Market Overview and the Impact of Trump’s Announcements

U.S. financial markets saw a sharp downturn as all three major indices—Dow Jones, S&P 500, and Nasdaq—closed in the red on Friday, January 31. The Dow Jones led the decline with a 0.75% drop, reflecting investor concerns over the looming economic consequences of new tariffs announced by President Trump. Gold prices also fell slightly to $2,831 per ounce, although they remain near record highs. Oil prices hovered around $73.8 per barrel, reflecting cautious sentiment amid global trade tensions.

Bitcoin mirrored this negative sentiment, slipping from $105,000 to $102,000 within 24 hours. Most altcoins followed suit, resulting in a market-wide correction that left the total crypto market capitalization at $3.66 trillion. However, despite short-term setbacks, Bitcoin ended January with a 9.26% gain, marking the highest monthly close in its history at $102,000.

Meanwhile, spot Bitcoin ETFs in the U.S. recorded substantial inflows, totaling $318 million, with Ethereum ETFs adding $27 million. These inflows highlight continued institutional interest in crypto, even in the face of broader market uncertainty.

Trump’s Economic Offensive: Tariffs, Trade Wars, and Crypto Reactions

The latest market turbulence is largely attributed to President Trump’s unexpected escalation of tariffs. Initially scheduled to take effect in March, Trump advanced the timeline to February 1, leaving markets reeling. The tariffs include a 25% levy on goods from Mexico and Canada and a 10% levy on Chinese imports. These measures, aimed at combating illegal immigration and the influx of fentanyl into the U.S., signal Trump’s no-compromise stance on economic negotiations.

Karoline Leavitt, the White House press secretary, described the tariffs as “non-negotiable” and emphasized that foreign nations would have to either comply with U.S. demands or face a comprehensive trade war. The sudden shift in policy underscores Trump’s commitment to delivering on his campaign promises while leveraging America’s current economic strength against weaker global competitors.

The Kremlin, through spokesman Dmitry Peskov, downplayed the threat, stating that the BRICS nations have no intention of challenging the U.S. dollar’s dominance or provoking a full-scale economic conflict. However, this reassurance did little to calm market jitters, as investors brace for potential retaliatory measures from affected nations.

Will Bitcoin Benefit from the Decline of the U.S. Dollar?

The long-term question on everyone’s mind is whether Bitcoin could eventually replace the U.S. dollar as a global reserve currency or at least play a significant role in a multi-currency system. Although the dollar’s dominance has gradually declined, its status as the world’s primary reserve currency remains intact, and the pace of its decline is slower than many anticipate.

Thuận Capital suggests that in the future, a diversified international monetary system could emerge, with various currencies—potentially including crypto assets—playing a role in cross-border transactions. This shift could benefit Bitcoin, as it is increasingly viewed as a store of value and a hedge against inflation and geopolitical risks.

Key Economic Data: PCE and the January Fed Meeting

The Personal Consumption Expenditures (PCE) Price Index, a key measure of inflation closely monitored by the Federal Reserve, reported a 2.6% increase, up from the previous month’s 0.2% growth. Core PCE, which excludes volatile food and energy prices, stood at 2.8%, unchanged from the prior month but well above the Fed’s 2% target. This data suggests persistent inflationary pressures, albeit within market expectations.

Additionally, the Q4 2024 GDP report showed the U.S. economy grew by 2.3%, falling short of the projected 2.7% and the previous quarter’s 3.1% growth. While growth has slowed, the economy remains on a positive trajectory, providing the Fed with room to maintain its current monetary policy stance.

During its January meeting, the Fed decided to hold interest rates steady, following three consecutive rate cuts in late 2024. Fed Chair Jerome Powell emphasized that the central bank would not rush to cut rates further until it sees “significant progress in reducing inflation or a notable weakening in the labor market.” Powell also highlighted the uncertainty surrounding the impact of Trump’s tariffs, acknowledging that their effects on the economy and consumer behavior are still unclear.

Despite Trump’s calls for immediate rate cuts, Powell confirmed that he had no direct communication with the president and refrained from commenting on Trump’s public statements.

Positive Signals for Bitcoin Adoption in the U.S.

Despite market volatility, the U.S. is witnessing increasing institutional adoption of Bitcoin and crypto at both federal and state levels. Kash Patel, Trump’s nominee for FBI Director, disclosed holdings exceeding $100,000 in Grayscale’s Bitcoin products and shares of Core Scientific, a Bitcoin mining company. This demonstrates the growing acceptance of crypto among top government officials.

On the state level, South Dakota Representative Logan Manhart introduced two bills promoting Bitcoin integration into public investment strategies:

• House Bill 1202: Permits up to 10% of state funds to be invested in Bitcoin.
• House Concurrent Resolution 6006: Encourages the state’s investment council to consider Bitcoin as a hedge against inflation.

Other states, including Arizona and Utah, are racing to establish Bitcoin reserve laws, highlighting the asset’s expanding role in public finance.Nasdaq also signaled its intent to increase its crypto involvement once regulatory clarity is achieved. Meanwhile, MicroStrategy, a major Bitcoin holder, raised $584 million by issuing additional preferred shares to finance further Bitcoin purchases. This move underscores the company’s unwavering commitment to Bitcoin as a long-term store of value.Europe’s Divided Stance on BitcoinAcross the Atlantic, the European Central Bank (ECB) reduced interest rates by 0.25%, leaving the door open for further easing. However, ECB President Christine Lagarde reiterated her opposition to including Bitcoin in the EU’s reserves. She also convinced the Czech National Bank to abandon its plans to accumulate Bitcoin reserves.Despite Lagarde’s stance, the Czech National Bank is reconsidering its reserve strategy, with Governor Aleš Michl advocating for the inclusion of Bitcoin. The proposed Bitcoin reserve could amount to $7.3 billion, representing 5% of the country’s total reserves.Meanwhile, Norway’s sovereign wealth fund revealed a $500 million investment in MicroStrategy shares, indirectly gaining exposure to Bitcoin.

‍Additional Developments in Crypto

• Purpose Investments: The Canadian investment firm has filed a preliminary application to launch Canada’s first XRP ETF, further expanding the range of crypto investment products available to retail and institutional investors.
• Tether’s Profit Surge: Tether reported a record profit of $13 billion in 2024, supported by its increasing holdings in U.S. Treasury bonds (valued at $113 billion). The company also surpassed $7 billion in excess reserves, providing additional financial stability.
• Genius Group’s Bitcoin Investment: The education-focused company has announced a $33 million rights offering to raise funds for additional Bitcoin purchases, underscoring the growing trend of corporate crypto investments.
• MicroStrategy’s Expansion: The firm has expanded its Bitcoin holdings once again, with plans to issue up to 7.3 million shares and raise additional capital for crypto acquisitions.
• Tether’s Expanding Reach: With 136 billion USDT in circulation and a 36% year-over-year increase in its reserve surplus, Tether is solidifying its dominance in the stablecoin market while maintaining significant exposure to traditional financial instruments.

Outlook for February and Beyond

‍Historically, February has been a strong month for Bitcoin and crypto. With Bitcoin closing January at a record high and ongoing institutional inflows into crypto ETFs, the market appears poised for further gains. However, much will depend on the outcome of Trump’s aggressive trade policies, inflation data, and the Fed’s response.While short-term volatility may persist, the long-term narrative for Bitcoin remains strong, driven by its growing role as a hedge against inflation, geopolitical risks, and economic instability. As the global financial landscape evolves, Bitcoin’s status as a digital reserve asset could become even more prominent, potentially reshaping the world’s monetary system.