Here is the English translation of the text, with the specified terms translated as requested:

Original author: @Web3_Mario

In the past few days, the crypto market has experienced a significant correction, and the market is in a state of chaos, coupled with the continuous accumulation of negative news from the crypto industry due to massive hacker attacks, making it difficult to understand the recent market trends in the short term. The author has some views on this, and hopes to share and discuss them with you. I believe that there are two main reasons for the current crypto market pullback. Firstly, from a micro perspective, the consecutive hacker attack incidents have caused concerns among traditional capital and heightened the risk-averse sentiment. Secondly, from a macro perspective, the further debunking of the US AI bubble by the DeepSeek open-source progress, combined with the actual policy direction of the Trump administration, has on the one hand triggered market concerns about US stagflation, and on the other hand, initiated a reassessment of Chinese risk assets.

Micro level: Massive capital loss, triggering traditional capital's concerns about the short-term trend of crypto

I believe everyone still vividly remembers the Bybit and Infini hacking incidents that occurred last week and recently. There has been a lot of discussion on this, so I won't go into details here. I would like to briefly discuss the impact of the stolen funds on these two companies and the impact on the industry. First, for Bybit, the $1.5 billion amount, although roughly equivalent to its annual net profit in terms of scale, is by no means a small sum for a company in the expansion stage. Typically, companies maintain a cash reserve of 3 months to a year, which is sufficient. Considering that the exchange business is a high-cash-flow industry, its cash reserve is likely closer to the left-side level. If we look at Coinbase's 2024 financial report, we can get some preliminary judgments. In 2024, Coinbase's annual revenue will more than double year-over-year to $6.564 billion, with a net profit of $2.6 billion, while total operating expenses will be $4.3 billion.

Referring to the data disclosed by Coinbase, and combined with Bybit's current expansion stage, its spending control will be more aggressive, and it is estimated that Bybit's cash flow reserve is basically in the range of $700 million to $1 billion. The $1.5 billion user fund loss is obviously beyond the reach of its own funds, so it will need to resort to methods such as borrowing funds, equity financing, or shareholder capital injection to get through this crisis. However, regardless of the model, considering the concerns about the lack of growth in the crypto market in 2025, the resulting cost of capital is likely to be quite high, which will also bring a certain burden to the company's future expansion.

Of course, I saw the news today that the core vulnerability was in Safe rather than Bybit itself, so there may be some incentive to recover some of the losses, but the important factor plaguing the crypto industry is the imperfect legal framework, so the related litigation process will definitely be lengthy and costly. It is unlikely to be an easy task to recover the losses. As for Infini, the $50 million loss is obviously unbearable for a startup, but it seems that the founders have strong financial strength, and relying on capital injection to overcome the difficulties is indeed rare.

These two consecutive major losses may have become commonplace for crypto traders who are already accustomed to high-risk, but they have clearly shaken the trust of traditional capital. Specifically, the capital outflow situation of the BTC ETF can be seen, and the outflow after the 21st attack clearly indicates that the incident has had a negative impact on traditional investors. If the concerns focus on whether it will hinder the development of a regulatory-friendly legal framework, then it is a serious matter. Therefore, it can be said that the theft incident is the trigger for this round of correction at the micro level.

Macro level: Intensified geopolitical competition between major countries, and the liquidity migration under the resonance of the reassessment of Chinese risk assets

Now let's look at the macro-level impact, which is clearly unfavorable to the crypto market in the short term. In fact, after a period of observation, the policy direction of the Trump administration has become relatively clear, that is, through strategic contraction, to gain time and space for internal integration and industrial restructuring, so that the US can regain the ability of re-industrialization, because technology and production capacity are the core factors in the competition between major countries. The most crucial factor in achieving this goal is "money", which is mainly reflected in the US's fiscal situation, financing capacity, and the real purchasing power of the US dollar, and the relationship between these three aspects is mutually reinforcing. Therefore, observing the changes in the relevant process is not that easy, but by unraveling the clues, we can still find some core concerns:

1. The US fiscal deficit problem;

2. The risk of US stagflation;

3. The trend of the US dollar strength.

First, let's look at the first point, the US fiscal deficit problem. This problem has been analyzed in previous articles. In simple terms, the core reason for the current round of US fiscal deficit is to be traced back to the Biden administration's extraordinary economic stimulus bills to deal with the COVID-19 pandemic, as well as the Treasury Department represented by Yellen adjusting the US debt structure by over-issuing short-term debt, thereby collecting wealth globally through yield curve inversion. The specific reason is that the over-issuance of short-term debt will suppress the price of short-term US Treasuries on the supply side, thereby raising the yield of short-term US Treasuries, and the rise in short-term US Treasury yields will naturally attract the flow of the US dollar back to the US, as there is no time cost to enjoy excess risk-free profits, which is a huge temptation. This is also the reason why capital represented by Buffett chose to sell a large amount of risk assets and increase cash reserves in the previous cycle. In the short term, this has put tremendous pressure on the exchange rates of other sovereign countries. To avoid excessive currency depreciation, central banks of various countries have to sell short-term bonds at a discount, turning paper losses into real losses, in order to stabilize the exchange rate by obtaining US dollar liquidity. In general, this is a global wealth collection strategy, especially targeting some emerging countries and trade surplus countries. However, this approach also has a problem, that is, the US debt structure will cause its short-term debt repayment pressure to increase sharply, because the repayment of principal and interest on matured short-term debt is the origin of the current US fiscal deficit-induced debt crisis, which can also be said to be a time bomb left by the Democratic Party for Trump.

The biggest impact of the debt crisis is on the US's creditworthiness, which will reduce its financing capacity. In other words, the US government needs to pay a higher interest rate to raise funds through government bonds, which will raise the overall neutral interest rate of the US society, and this neutral interest rate cannot be influenced by the Federal Reserve's monetary policy. The raised neutral interest rate will put tremendous pressure on corporate operations, and will also lead to economic stagnation, and economic stagnation will be transmitted to the general public through the job market, thereby triggering a negative feedback loop that leads to an economic recession.

The focus of observing this main line is on how the Trump administration will reshape the US government's fiscal discipline and solve the fiscal deficit problem. The specific policies involved are the efficiency department led by Musk's DOGE, the reduction of US government spending and the process of staff layoffs, as well as the impact on the economy during the process. Currently, the force of Trump's internal integration this round is very strong, and the reform has entered the deep water area. I won't go into the tracking of the progress here, but I'll just introduce some of my own observation logic:

1. Pay attention to the degree of aggressiveness in the efficiency department's policy promotion, such as overly drastic layoffs and reductions, which will inevitably cause concerns about the economic outlook in the short term, which is usually unfavorable to risk assets.

2. Pay attention to the feedback of macroeconomic indicators on its policies, such as employment data and GDP data.

3. Pay attention to the progress of tax cut policies.

Here is the English translation of the text, with the specified terms translated as requested: We cannot underestimate the impact of government spending and government employees on the US economy. Typically, we would think that China's government spending as a percentage of GDP is higher than the US, but this is actually a misconception. The US government spending accounts for 17.2% of GDP, while China's is 16.51%. Government spending is usually transmitted through the industrial chain multiplier to the entire economic system, and the structural differences between the two mainly reflect that consumption accounts for a very high proportion of US GDP, while imports and exports account for a higher proportion of China's GDP. This represents two different ways of boosting the economy - for the US, expanding external demand and increasing exports is a means of stimulating the economy, while for China, domestic demand still has great potential to be tapped. For consumption, it is the same. In this chart, we can see that the wage level of the government sector is not low in the entire industrial chain, and the reduction of redundant government employees has also hit the economic growth on the consumption side. Therefore, overly aggressive policy promotion will certainly trigger concerns about an economic recession. Some things, if handled slowly, can be resolved, but they also need to be coordinated with the overall pace of the Trump administration's policies. As for the progress of tax cuts, it seems that Trump's focus is not currently on this, so the concerns about the short-term revenue reduction are not yet obvious, but we still need to remain vigilant. Secondly, there is the concern about the US stagflation problem. Stagflation refers to a situation where economic growth stagnates while inflation accelerates, which is unacceptable in terms of the misery index. In addition to the impact of government spending cuts on economic growth mentioned earlier, there are some other important points of concern: 1. How will DeepSeek further disrupt the AI track. 2. The progress of the US sovereign wealth fund. 3. The impact of tariff policies and geopolitical conflicts on inflation. Among them, the author believes that the first point is the most significant in the short term. Those interested in technology may know that DeepSeek's open-source week has produced extremely shocking results, all pointing to the fact that AI's demand for computing power has been greatly reduced. This is the reason why the stock market could remain stable during the previous US interest rate hike cycle - the huge narrative around the AI track and the US's monopoly over the upstream and downstream of the AI track. The market has given extremely high valuations to US AI-related stocks, naturally with an optimistic attitude towards the new round of economic growth driven by AI in the US. However, this will be reversed by DeepSeek, and DeepSeek's biggest impact is in two aspects: one is on the cost side, that is, it has greatly reduced the demand for computing power, which has led to a significant reduction in the growth potential of upstream computing power providers represented by Nvidia. The other is that through open-source means, it has broken the US's monopoly on AI downstream algorithms, thereby depressing the valuations of algorithm providers represented by OpenAI. And this impact has just begun, and we need to see how the US AI industry will respond, but in the short term, the valuation pullback of US AI stocks and the valuation return of Chinese tech stocks have already become apparent. In fact, for a long time, the US has suppressed the valuation of Chinese companies through public opinion, making them undervalued. Benefiting from the grand narrative brought by DeepSeek's upgrade of China's manufacturing industry, as well as the relatively mild attitude of Trump's policies on China-related issues, which has reduced geopolitical risks, the valuations of Chinese and US companies have seen a return. According to a report from CICC, the current surge in the Hong Kong stock market is mainly benefiting from southbound capital, that is, capital inflows from the mainland, as well as the inflow of passive overseas capital. However, active overseas funds, subject to Trump's investment restrictions on Chinese companies, have not shown significant changes. But for the observation of liquidity, it is also very important, as there are many ways to bypass direct investment and enjoy the dividends of the revaluation of Chinese companies, such as investing in related markets like Singapore. The second point worth noting is the construction of the US sovereign wealth fund. We know that sovereign wealth funds are a good supplement to the government's financial resources, especially for countries with large trade surpluses in US dollars. Among the top 10 sovereign wealth funds in the world, 3 are from China, 4 from the Middle East, and 2 from Singapore, with the largest being the Norwegian Government Pension Fund Global, with total assets of about $1.55 trillion. Due to the constitutional framework of the federal government, the establishment of a sovereign wealth fund in the US is actually quite difficult, as the federal government can only receive direct taxes, and its financial resources are relatively limited. However, Trump seems to have instructed the Treasury Department to establish a trillion-dollar sovereign wealth fund, which is naturally also a means of alleviating the fiscal deficit. However, the problem here is where the money will come from and what it will be invested in. According to the remarks of the new US Treasury Secretary Yellen, it seems that the plan is to reprice the US gold reserves to provide $750 billion in liquidity for the sovereign wealth fund. The reason behind this is that according to Section 5117 of Title 31 of the US Code, the US government's 8,133 metric tons of gold are still legally valued at $42.22 per ounce, but if calculated at the current market price of $1,920 per ounce, the US government would have $750 billion in unrealized returns. So by amending the law, additional liquidity can be obtained, which has to be said to be a clever move. However, if this is approved, the US dollars used for investment or debt relief will inevitably come from the sale of gold, which will also have an impact on the gold price trend. As for what to invest in, the author believes that it is most likely to be centered around the goal of bringing production capacity back to the US. Therefore, the impact on Bitcoin is probably limited. In previous articles, the author has analyzed that in the short to medium term, Bitcoin's value relative to the US is to become a hedge against the economy, which is based on the premise that the US has sufficient pricing power over this asset. But in the short term, the economy has not shown obvious signs of recession, so this is not the main focus of Trump's policies, but an important tool to get through the reform pains. Finally, on the tariff front, the tariff concerns have actually been well traded. Currently, it seems that the tariff policy is more of a bargaining chip for Trump's negotiations, rather than a necessary choice. This can be seen from the proportion of tariffs imposed on China, where Trump has been relatively restrained, naturally considering the impact of high tariffs on domestic inflation. The author is more interested in the next step, which is the tariffs on Europe, and what the US can get in return. Of course, the author is concerned about the process of Europe regaining its independence, as harvesting Europe to restore its own strength is the first step for the US to participate in this great power game. As for the inflation risk, although the CPI has been growing for consecutive months, considering that it is still within a controllable range, and the moderation of Trump's tariff policy, the current risk does not seem to be too large.

Here is the English translation:

Finally, let's talk about the trend of the US dollar, which is a very critical issue that needs to be observed continuously. In fact, the debate over the strength and weakness of the US dollar under the new term of President Trump has been ongoing, and the remarks of some key figures have significantly impacted the market. For example, Stephen Mnuchin, the newly appointed economic advisor and the chief economic strategist of the White House, stated that the US needs a weak US dollar to boost exports and promote domestic reindustrialization. After causing market panic, US Treasury Secretary Yellen then tried to reassure the market during an interview on February 7, stating that the US will continue its "strong US dollar" policy, but the renminbi is slightly undervalued.

In fact, this is an interesting issue. Let's look at the impact of a strong or weak US dollar on the US. First, a strong US dollar will have two main effects. Firstly, on asset prices. As the US dollar appreciates, dollar-denominated assets will perform better, which is mainly beneficial for US government bonds and global companies' US stocks, as it increases the market's enthusiasm for buying US bonds. Secondly, in the industrial sector, a stronger US dollar purchasing power benefits global US companies by reducing costs, but it suppresses the competitiveness of domestic industrial products in the international market, which is not conducive to domestic industrialization. The impact of a weak US dollar is the opposite. Considering Trump's overall policy design, which is based on industrial repatriation, capacity enhancement, and enhancing the competitiveness of great power rivalry, a weak US dollar policy seems to be the right solution. However, there is a problem - a rapid weakening of the US dollar will lead to a devaluation of dollar-denominated assets, and given the current fragility of the US economy and financing pressure, this could make it difficult for the US to overcome the pains of reform.

There is a representative event that illustrates this pressure. In Buffett's annual shareholder letter on February 25, he expressed dissatisfaction with the US fiscal deficit, which has obviously exacerbated market concerns. We know that Buffett's leverage strategy in the recent period has been to clear out overvalued US risk assets and allocate more cash reserves to US short-term Treasuries, while also configuring some of the major Japanese trading companies. This is obviously a form of interest rate arbitrage, which does not need to be elaborated here. What I want to say is that Buffett's views have a strong influence in the market, and capital that is overweight in the US dollar will naturally have a unified concern about the real purchasing power of the US dollar, that is, the concern about US dollar depreciation. So the pressure to enter the depreciation channel too quickly is very large.

However, regardless, using space to exchange time and gradually reducing debt will become the choice of both China and the US, and the trend of the US dollar will most likely follow a pattern of first strengthening and then weakening. The changes in dollar-denominated assets will also fluctuate with this cycle. Cryptocurrencies are also one of the assets affected by this wave.

Finally, I would like to share my thoughts on the crypto currency market. I believe that there are too many uncertain factors in the current market, so individual investors can choose a barbell strategy to enhance the anti-fragility of their investment portfolio. On the one hand, allocate to blue-chip cryptocurrencies or participate in some low-risk DeFi yields, and on the other hand, make small-scale allocations to some high-volatility targets when the market dips. As for the short-term market trend, the accumulation of many adverse factors has indeed caused certain price pressure, but there does not seem to be any clear structural risks. So if the market experiences an excessive correction due to panic, appropriate positioning may also be a choice.