Markets were already on edge but Trump’s updated national security strategy pushed volatility even higher. The document doesn’t just adjust U.S. foreign policy; it rewrites the expectations that shaped global defense spending for decades. And crypto felt the impact faster than almost any other asset class.
A strategy that shifts America’s global role
The core message of the new strategy is simple but heavy:
America will no longer carry the bulk of the world’s defense burden.
The plan argues that U.S. allies must take far more responsibility for their own regions, repeating the same warning Trump delivered at the United Nations last year. This isn’t just a military stance , it’s an economic one.
Investors reacted not to the politics, but to the downstream effects:
possible shifts in defense budgets
changes to government borrowing
inflation pressure
and the risk of slower monetary easing
All of these factors move financial markets instantly, especially crypto.
Why crypto reacted so fast
The sell-off wasn’t caused by anything inside the crypto ecosystem.
The shock came from what the strategy implies.
If NATO members raise defense spending from 2% to 5% of GDP, governments will need massive borrowing. That kind of surge usually pushes inflation higher, forcing central banks to rethink rate cuts.
And crypto is extremely sensitive to interest-rate expectations.
Bitcoin’s strongest rallies historically came during periods of lower rates and expanding liquidity. Anything that delays easing , or hints at future inflation , reduces appetite for risk assets. That’s why Bitcoin reacted almost immediately.
Markets still expect the Fed to cut
Despite the volatility, traders have not abandoned the idea of a rate cut next week:
CME FedWatch shows an 86% chance of a 25 bps cut.
Reuters’ economist survey shows similar expectations.
Polymarket traders place the odds at 94%.
These expectations kept the market from dropping deeper, even as geopolitical tensions clouded the outlook.
A market caught between fear and anticipation
Investors are now trying to balance two forces:
The possibility of real monetary easing
The uncertainty triggered by Washington’s new global posture
This tension has revived old conversations about whether another prolonged downturn , even a new crypto winter , could form if geopolitical risks keep rising.
For now, all eyes turn to the Federal Reserve.
A confirmed rate cut could steady Bitcoin and restore confidence.
A hesitation or a more cautious tone could send risk markets into another decline.
The Fed’s next decision may decide whether this volatility becomes a temporary shakeout , or the start of a deeper correction.
