The market environment is full of information, and it's hard to know where to start. First, in the crypto currency market, the price of BTC plummeted last week to $78,000, and according to Coinglass, over $3 billion in long futures positions were liquidated. BTC is set to post its worst monthly performance since June 2022, and ETFs have also seen the largest monthly outflow of funds on record (with $2.5 billion outflow just last week).
With the price crash, market sentiment has deteriorated significantly, and last Friday the Alternative "Fear & Greed" index fell to an extremely low point. Subsequently, the Trump administration intervened, bringing two major positive news: announcing a "Crypto Summit" at the White House this week, and proposing to include 5 tokens (BTC, ETH, SOL, XRP, ADA) in a new strategic reserve.
Encouraged by this, the coin prices rebounded sharply, with the BTC price rising sharply, but encountering resistance around $92,000-$93,000, which corresponds to the long-term trend line resistance level. If the government is learning from the Fed how to "manipulate" the asset market - oh no, I should say "verbally guide" the market trend - so far, their timing and technical control have been impeccable. Does this mean we are witnessing the gradual formation of a "Trump Put" in the crypto currency market?
However, the news of the "strategic reserve" has not been endorsed by all market participants, and long-term supporters and opinion leaders of decentralization (such as Naval Ravikant) do not support it. Discussions and controversies over the composition of the reserve assets are likely to continue to ferment in the coming period. If the Democratic Party, in order to oppose the Trump administration, ultimately chooses to embrace BTC and become BTC extremists, that would be a rather ironic scenario.
Our intuitive judgment is that this rebound may only be a corrective rebound within the trend, as the structural forces at the recent top still exist (meme coin FUD sentiment, the impact of trading account losses, excessive market leverage, and the overall risk-averse sentiment in the asset market), not to mention the legislative process for establishing a crypto currency strategic reserve is still long and uncertain.
It should be emphasized that the US President has no power (or funds) to directly purchase crypto currency assets, and related measures still need to be approved by Congress and follow the legislative process, and before taking any substantive action, funds must be obtained by the Treasury issuing debt.
Although we are positive about the long-term development direction of the market narrative, we must also remind that the market should not hold overly optimistic expectations for short-term progress, and in the foreseeable future, crypto currency prices will still be closely related to the risk appetite/risk aversion sentiment of the macro market.
Turning to the macro market, although the stock market rebounded at the close last Friday, stocks most affected by Trump's policies have fallen about 80% from their post-election highs, and his uncertain stance on tariffs and DOGE spending cuts has also begun to negatively impact market sentiment.
Although US stocks rebounded (+1%) last Friday in an oversold situation, causing the February trend to be slightly narrowed, the overall macro market sentiment has clearly become more negative, with most economic surprise indices turning negative.
The most noteworthy is that the Atlanta Fed's first-quarter GDP growth forecast saw a record decline last week, from +2.2% to -1.3%, mainly due to a sharp weakening in exports (from -$29 billion to -$250 billion) and consumer spending (from +2.2% to +1.3%).
Consumer credit and housing market data continue to decline sharply, further exacerbating expectations of weak economic growth, with new home sales hitting a historic low and new home starts beginning to decline after the post-pandemic boom.
At the same time, Treasury Secretary Bessent seems unconcerned about the current economic slowdown, attributing the economic pressure to "Bidenflation" and the policies of the previous administration. More interestingly, he explicitly stated that it will be the real "Trump economy" "6-12 months later", suggesting that the government is not in a hurry to address the current economic downturn, and also means that the stock market's "Trump Put" may not start to take effect until a year later.
If the "Trump Put" in the crypto currency market is currently only verbal, and the "Trump Put" in the stock market will not take effect until next year, then where is the real "Trump Put"? We believe that the macro (and crypto currency) community has overlooked the core key, and the real "Trump Put" has been playing a role in the fixed income market all along.
The following is a summary of several observations over the past month:
Bond yields have fallen significantly, with expectations of the first rate cut this year brought forward from year-end to early summer.
The core PCE has quietly declined, falling to the lowest level since March 2021 (3.096%).
Elon Musk has explicitly stated that the bond market should thank the government for the DOGE spending cuts.
In a recent X conference call, Elon Musk said:
"If you're short bonds, I think you're on the wrong side."
Treasury Secretary Bessent said in a public interview with Bloomberg TV:
"We are not focused on whether the Fed will cut rates... After the Fed's large-scale rate cuts, the 10-year bond yield actually rose, causing the market's reaction to raise questions about whether monetary policy can effectively impact the overall economy."
Bessent further emphasized:
"The President wants to see lower interest rates... In our discussions, our main focus is on the 10-year bond yield."
"The President has not asked the Fed to cut rates, he believes that as long as we relax regulations on the economy, push through tax reform bills, and lower energy costs, interest rates and the dollar will adjust on their own."
It is clear that the Trump administration has a deep understanding of the workings of the financial markets, and is aware of how the decline in long-term interest rates can benefit the economy. In fact, focusing on long-term interest rates rather than overnight rates is no different from the logic of the Fed's QE (quantitative easing) or Operation Twist, just with different expression.
That is, the current strategy of the Trump administration is clearly to suppress long-term interest rates, so that the benefits of lower financing costs can naturally spill over to the dollar, stock market and crypto currency market. Therefore, we believe that the real "Trump Put" in the market is currently in the bond market, not the stock market, and investors can adjust their investment strategies accordingly. (Disclaimer: Please do your own research, this is not investment advice.)
