Macroeconomic interpretation: The strong performance of Bitcoin at the beginning of 2025 is worth paying attention to, as it also relates to the dollar-denominated assets. We will explore the sustainability of the dollar's strength and its impact on the cryptocurrency market, aiming to provide valuable references for everyone.
Since Trump's election victory, the US dollar index has shown a significant upward trend. This change is not an isolated phenomenon, but the result of multiple factors acting together. Firstly, the market holds an optimistic outlook on the economic policies following Trump's return. Trump’s tax reduction policy, deregulation, and potential stimulus measures are believed to promote US economic growth, thus enhancing the real value of the dollar. In addition, rising inflation expectations have also intensified the strengthening of the dollar. Trump’s policies, including restricting immigration and raising tariffs, may push inflation to rebound from both demand and supply sides, thereby increasing the attractiveness of dollar assets. Meanwhile, the increase in policy uncertainty has prompted investors to flock to the dollar as a relatively safe haven.
However, will the strength of the US dollar be able to persist amidst numerous challenges? There are potential conflicts between Trump's policy objectives, such as the balance between inflation, deficits, and the economy. If production efficiency cannot be improved or government spending reduced, the inflationary pressures that may arise from tariffs and tax cuts will contradict the low-interest rate policy. Furthermore, Trump's dollar-first policy conflicts with isolationism and efforts to reduce the trade deficit. The contradictions between these policies indicate that they cannot be smoothly implemented at the same time, leading to a gap between strong expectations and weak realities. Once the effects of the policies diverge significantly from market expectations, the strong position of the dollar may be shaken.
In addition to the impact of domestic economic policies in the US, global economic dynamics also play an important role in the dollar's movements. In particular, the performance of the European economy may become a turning point for the strengthening of the dollar. Since the outbreak of the Russia-Ukraine conflict, the European economy has been continuously impacted by unstable energy supplies, rising prices, and geopolitical risks. If Trump's return can lead to a pause in the Russia-Ukraine conflict, the pressure on Europe regarding energy supply and prices will ease, helping to improve the long-term capital expenditure levels and investment expectations of European manufacturing. Once signs of recovery emerge in the European economy, funds may flow out of the US, further weakening the dollar's strength.
Regarding inflation, the base effect of high inflation followed by low inflation in the US may lead to inflation first decreasing and then increasing. Musk's remarks about government layoffs and spending cuts have raised market concerns about fiscal contraction, which could become a primary factor in curbing inflation. However, the Trump administration may adopt tough measures to suppress oil prices and regulate oil prices and curb inflation by relaxing regulations on oil and gas drilling. Additionally, if the Russia-Ukraine conflict eases and Russian oil can re-enter the international market, it may also lead to a decrease in oil prices. These factors will have significant impacts on the inflation levels in the US, thereby affecting the movements of the dollar.
Next, we analyze the impact of the dollar's movements on the cryptocurrency market. The cryptocurrency market, as a relatively emerging and highly volatile field, is extremely sensitive to changes in the global economic environment. The strong performance of the dollar may have a dual impact on the cryptocurrency market. On one hand, the strengthening of the dollar may attract some investors to withdraw from the cryptocurrency market and seek relatively stable dollar assets. This would lead to a decline in cryptocurrency prices and increased market volatility. On the other hand, the strength of the dollar may also prompt some investors to seek assets that hedge against risks, and cryptocurrencies, as a decentralized safe-haven asset, may benefit to some extent. In particular, cryptocurrencies that have stable values and lower volatility may become the preferred choice for investors.
Moreover, the dynamics of companies like MicroStrategy also have a significant impact on the cryptocurrency market. MicroStrategy announced plans to raise up to $2 billion through the issuance of preferred stock to strengthen its balance sheet and acquire more Bitcoin. This move indicates that despite the many uncertainties in the cryptocurrency market, there are still institutional investors who hold an optimistic view. MicroStrategy's Bitcoin investment strategy is seen as a long-term value investment, and its success or failure will have a significant impact on confidence in the cryptocurrency market. If MicroStrategy can successfully raise funds and continue to increase its Bitcoin holdings, it will inject new vitality into the cryptocurrency market and drive up the prices of mainstream cryptocurrencies like Bitcoin.
The cryptocurrency market still faces many challenges. Firstly, the uncertainty of the regulatory environment is a significant factor restricting its development. Different countries and regions have varying regulatory attitudes towards cryptocurrencies, which may lead to market fragmentation. Secondly, the cryptocurrency market is highly volatile, and investors need to have a high risk tolerance. Additionally, issues such as technological security and market manipulation may also negatively impact the stability of the cryptocurrency market.
Overall, the strong performance of the dollar intertwines with the volatility of the cryptocurrency market, constituting an important feature of the current financial market. The movements of the dollar are influenced by multiple factors, including domestic economic policies, global economic dynamics, and inflation levels. The cryptocurrency market, on the other hand, is constrained by factors such as dollar movements, regulatory environments, and technological security. In the future, investors need to closely monitor market dynamics and policy changes to flexibly respond to potential risks and opportunities. At the same time, for the cryptocurrency market, strengthening regulation, improving technological security, and enhancing market transparency will be important directions for promoting its healthy development.
Data analysis:
On the 16th anniversary of Bitcoin's birth, the BTC hash rate (total computational power of the Bitcoin network) reached a historic high of 1,000 EH/s, nearly double the network hash rate from 12 months ago. According to Coinank data, the current total computational power of the Bitcoin network is 809.3 EH/s.
Data shows that the US accounts for over 40% of the Bitcoin network's hash rate, with two mining pools located in the US, Foundry USA and MARA Pool, accounting for over 38.5% of all mined blocks. Reports indicate that Foundry USA's hash rate grew from 157 EH/s in early 2024 to approximately 280 EH/s in December. Foundry is currently the largest single mining pool by hash rate, controlling about 36.5% of the total Bitcoin network hash rate.
Bitcoin's hash rate has reached a historic high, marking that the total computational power of the Bitcoin network has nearly doubled. Compared to 12 months ago, this growth indicates the resilience and expansion of the Bitcoin mining industry. The US dominates the Bitcoin network's hash rate, accounting for over 40%, particularly with Foundry USA becoming the largest single mining pool, controlling about 36.5% of the total Bitcoin network hash rate. This increase in concentration may pose challenges to the decentralized nature of the Bitcoin network, but it also reflects the US's leading position in Bitcoin mining. Currently, the Bitcoin hash rate stands at 809.3 EH/s, and this high hash rate level enhances the security of the Bitcoin network, resisting potential attacks and may positively impact the price stability of Bitcoin.
