In the current crypto market, Bitcoin has ample liquidity, while altcoins have very poor liquidity and are constantly being drained. Technically, Bitcoin is still fluctuating between $90,000 and $110,000, while many altcoins have hit new lows.
Recently, industry leader Arthur Hayes believes that Bitcoin may first fall to $70,000 and then rise to $250,000. StarEx exchange analysts agree with some of these views.
The current market sentiment is similar to the situation before the crypto market crashed at the end of 2021. A series of financial indicators (such as the central bank's balance sheet, the speed of bank credit expansion, and the 10-year Treasury bond yield) show potential risks. In addition, the crazy trend of $TRUMP memecoin has also exacerbated the market's anxiety. After TRUMP was hyped, meme coins and AI Agent tokens plummeted, and liquidity was evacuated at a rapid speed.
This is also the reason why Trump’s tariff policy on February 2 triggered a market crash, especially Ethereum’s 25% plunge, which further hit confidence in altcoins.
As a key asset of the global reserve currency, the surge in the yield of U.S. Treasury bonds may lead to financial market turmoil. In 2023, former Treasury Secretary Yellen lowered the yield of long-term Treasury bonds by issuing more short-term Treasury bills, but the current total debt has soared to 36.22 trillion U.S. dollars, and major buyers (the Federal Reserve, commercial banks, and foreign surplus countries) have reduced their bond purchases.
After Trump's actions, the financial market has become even more panicked. The 10-year Treasury bond yield may further rise to 5%-6% in the future. The market relies on hedge funds for arbitrage transactions, but these funds rely on leverage and repurchase agreements. If the repurchase rate rises or the futures margin requirements increase, the fund's purchasing power will drop sharply, the Treasury market may fall into crisis, and a small financial crisis may be triggered. This may bring about a larger correction in Bitcoin, ranging from US$70,000 to US$75,000.
Although the Fed internally dislikes Trump, if a financial crisis really occurs in the United States, the Fed will also take necessary measures to stabilize the financial system, such as suspending the supplementary leverage ratio requirement, allowing banks to purchase government bonds with unlimited leverage, lowering interest rates and stopping quantitative tightening (QT), and even restarting quantitative easing (QE). The U.S. Treasury Department has clearly requested a suspension of the supplementary leverage ratio, and the Fed's political will will determine the final action. The Fed's actions during the Biden administration show that they may try to curb Trump's influence. For example, in 2021, the Fed insisted on the "temporary inflation theory" and delayed raising interest rates; in September 2023, it suspended interest rate hikes and started a rate cut cycle in 2024, intending to stabilize the market and support the Democratic Party's election.
So if a financial crisis occurs, the Fed’s measures could cause Bitcoin to soar.
With the introduction of a series of policies after Trump took office, he may maintain the fiscal deficit, forcing the issuance of treasury bonds to continue to rise, or create a deadlock on the debt ceiling issue, freeze the liquidity of the Treasury Department, take advantage of market panic, and cause the 10-year Treasury bond yield to soar to more than 5%, ultimately forcing the Federal Reserve to cut interest rates and ease monetary policy.
If a crisis occurs and the market panics, Bitcoin will plummet in the short term. Once the Federal Reserve stabilizes the market, funds may flow back to risky assets, including Bitcoin, pushing its price higher.
StarEx exchange analysts believe that it is still necessary to wait for the policy to become clear. However, Bitcoin still benefits from the global loose liquidity environment, and the long-term bull market still exists.
