Will Trump's 'Short-Term Pain' Plan Bring Long-Term Benefits to Crypto?

High-risk assets such as tech stocks and cryptocurrencies have been heavily sold off over the past month as Donald Trump's trade war escalates. However, all of this could be part of a master plan of "short-term pain" in a strategy aimed at lowering inflation and recapitalizing about $9 trillion in U.S. debt by allowing markets to weaken. as Kobeissi Letter reported. "We've seen more than $5 trillion written off U.S. stocks with the goal of lowering interest rates. Will this work?" Market chaos is planned The administration appears to be united in this approach, with Commerce Secretary Howard Lutnick declaring, "The stock market does not determine the outcome of this administration," Treasury Secretary Scott Bessent saying he was "not concerned about a little bit of volatility" and Trump acknowledging the "transition period" will "take some time." Elon Musk also seems to support this strategy, saying that Tesla shares "will be fine in the long term" even though the TSLA has fallen 40% since the beginning of this year.

This deliberate market decline can be attributed to a number of factors, such as the government's record deficit of $1.15 trillion in February, its desire to lower oil prices, the U.S. plan to reduce the trade deficit through tariffs, and the government's job-cutting target that contributed to job growth do recently. Trump's plan to mitigate economic weakness appears to have several goals, including bringing down current (hiện inflation of 2.8% ), oil prices and interest rates. He also aims to reduce deficit spending, trade deficits and government inefficiency. Economist Joe Foudy told Newsweek that this was a "political recognition" before adding: "If the stock market reacts negatively or if we see weaker economic data, Trump needs to stay ahead of the story. By framing a short-term recession as necessary for long-term returns, he is managing expectations." "Typically, the Federal Reserve would lower interest rates to stabilize the economy. But if tariffs push up prices, policymakers may be hesitant, fearing rate cuts could fuel inflation," said NYU economics professor Lawrence White. Impact on the cryptocurrency market This "short-term pain" approach can lead to significant market volatility across all asset classes, including cryptocurrencies. When traditional markets experience a downturn, investors may reduce their exposure to high-risk assets like cryptocurrencies to cover losses elsewhere or switch to cash positions, especially if interest rates rise again. Market instability can also lead to liquidity issues in the cryptocurrency market, potentially causing excessive price volatility. Cryptocurrencies may continue to follow the trend of the stock market in the short-term. The market has fallen about 25% over the past few months as $1 trillion has left the market. In the long run, lowering interest rates could ultimately benefit it as an alternative investment as cheap cash flows seek profits. Furthermore, economic uncertainty could accelerate crypto regulatory efforts, which could bring clarity and potentially attract more institutions to adopt. If this strategy impacts the strength of the dollar, which has weakened recently, cryptocurrencies could benefit from being alternatives to fiat currencies. Over time, the cryptocurrency market may gradually diverge from the traditional market as the sector matures and establishes its own economic cycle, however it is likely that there will be many difficulties before any profits are achieved.