Impact of US Economic and Policy Factors on the Crypto Market (Some Basic Knowledge You Need to Know)

US Labor Market


Strong labor market: If the job report is good (high job growth, decreased unemployment), the economy is assessed as 'still hot'. The market will expect the Fed to continue to keep interest rates high instead of cutting them. This is a risk-off environment (prioritizing safe assets), putting downward pressure on crypto. For example, the surprisingly good job report for June 2025 increased the probability of the Fed keeping interest rates in July from 75% to 95%, and the price of Bitcoin decreased slightly (touching below $109K) after hitting a peak.

Weak labor market: If labor indicators are weak (slow labor growth, increased unemployment), many people predict that the Fed will soon cut interest rates. The USD weakens in the face of monetary easing, and capital flows into risky assets will support crypto price increases. For example, if the number of applications for unemployment benefits increases or the JOLTS index decreases, investors may pour money into Bitcoin as an alternative safe haven when the USD weakens.

US Bond Market (Yields)


Increased yields: Increased US Treasury yields (such as 10-year Treasury bonds) are often accompanied by expectations that the Fed will keep interest rates high or real interest rates will increase. According to research, Treasury yields and crypto returns are inversely correlated. When yields rise due to high inflation or a 'hawkish' Fed, investors often withdraw from risky assets - crypto prices therefore fall (witnessed in 2022 when the Fed aggressively raised interest rates, Bitcoin fell sharply).

Decreased yields: Conversely, if yields fall (the Fed is preparing to cut interest rates, the bond market rises), a more lenient liquidity environment will help risky assets recover. Crypto has the potential to increase in price as investors seek higher yields outside of bonds. (However, it should be noted that if yields increase due to good economic growth, crypto can still rise along with stocks; but this scenario is less common compared to the impact of inflation and the Fed.)

US Public Debt, Debt Ceiling and Government Shutdowns


Federal Debt Ceiling: The debate over raising the debt ceiling and high public debt increases concerns about US credit. Although some argue that Bitcoin may benefit due to a weaker USD, historical data shows that there is no consistent correlation between raising the debt ceiling and Bitcoin prices. Raising the debt ceiling can create macroeconomic concerns, causing investors to reduce overall risk but also weakening the USD, so the impact on crypto is somewhat mixed.

Risk of government shutdown: Government shutdowns create instability and market fluctuations. History shows that Bitcoin often fluctuates sharply during this time - sometimes increasing because it is seen as a safe haven, sometimes decreasing according to general sentiment. For example, during the 2013 shutdown, the price of Bitcoin soared more than 80% initially because investors were looking for a safe haven, but then also reversed. In summary, shutdowns increase volatility and cautious investor sentiment; Bitcoin is sometimes used as a hedge against volatility, but it is not certain that it will always increase in price.

USD Developments


Strong USD: Research shows that the USD Index (DXY) is often inversely related to crypto prices. When the USD strengthens (reflecting low-risk sentiment or the Fed raising interest rates), capital often flows to assets valued in USD, putting downward pressure on the price of Bitcoin and altcoins. For example, when the DXY rises, investors prioritize holding USD, causing Bitcoin prices to usually fall.

Weak USD: Conversely, a weakening USD (due to the Fed cutting interest rates, increased budget deficits, or loose fiscal policy) often increases the attractiveness of alternative assets. Crypto is seen as a hedge against currency devaluation, so when the USD falls in price, Bitcoin and altcoins tend to increase in price accordingly. Capital from traditional investment channels may also flow into crypto when the USD weakens and risk sentiment improves.

US Inflation (CPI/PCE)


Increased inflation: A sudden increase in CPI/PCE (above expectations) increases inflationary pressure, forcing the Fed to maintain or increase interest rates to curb it. This scenario creates a 'tight money' environment, which is not favorable for crypto. In fact, when inflation figures are higher than expected, Bitcoin and gold usually fall in price because investors choose to abandon this non-yielding asset. Crypto has not clearly proven to be an inflation hedge (according to SPGlobal, the track record is too short).

Decreased inflation: If CPI/PCE is lower than expected, the market will expect the Fed to become 'dovish' (cut interest rates). As a result, liquidity increases and capital flows into risky assets increase accordingly. For example, recently, when the CPI for May 2025 increased by only 0.1% (below the forecast of 0.2%), Bitcoin increased slightly by ~0.6% in the minute after the announcement. The reduction in inflationary pressure is seen as a positive signal for crypto, as it opens up the possibility of lower interest rates and a weaker USD.

Fed Interest Rate Policy


Interest rate cuts: If the Fed switches to cutting interest rates (due to weak growth or falling inflation), looser financial conditions will create a strong impetus for crypto. According to analysis, lower interest rates will reduce the opportunity cost of holding non-yielding assets like Bitcoin/ETH and tend to weaken the USD, thereby amplifying the rise of crypto. In addition, the news flow that the Fed is cutting interest rates will trigger a 'bull' capital flow into the crypto market.

Keeping interest rates unchanged: If the Fed keeps interest rates unchanged for a long time (even if inflation is not high enough to cut, due to concerns about inflation flaring up again), crypto may move sideways or decrease slightly because the expectation of cuts is pushed back. This 'neutral' sentiment often makes it difficult for crypto prices to increase sharply.

Increase interest rates: The Fed raising interest rates further (if inflation is unexpectedly high) will put tremendous negative pressure on crypto. History shows that the period of aggressive tightening by the Fed (2022) caused Bitcoin and risky assets to plummet. Crypto only really rebounded when the Fed ended its tightening cycle and began to cut rates.

US Tariff Policy


Increased tariffs: Increasing import taxes (especially with China or major partners) creates economic instability. Announcements of tariff increases related to trade tensions often reduce risk appetite: stock and crypto markets may temporarily fall as soon as the news is released. For example, information that the US imposed new tariffs on Chinese goods in February 2025 caused Bitcoin prices to plummet sharply in the short term. In addition, tariffs push import costs up, pushing inflation and potentially forcing the Fed to be more cautious - this environment is also not favorable for crypto. However, in a scenario where tariffs put pressure on the USD to weaken (due to growth concerns), crypto may benefit indirectly (being seen as an alternative asset), especially when investors are looking for a hedge against devaluation.

Reduced tariffs: If the US reduces tariffs or eliminates trade tensions, the market's risk appetite will improve significantly. Confidence in the global economy and trade increases, and money may return to risky assets (both stocks and crypto). A reduced tax environment may strengthen expectations that the Fed does not need to tighten further, thereby also supporting crypto price increases.

Legal policies are being tightened but are also gradually becoming clearer:


Stablecoins: The US Senate recently passed the 'GENIUS Act' - an important step in stablecoin management. If signed into law, this law requires stablecoins to be secured by liquid assets (USD, US Treasuries) and publicly disclosed reserves monthly. Clear regulations help increase trust and encourage stablecoin development, although it may limit some models of large stablecoins (pay attention to legal loopholes for big tech, AML). Overall, this is positive news that helps stabilize the crypto infrastructure.

Digital asset laws: Proposals such as the 'FIT21 Act' (passed in 2024) and the CLARITY Act (proposed in 2025) aim to delineate responsibilities between the SEC and CFTC, establishing clear definitions of cryptocurrencies, exchanges, custodians, and stablecoins. If passed, these laws will create a transparent legal framework for the entire industry, promote the participation of institutional investors, and minimize jurisdictional disputes between regulatory agencies.

SEC and CFTC: Under the new administration, the SEC has shown signs of strong adjustment. The SEC Commission has withdrawn its lawsuit against Coinbase and concluded that memecoins are not under securities jurisdiction. The CFTC has also consistently affirmed its right to manage futures contracts on crypto. This development shows a trend of greater consumer protection and creates conditions for the crypto market to develop (although the SEC still holds the view that BTC is a commodity, not a security).

ETFs and the market: In early 2025, the SEC allowed many spot Bitcoin ETFs to be listed, attracting tens of billions of dollars. This is a major boost to help Bitcoin access institutional money. Applications for Ethereum ETFs and other altcoins are also under consideration. The creation of 'yield-bearing' products (staking ETFs) is being discussed - if approved, it will attract more capital into crypto.

Overall impact: In general, a transparent and friendly legal framework (stablecoin law, ETF) will attract long-term capital into crypto. Meanwhile, economic policies (interest rates, public debt, USD...) will dominate short-term fluctuations in the crypto market in line with the general trend of risky assets. Currently, interest rates and the USD along with Fed expectations are the leading factors: if the Fed eases early, crypto will benefit; otherwise, it will be under pressure. Variables such as inflation, public debt, and tariffs create macroeconomic 'storms', increasing volatility and divergent predictions. In the next 6-12 months, crypto investors need to closely monitor US economic indicators and policy developments to adjust their strategies flexibly.

Source: BLOGTIENAO (BTA)