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The White House, and by extension President Donald Trump, has released a document outlining the United States’ national security agenda. The document details what the U.S. will do and what it expects from its allies. What are the implications for crypto and bond yields?
Increasing Defense Budgets & Deterrence Policy #
In the document, the White House introduces an “America First” agenda, which requires NATO allies to significantly increase their defense spending to five percent of their GDP. Other allies and friendly nations, including Japan, South Korea, Australia, and Taiwan, are also expected to boost their defense budgets.
Trump wants these countries to possess the capabilities to deter other nations, particularly focusing on the islands in the region around China, such as Taiwan and Japan. He aims to see progress before he next meets with China’s president.
Taiwan has indeed taken steps to make an invasion costly—laying sea mines and purchasing drones and mobile missile systems. However, Trump imposed a 20% tariff on this ally, effectively treating friends similarly to foes, thereby undermining military morale.
Dangers of the Plan #
The United States will also increase its own defense budget, with investments in the Indo-Pacific region. All these measures will raise global debt and push bond yields higher. That is not good for bitcoin and crypto. Moreover, such high expenditures could trigger a financial crisis, which would be even worse for financial markets.
The U.S. also aims to end the era of mass migration. America no longer wants cheap foreign labor, which could drive up wages and fuel inflation.
Opportunities for Crypto and Gold #
While some of these consequences might benefit assets that offer inflation protection, such as bitcoin and gold, we have seen little evidence of that so far. Bitcoin did set a new price record this year but has also crashed just as easily, even after the Federal Reserve’s rate cuts.
Gold has had a very strong run but has now been stagnant for months. The difference between gold and bitcoin is clear: bitcoin lost a few percent, while gold gained around 60 percent this year.
The Fed will cut rates by 25 basis points, but with enormous defense investments on the horizon, the chance of many more rate cuts is slim. How bitcoin will react to this remains highly uncertain.