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This week has been uneventful, with an Independence Day in between. As expected, the argument between Trump and Musk quickly calmed down, and this time it was Musk who backed down first. The reason we have already discussed: both SpaceX and Starlink need the support of the U.S. government, which means Musk is at a disadvantage in front of Trump. The actual outcome reflects this; although Musk established a so-called "third party," it remains a joke in front of Trump.
There are countless "third parties" in the U.S., and it is very difficult for such a third party to gain traction. This also happens to not touch Trump's bottom line, which he naturally does not care about. Trump's bottom line is that Musk cannot support the Democratic Party; if he does, it would likely lead to a "fight to the death."
Although Trump has no time to deal with Musk in the new week, focusing all his energy on opposing Powell and tariffs, Tesla has not rebounded as expected and is currently around $300. This indicates that the market remains sensitive to Musk's "big mouth," especially after the passage of the Inflation Reduction Act, which raises concerns about when Musk might make another controversial statement, causing headaches for investors.
From my personal understanding, the situation between Trump and Musk is far from over. Both Trump and Musk have busier matters at hand now, and Trump will not excessively pressure Musk. If Musk is truly pushed to the Democratic side, it would also be a headache for Trump and the Republican Party. Therefore, while their conflict will not end here, it should not escalate into a major spectacle.
Reasons Trump Wants Powell to Lower Interest Rates
What Trump truly hates is not Musk, but Powell. In his worldview, he has already made overtures in January and February 2025, softening his stance, but Powell refuses to budge and will not lower interest rates, which frustrates Trump greatly. Everything he wants to do must be based on the premise of low interest rates.
First is the stock market. Trump has repeatedly stated that his presidency would bring a bull market. However, the reality is that the stock market has become more volatile, especially after tariffs were implemented, leading to severe market fluctuations and shaken confidence. This uncertainty directly reflects in the polls, dragging down his and the Republican Party's electoral prospects. This is detrimental for the midterm elections in 2026 and the presidential election in 2028. To stabilize the stock market, the first step is to lower interest rates to alleviate the constraints of high rates on liquidity.
Secondly, on the fiscal side, Trump's Inflation Reduction Act not only raised the debt ceiling but also increased fiscal spending, focusing on manufacturing return, infrastructure, and industry subsidies. However, issuing bonds while bearing a 4.5% interest rate is unsustainable for the Treasury. Lowering interest rates is a prerequisite for this logic to function; without rate cuts, not only will plans fail to materialize, but the debt will continue to grow.
Next, regarding exchange rates, Trump is engaged in a global tariff war, with Japan, South Korea, China, and Mexico taking turns. Exporters are already under significant pressure, and if the dollar remains strong, it would be a double blow to domestic manufacturing. Therefore, for Trump, the depreciation of the dollar is essential, but it cannot be due to recession; it can only be alleviated through interest rate cuts. Additionally, a lower DXY can release more liquidity, stimulate risk markets, and increase investors' risk appetite.
Politically, Trump needs a compliant Federal Reserve, not an independent one; he needs Powell to be obedient. Only with the Fed's cooperation can Trump better maneuver tariffs and other political agendas. However, regarding inflation, I believe Trump will realize there may be issues, but it is certainly not his primary concern right now. Having just taken office for six months, there have been issues arising almost every month due to him.
Lastly, and most importantly, we all know that historically, high interest rates have a 70% to 80% probability of leading to economic recession. How could Trump not know this? Quickly lowering interest rates to eliminate the probability of recession caused by high rates is something Trump urgently needs to accomplish. If a recession occurs during Trump's term, his approval ratings will plummet, providing ammunition for the Democrats.
Monetary Policy
Although Trump has been vocally urging Powell to lower interest rates, the market's expectations for the Fed to cut rates in July and September have been steadily decreasing. When we looked at the data last week, the probability of the Fed not cutting rates in July was 80%, but today that probability has risen to 95%. Meanwhile, the probability of not cutting rates in September has increased from 6.8% to 34.1%, primarily due to inflation and employment data.
Rising inflation and falling unemployment rates, along with an increase in employment numbers, indicate that inflation in the U.S. is still not well controlled, while the economy remains very stable. This has led investors to lower their expectations for the Fed's determination to cut rates in July and September, which is not what Trump wants to see. As we have analyzed, Trump must alleviate pressure through rate cuts, but Powell is unlikely to cooperate, especially regarding a July rate cut, which is almost impossible.
The next scenario should be that Trump will appoint a new Fed chair this month. If this person is already a Fed governor, they may exert pressure on Powell from within the Fed. Currently, the candidates who have emerged are Bowman and Waller. If Waller is elected, it is likely that more people within the Fed will align with Trump.
This situation will increase the internal dynamics of the Fed, heightening market expectations for rate cuts, while also aiming to alleviate the pressure from tariffs and fiscal deficits. This is the most practical approach; if rate cuts are not genuinely implemented and done quickly, the fiscal pressure on the U.S. will continue to drain the market. Therefore, Trump is likely to announce the new Fed chair as a counterbalance to the implementation of new tariffs.
Trump's Policy on Reciprocal Tariffs
The reciprocal tariffs began with Japan and South Korea. Trump first announced the tariff details for Japan and South Korea, with an overall tariff of 25%. It is important to note that the 25% tariff already includes the previous 10% base tariff, meaning that the actual reciprocal tariff Trump is imposing is 15%, with a total tariff of 25%. Even so, this is still ten times the average tariff in the U.S. for 2024.
However, Trump has left a window open; if Japan and South Korea can meet the conditions of opening up to the U.S. and reducing taxes, the tariffs may be lowered. Moreover, not only Japan and South Korea, but Trump has also successively announced tariff policies for many "Belt and Road" countries and specifically warned BRICS countries, viewing BRICS (Brazil, Russia, India, China, South Africa) and its expanded member states as groups opposed to U.S. interests.
He emphasized that not only joining BRICS but also countries that exhibit pro-BRICS stances in diplomacy, finance (such as de-dollarization), and geopolitics will be regarded as hostile or confrontational actions. These countries will be subject to a 10% tariff.
Considering all the data, Trump's actions are likely a bipartisan decision to impose higher tariffs on BRICS and Belt and Road countries that bypass the dollar system, forcing these nations to return to the dollar system. Therefore, the U.S. and Europe do not face such significant issues, and negotiations between the U.S. and the EU will likely proceed more smoothly.
In contrast, the tariff issues with China, although Trump previously stated that an agreement had been reached, neither side has disclosed the final negotiation details. Trump has also hinted multiple times that certain countries may face higher tariffs, especially given the performance of BRICS and Belt and Road countries. The tariff issues between China and the U.S. are likely to flare up again, which is currently the biggest concern for the market.
Since the beginning of this year, every time the U.S.-China tariff issue arises, it has led to significant fluctuations in risk markets. Currently, the greatest uncertainty regarding tariffs likely lies between the U.S. and China, and it is even possible that Trump, despite stating he would not extend the deadline, has postponed the final date from July 9 to August 1, likely to allow enough time for U.S.-China negotiations.
Is Cryptocurrency Used as a Tool for Corruption by the Bukele Regime?
In June 2025, U.S. Democratic Senator introduced HB 2058, targeting El Salvador's President Bukele and his Bitcoin policy. The bill requires the U.S. State Department to submit a report on whether "cryptocurrency is being used as a tool for corruption by the Bukele regime."
The focus is on investigating the total amount of funds El Salvador used to purchase Bitcoin, government-controlled Bitcoin addresses, whether there is misappropriation or opaque fund flows, and whether there are actions to evade international sanctions using BTC. I know many friends may wonder why this is an issue for the U.S. when it is clearly El Salvador's own matter.
In fact, since El Salvador adopted Bitcoin as legal tender in 2021, the U.S. has been extremely vigilant towards that government. On one hand, Bitcoin as a payment method effectively bypasses the dollar settlement system; it is important to note that Bitcoin is not controlled by SWIFT, and the U.S. fears it could become a channel for gray funds or terrorism financing. On the other hand, the U.S. is also concerned that if El Salvador succeeds, more underdeveloped countries may follow suit, further weakening the dollar's position.
Additionally, this does not seem to align with Trump's style. Trump and Bukele have communicated quite well, especially with Bitcoin as a strategic reserve, which has some similarities with El Salvador's approach. However, from the tariff measures mentioned above, it is not primarily aimed at attacking BTC, but rather an extension of dollar hegemony. In the future, it may restrict El Salvador's dollar channels and even cut off its cooperation with multilateral financial institutions like the IMF and World Bank, forcing El Salvador to return to the dollar system.
Returning to Bitcoin Data
Despite the frequent events in recent weeks, Bitcoin's price has remained very stable, hovering around $108,000 in the past week, appearing quite strong. However, trading volume has gradually decreased, currently at the lowest level for 2025. The reduction in trading volume can be seen as a decline in user trading and turnover interest. On one hand, this indicates that the current price is gradually losing its appeal to investors; on the other hand, it suggests that users do not expect a significant price drop.
We have discussed this situation for a long time, especially from the data of Bitcoin spot ETFs, which can be seen as a reflection of traditional investors' sentiment. Recently, the net inflow of traditional investors has been gradually decreasing, and with the price increase in 2025, there are no signs of large-scale buying like in 2024; rather, traditional investors do not want to sell.
From the exchange stock data, the stock on exchanges has continued to decrease in the past week, indicating that investors' selling sentiment towards Bitcoin is very low. Not only have traditional investors reduced their selling demand, but even cryptocurrency investors' willingness to sell is also decreasing. Compared to traditional investors, cryptocurrency investors are currently the main force in purchasing, and the primary reason investors do not want to sell is due to the openness and support of the U.S. towards cryptocurrency.
Therefore, as long as there is no systemic risk, Bitcoin is likely to experience a slow upward trend during the Republican term. However, if systemic risks arise, or if the Republican Party or even Trump faces challenges, this sentiment may weaken or dissipate.
In terms of investor confidence data, it can be seen that investors holding Bitcoin for over a year have recently shown signs of distribution. Although there was no significant change in this data over the past two weeks, the current distribution still indicates the potential for price increases. Of course, this distribution is also influenced by the movement of 80,000 Bitcoins from ten years ago; however, this has not impacted the price, as there are no signs that these 80,000 BTC have entered exchanges. Currently, there are still over 3.8 million Bitcoins in ancient stock.
Next, looking at the data on Bitcoin investor holdings from the past week, the overall trend shows that high-net-worth investors are increasing their holdings, while small-scale investors are maintaining their sell-off. In the last 24 hours, there has been a slight exit of high-net-worth investors, while small-scale investors have shown signs of accumulation. The main reason for this may be that Trump has postponed the reciprocal tariff timeline again. Additionally, the reduction in holdings by high-net-worth investors is likely due to the decrease in exchange stock data. I checked the detailed data, and the main reduction is in the range of 10,000 to 100,000 Bitcoins, which is likely a significant portion of the exchange data.
Finally, we still look at the BTC support situation through URPD data. After a week, the current chip concentration situation has changed again. The accumulation of BTC between $104,000 and $108,500 is gradually increasing, and even with a few small fluctuations, there has not been a significant turnover. This range is likely to form a new bottom support. However, from the support structure, the $93,000 to $98,000 range remains the safest position, as it is more solid and investor confidence is stronger. For BTC's price to continue rising and consistently break new highs, it still requires favorable policy stimuli, such as a change in the Federal Reserve chair.
Overall, there have not been any major events in the past week; everything has been within expectations. The upcoming July will see more of a game between tariffs and monetary policy. Although Trump has just taken office for six months, he does not have much time left. The Inflation Reduction Act and tariffs both require the support of the Federal Reserve. Investor expectations for risk markets also hinge on the Fed's interest rate cuts. If Trump cannot gain policy support from the Fed, it is likely to continue lowering his approval ratings, which is something Trump and the Republican Party absolutely do not want to see.
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