As I estimated there would be at least a 20% correction in the US stock market, dragging the $BTC price back to ~$50,000 level. My first target is reached: the US stock market did a 20% correction at a VIX index of ~55, as catalysed by the more intense tariffs imposed by President Trump on many other countries. $BTC once dipped to $74,000 level, much more resilient than what we expected with reference to the historical price movements. Here is what’s next: before June, we expect there will be rate cuts by the Fed, followed by the bottoming out of both the US stock market and crypto market. Indeed, President Trump just explicitly forced the Fed Chair Jerome Powell to cut interest rates. This article is to explain why President Trump is so paranoid about rate cut in full details, and why we are bullish on the crypto market. This is presented to you by @velocitycap_.

Two Pressing Issues Arising From High Interest Rates

There are two pressing issues which necessitate aggressive rate cuts in the next few months. First, the ‘wall of maturities’ of $9 trillion worth of treasury bills this year rendered Trump administration pull all weight to find ways to have rates cut and save trillions of dollars of refinancing costs. However, in the eyes of the Fed, the current inflation level spares no room for it to cut rates fast. Thus, the best way of explaining the seemingly irrationally radical policies and measures by the Trump Administration such as the tariffs, the setup of DOGE, etc was that they constituted a coordinated scheme that tried to force the Fed to cut rates with macro uncertainty. Otherwise, the US government would have to spend at least 3-4x more interests after the rollover. Indeed, the 2-year short-term treasury yield has been dropping to reflect the risk-off sentiment of the market and the capital inflow into treasuries.

How pressing it is for the rate cut in the eyes of Trump administration can be best explained by the following chart:

Indeed, the likelihood of Fed rate cut can be further exemplified by the surging The Merrill Lynch Option Volatility Estimate (MOVE) Index, which reflects the level of volatility in U.S. Treasury futures. The index is considered a proxy for term premiums of U.S. Treasury bonds (i.e., the yield spread between long-term and short-term bonds). As it goes higher, anyone doing financed Treasury or corp bond trades will be forced to sell by higher margin requirements. A sustained rise in the MOVE Index, especially above 140, could indicate significant instability, potentially forcing the Fed to stabilize Treasury and corporate bond markets by cutting rates, as these are critical to financial system functioning. (Note: the last time MOVE index surged above 140 was due to the Silicon Bank collapse - the largest bank failure since 2008)

The second reason for aggressive rate cut in the next few months is also due to the ‘wall of maturities’, but this time it’s referring to the $500B+ in US Commercial Real Estate (CRE) loans which are due in this year. Many CRE loans, previously underwritten at lower rates during the COVID period, face refinancing challenges in a higher-for-longer rate environment, potentially leading to increased defaults, especially for overleveraged properties. In particular, the work-from-home policy is becoming more prevalent, which induces the structural change that has actually rendered a high vacancy rate after COVID. Indeed, the potential CRE loan massive default may actually contribute to the spike in the MOVE index.

In Q4 2024, the delinquency rate for CRE loans stood at 1.57%, up from 1.17% in Q4 2023. Historical comparisons indicate that rates above 1.5% are concerning, especially in a tightening monetary environment. Meanwhile, offices, with values down 31% from peaks, face elevated default risk due to high vacancy rates of 20%, rising cap rates (around 7-8%), and significant loan maturities.

The logic here is: high vacancy rates reduce Net Operating Income (NOI), lowering Debt Service Coverage Ratio (DSCR) and debt yield, but increasing cap rates. High interest rates exacerbate this, particularly for loans maturing in 2025, where refinancing at higher rates may be untenable. Hence, if CRE loans can’t be refinanced at reasonably low rates similar to rates during COVID, banks are bound to have more bad debts, which may in turn trigger domino effects that can crash more banks (just to recall how significant it is for the interest rate spike in 2023 that collapsed Silicon Valley Bank and others).

With these 2 pressing issues arising from current high level of interest rates, the Trump administration has to adopt radical measures to have the rates cut as soon as possible. Otherwise these debts have to be rolled over where the US government would suffer from a much higher refinancing cost, while many CRE loans may fail to rollover and cause a great amount of bad debt.

Catalyst That Can Drive The Next Bull Run - Stablecoins

What affects the crypto market the most is market liquidity. But what affects liquidity the most are (i) monetary policy & (ii) the prevalence of stablecoin. With a dovish monetary policy, stablecoin penetration can further catalyse the capital inflow in the bull run. How much the upside of a bull run is dependent on the increase in total stablecoin supply. In the last bull cycle (2019-2022), the total stablecoin supply was up 10x from trough to peak, as opposed to only around 100% increase from 2023 to early 2025, as seen below.

Let us highlight events that hint at the fast growing stablecoin adoption in the next 12 months:

• U.S. Legislative Progress on Stablecoins: in Q1 2025, the Senate Banking Committee approved the GENIUS Act in March, which outlines oversight and reserve rules for stablecoin issuers. This aims to integrate stablecoins into the mainstream financial system, reflecting a growing acceptance of their role in crypto markets. Also, the US House Financial Services Committee has passed a stablecoin framework bill, the STABLE Act, which says that any nonbank can issue a stablecoin as long as they acquire approval from a federal regulator. Regulatory clarity has always been recognised to be the most important factor that affects the adoption of stablecoin, and hence the capital inflow to the crypto industry via stablecoin.
• Accelerating Institutional Adoption: Fidelity Investments began testing a dollar-pegged stablecoin in late March, marking a significant move by a traditional financial giant into crypto. Concurrently, Wyoming announced plans to launch a state-backed stablecoin by July, aiming to be the first fiat-backed, fully-reserved token issued by a U.S. entity.
• Trump’s World Liberty Financial Stablecoin: World Liberty Financial, linked to President Trump, announced plans on March 25 to launch USD1, a dollar-pegged stablecoin, following a $500 million raise from a separate token sale. This move aligns with the Trump administration’s support for stablecoins as key infrastructure for crypto transactions.
• USDC’s Geographical Expansion to Japan: on March 26, Circle launched USDC in Japan in collaboration with SBI Holdings, marking it as the first stablecoin officially sanctioned for use in the country under Japan’s regulatory framework. This move reflects Japan’s proactive stance on integrating stablecoins into its financial system, potentially setting a precedent for other nations.
• PayPal and Gemini’s Stablecoin Push: throughout Q1, PayPal and Gemini solidified their presence in the stablecoin market. PayPal’s PYUSD and Gemini’s GUSD saw increased adoption, with PayPal leveraging its payment network and Gemini focusing on institutional clients, contributing to the crowded U.S. stablecoin issuer space.
• More Use Cases via Rise’s Stablecoin Payroll Platform: on March 24, Rise, a payroll platform, expanded its offerings to include stablecoin payments for international contractors in over 190 countries. This development highlights practical stablecoin use cases beyond trading, with employers funding payroll in stablecoins and workers withdrawing in local currencies.
• Circle’s IPO: Circle has filed IPO applications. If it is approved, Circle will become the first stablecoin issuer that can be listed in the New York Stock Exchange. This will signify the official status of stablecoin business in the US and motivates more corporations to explore the landscape, especially for big institutions since the stablecoin business depends more on the institutional resources, distribution channels and business development effort.

Why is the Trump administration so actively supporting the stablecoin development? It aligns with our first section: collateral that backs stablecoin in circulation is mainly short-term US treasuries, and hence the more prevalent the stablecoins, the higher demand is the short-term treasuries as the US government rolls over the trillions of dollars worth of maturing treasury bills this year.

To us, the market direction is clear: in the short-term we will likely experience market turmoil with high volatility, and drop even further from the current level. But in the mid-term, we expect aggressive rate cuts accompanying a dovish monetary policy, plus more prevalent stablecoin adoption are likely to cause another strong bull run that can be comparable with the one in the last cycle.

We are approaching an ideal timing for generating good returns by investing in the crypto market.

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