Could This Be the Reason Behind Bitcoin’s Recent Drop? It Was Overlooked in Yesterday’s Headlines

The National Security Strategy published yesterday by US President Donald Trump increased geopolitical risks and created severe unease in the cryptocurrency markets.

Following the document, the Bitcoin price fell to the $89,000 level, and the possibility of a new “crypto winter” was brought to the agenda among market participants.

The strategy document released by the White House conveys the message that the US will no longer carry a significant portion of the global defense burden alone. Reminiscent of Trump's speech at the United Nations last year, the text states, “The days of the US carrying the entire world order on its back like an Atlas are over.” The document states that developed countries allied with the US must assume greater responsibility in their own regions.

Although the strategy document is not legally binding, analysts note that it increases uncertainty in the market, putting downward pressure on crypto assets.

The crypto market's strong reaction stems from expectations that a potential increase in defense spending could delay interest rate cuts by central banks. The strategy document advocates for NATO countries to increase their defense budgets from 2% to 5% of GDP. The possibility of governments borrowing to fund such an increase could increase inflationary pressures.

Rising inflation puts pressure on risky assets because it could lead central banks to delay interest rate cuts. Low interest rates typically drive investors into riskier assets, particularly cryptocurrencies. Therefore, any delays in rate cuts could weaken Bitcoin's bullish potential.

Despite this, markets are still anticipating a rate cut at next week's Fed meeting. The Chicago Mercantile Exchange's FedWatch tool puts the probability of a 25 basis point cut at 86%. A Reuters survey of 100 economists similarly suggests a high probability of a rate cut. Forecasts on the Polymarket platform put the probability as high as 94%.