2024 Crypto Market Turbulence: The Interplay of U.S. Policy Games and Global Economic Risks

The Bitcoin Halving cycle was supposed to serve as a time anchor for the Fed's interest rate cuts, expected to occur in the fourth quarter of 2023. However, the government's adjustments to illegal immigrant employment policies and the expansion of the public sector workforce influenced non-farm employment data, thereby delaying the interest rate cut process. To support the government's economic stimulus policies, the U.S. Treasury issued a large amount of government bonds to raise funds, leading to a significant decline in the 10-year Treasury yield, which fueled a seasonal bull run spanning the fourth quarter of 2023 and the first quarter of 2024.

In the second quarter of 2024, as the pace of government bond issuance slows down, coupled with the emergence of systemic risks in non-US countries (including China's real estate market and Japan's bond market), the demand for safe-haven assets surges. The US dollar, US government bonds, and gold become favored safe-haven assets for investors. This trend, combined with the historical pattern of poor performance of risk assets in the second quarter, leads the cryptocurrency market into a downturn.

As we enter the third quarter of 2024, in order to boost the ruling party's election prospects, the Fed has begun to lower interest rates. However, the yield on 10-year Treasury bonds has seen an unusual rise, resulting in a rare situation where nominal interest rates are declining while real interest rates approach historical highs. Therefore, the market trends in the fourth quarter of 2024 are not driven by external capital but are influenced by political factors and seasonal investment psychology. The market dynamics during this period began with Trump's election as President of the United States and concluded with the depletion of on-chain liquidity from the launch of his namesake meme coin.

By the first quarter of 2025, the main contradiction in the market has shifted from the game between economic data and the Fed's expectations to a conflict between the White House, government efficiency departments, and the Fed. The impact of this contradiction is extremely far-reaching, coupled with breakthroughs in the field of artificial intelligence challenging America's technological hegemony, even triggering a massive sell-off of U.S. government bonds. This decline in real interest rates, driven by panic, not only failed to bring about the anticipated spring market but instead led to a significant outflow of funds.

Currently, the United States is facing a major change not seen in a century. If the policies supporting the development of new technologies succeed, they may extend America's global leadership for another century; if they fail, the consequences are unpredictable.

Faced with such enormous systemic risks and the uncertainty of the U.S. cryptocurrency regulatory framework in July, major participants in the struggling crypto market have chosen to adopt a preemptive strategy, prioritizing the withdrawal of market liquidity.

Many well-known trading platforms and key projects in the primary market have taken aggressive measures, reflecting this strategy.

In this tumultuous market environment, a conservative strategy and protecting the principal may be a wise choice.