Countless investors have lost their investments, with the total market value of cryptocurrencies evaporating by over $200 billion in a single day. Even more frightening is that these three major negative factors are forming a 'death triangle', completely destroying confidence in the crypto space.
1. Federal Reserve's interest rate cut expectations have completely evaporated.
Federal Reserve's Williams suddenly adopts a 'hawkish' stance, stating that 'inflation must be suppressed at all costs.' The market's expectations for interest rate cuts in 2025 have been completely wiped out, and even for 2026, only four cuts are anticipated. The dollar index surged to 107, and risk assets like Bitcoin were wildly sold off, with funds pouring into U.S. Treasury bonds for safety. On-chain data shows that net outflows from Bitcoin exchanges have reached a three-month high, indicating clear signs of institutional sell-offs.
2. Trump's tax reform detonates a debt bomb.
The recently passed tax reform bill is expected to increase the deficit by $3.8 trillion over the next ten years, consuming $2.2 trillion in the first five years alone. Goldman Sachs warns that this will lead to a surge in U.S. Treasury yields to 5.5%, with funds flowing back from the crypto space to traditional markets. More critically, the bill contains a hidden provision to raise 'cryptocurrency transaction taxes to 30%', which directly impacts market liquidity.
3. The trade war between the U.S. and Europe escalates into a financial strangulation.
Trump suddenly announced a 50% tariff on the European Union, with negotiations postponed until July 9. This directly triggered global trade panic, with the correlation between Bitcoin and U.S. stocks soaring to 0.85. The three major U.S. stock indices plummeted over 2%, forcing Bitcoin to drop to the critical support level of $107,000, with bearish forces completely crushing the bulls.
Buy the dip or escape? Three strategies to help you deal with life-and-death situations:
• Short-term: If Bitcoin falls below $105,000, programmatic sell orders will be triggered, targeting $102,000.
• Mid-term: The S&P 500 index may drop 10% by the end of 2025, and cryptocurrencies, as high-volatility assets, will increase risk. It is recommended to keep positions within 10% of total assets and allocate remaining funds to gold ETFs (like GLD) or USDT;
• Long-term: After the Federal Reserve's interest rate cut cycle begins in 2026, Bitcoin is expected to rebound to $150,000. However, before that, beware of Musk's 'Twitter bomb' and regulatory surprises from the U.S. SEC.
Final reminder: The expiration of options on May 31 and the Federal Reserve's meeting in June will become critical turning points. If interest rate cut expectations further cool down, the crypto space may face an 'epic collapse.'
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