconomic shocks.

From a structural perspective, although prices have seen a significant pullback, the current crypto market has not experienced a repeat of the systemic risks seen in 2022. There has been no credit crisis among major exchanges or stablecoins, nor have we observed continuous liquidation crashes or on-chain liquidity freezes. Long-term holders continue to behave relatively orderly, with their token distribution reflecting more rational profit-taking than forced selling. While Bitcoin did trigger some liquidations after breaking key price levels, the overall scale and ripple effects were significantly smaller than in the previous bear market, resembling more of a position rebalancing under macroeconomic shocks rather than a collapse of the market's own structure. In other words, this is a phase of pressure driven by exogenous shocks, not a collapse caused by imbalances within the crypto system itself.

IV. Conclusion

The market volatility triggered by the escalation of US-EU trade frictions and the simultaneous rise in US and Japanese government bond yields is not essentially a "single-point risk event" for a particular asset or market, but rather a systemic repricing process centered on global liquidity, interest rate levels, and risk appetite. In this process, the decline in the crypto market is not due to a deterioration in its own fundamentals, nor to institutional or credit failures, but rather a natural consequence of its role in the current financial system—as a highly liquid, highly elastic, and highly sensitive risk asset to macroeconomic conditions, it is prioritized for pressure during periods of tightening liquidity and rising interest rates. From a longer-term perspective, this adjustment does not negate the structural revaluation process the crypto market is undergoing in 2026. On the contrary, it clearly reveals an ongoing change: crypto assets are gradually moving away from the early stage of "narrative-driven, emotion-based pricing" and entering a more mature and institutionalized pricing framework. Within this framework, prices are no longer primarily driven by stories, slogans, or single events, but are beginning to be internalized as a function of changes in macroeconomic liquidity, interest rate structure, and risk appetite. For investors, the real challenge lies not in judging short-term rises and falls, but in whether they can update their analytical framework in a timely manner and understand and adapt to this long-term trend of shifting from a "narrative market" to a "macro market".