Author's Note:

Greetings to the readers of Publish0x. It's been a good while since I've posted any article on this site, however, I am going to begin posting articles again (periodically). Rather than before, where I opted for pushing out low quality articles on a daily basis, I will now be posting on a mid-frequency level with higher quality articles.

Introduction:

The year of 2024-2025 has been a positive outlook within all markets/commodities, with popular stock indexes such as NAS100 and S&P500 rising to never-before seen all-time highs. The same positive sentiment is no different in the crypto community, as Bitcoin has also dug extremely new highs, even reaching 120k as of recent times. However, despite the extremely positive upside we've had this year, we must remain empirical and recognize warning signs when we see them. In this article, I will go over the current macroeconomic situation regarding the U.S, and why it is crucial to not look over the current warning signs.

Bullish Catalysts (For crypto):

In the world of cryptocurrency, there has been a huge influx of bullish catalysts that began with Trump's presidency. For instance, the dropping of various SEC lawsuits led to a large boom in specific cryptos such as XRP. Trump's presidency alone, however, was already a large catalyst for all cryptos due to his very much publicized support for every cryptocurrency as a whole.  Despite the overall positive sentiment regarding cryptocurrency, there are various different warning signs in regard to the macro-economic perspective. 

1: President Trump's Tariffs

Given President Trump's actions regarding the trade war and more has resulted in extreme moves in all markets. For short term effects, we have all witnessed the sheer psychological impact of his tariffs, with it causing popular indexes such as NAS100 and S&P500 to crash 15%+ consecutively before recovering as of recent times. However, the short-term psychological effect was never the main negative effect of President Trump's tariffs. On a longer-term basis, his tariffs would lead to less V (Velocity), whilst lowering the GDP at the same time. While the effect of these two haven't shown its effect on the economy yet, it is definitely yet to come, as the added tariffs need additional time to take effect. The future decreased GDP would result in a more modestly higher inflation. However, on the positive note, the decreased velocity (as a product from the trade war) would somewhat relieve the pressure on inflation in the longer term.

2: Debt Ceiling forcing FEDs to stay put with rate cuts

Due to the current gloomy outlook on inflation, the FEDs rightfully do not to wish to decrease rates due to potential future inflationary reasons. However, Trump's tariffs is not the only factor to worry about, as the recent raise in debt ceiling is also another factor to consider. As it stands right now, the raise in the debt ceiling would increase the selling of government bonds, which would in turn raise the MS (Money Supply). MS (Money Supply) has provenly had an inverse relationship with IR (Interest rates). This can be currently seen with the current de-valuation of the U.S Dollar (According to the DXY), which would in theory force the FEDs to either raise/maintain rates as it currently is.

Furthermore, common inflationary indicators such as CPI have risen within the last few months, which would further force the FEDS in a tight corner. If there is further de-valuation of the U.S dollar, it would only result in the FEDS to hike rates. This would in turn strengthen the dollar, and result in many investors adopting more of a "risk-off" approach to the markets. 

Conclusion:

In conclusion, the future macroeconomic state of the U.S indicates higher inflation, and even potentially additional rate hikes due to the current tariffs and recently increased debt ceiling. The further de-valuation of the dollar could potentially result in the FED's hand being forced, which will in turn, result in potential hikes in the near future.  

I hope this article was somewhat insightful, and I encourage any opinions below on this matter. Thanks!