The national security strategy released yesterday by US President Donald Trump has increased geopolitical risks and created serious unease in cryptocurrency markets.
Following the publication of the document, the price of Bitcoin fell to the level of $89,000 and the possibility of a new “crypto winter” was put on the agenda among market participants.
The strategy document released by the White House conveys the message that the United States will no longer bear a significant share of the global defense burden alone. Recalling Trump’s speech to the United Nations last year, the text states: “The days when the United States carried the entire world order on its back like an Atlas are over. » The document asserts that developed country allies of the United States must take greater responsibility in their own regions.
Although the strategy document is not legally binding, analysts note that it increases uncertainty in the market, putting downward pressure on crypto assets.
The crypto market’s strong reaction stems from expectations that a potential increase in defense spending could delay central banks cutting interest rates. The strategy document calls for NATO countries to increase their defense budgets from 2% to 5% of GDP. The ability for governments to borrow to finance such an increase could increase inflationary pressures.
Rising inflation puts pressure on risky assets because it could cause central banks to delay lowering interest rates. Low interest rates generally push investors toward riskier assets, particularly cryptocurrencies. Therefore, any delay in lowering rates could weaken Bitcoin’s upside potential.
Despite this, markets still expect a rate cut at next week’s Fed meeting. The Chicago Mercantile Exchange’s FedWatch tool estimates an 86% chance of a 25 basis point cut. A Reuters survey of 100 economists also suggests a high likelihood of a rate cut. Forecasts on the Polymarket platform put the probability at 94%.
*This does not constitute investment advice.
