Core Viewpoint - The cryptocurrency market experienced a significant downturn on September 22, with major cryptocurrencies like Bitcoin and Ethereum seeing substantial price drops, influenced by macroeconomic factors and rising concerns over a potential U.S. government shutdown [1][2]. Cryptocurrency Market Summary - On September 22, Bitcoin fell over 3% to a low of $112,000, while Ethereum dropped more than 9% to a low of $4,085 [2]. - In a single hour, over $1 billion in cryptocurrency contracts were liquidated, with 97% being long positions. In total, $1.7 billion was liquidated within 24 hours, affecting over 407,000 traders, with more than 90% of liquidations being long positions [1][2]. - The largest single liquidation occurred on OKX-BTC-USDT-SWAP, valued at $12.74 million [2]. Macroeconomic Factors - Federal Reserve Chairman Jerome Powell indicated that there would be no rapid adjustments to interest rates, leading to a decline in market enthusiasm for potential rate cuts. The focus has shifted to an uncertain macroeconomic environment [1][3]. - The risk of a U.S. government shutdown has increased, further pressuring the cryptocurrency market. The Senate rejected a temporary funding bill, raising concerns about government operations [5][6]. Economic Indicators - The Federal Reserve's recent decision to lower interest rates by 25 basis points to a target range of 4.00% to 4.25% did not lead to a rally in the cryptocurrency market, as traders remain cautious amid economic uncertainties [3]. - The upcoming release of the U.S. Personal Consumption Expenditures (PCE) price index is anticipated, with Powell predicting a year-on-year increase of 2.7% for August [4]. Employment and Economic Sentiment - Recent reports indicate a stagnation in U.S. job growth, with new job additions in the past three months being only one-third of last summer's figures. A survey revealed that 63% of Americans believe it is a bad time to find a job, reflecting growing economic uncertainty [7].

Group 1: Economic Environment - The current economic environment in the U.S. is markedly different from historical contexts, with systemic risks exacerbated by new government policy uncertainties and a growing fiscal deficit [1][2] - The U.S. economy is on the brink of a potential recession, characterized by a significant increase in public debt and financialization, creating a "perfect storm" scenario [1][2] Group 2: Structural Fiscal Weakness - The structural issues in U.S. fiscal policy are highlighted by the Congressional Budget Office (CBO) projecting a federal budget deficit of $1.9 trillion for FY2025, which is 6.2% of GDP, significantly above the historical average of 3.8% [2] - Federal government spending as a percentage of GDP has risen from 12% to 23.3% over the past 70 years, driven primarily by social security, Medicare, and net interest expenditures, while federal revenue has stagnated between 15% and 17% [2] Group 3: Economic "Over-Financialization" - The U.S. government's fiscal health is increasingly tied to stock market performance, with capital gains tax becoming a major revenue source, leading to significant revenue drops during market downturns [3] Group 4: Recession Dynamics - In the event of a recession, tax revenues could decline by 15%, reducing expected revenues for 2025 from $4.92 trillion to $4.2 trillion, while government spending could increase by 29%, leading to a potential deficit surge from $2 trillion to $4.5 trillion [4] - Economic contractions typically result in GDP declines of 4% to 5%, which would exacerbate the debt-to-GDP ratio, potentially exceeding 130% [4] Group 5: Labor Market and Social Pressure - A severe recession could raise the unemployment rate from 4.3% to 6%, reducing personal income tax revenues and increasing social security expenditures, while immigration policies may further strain labor supply and consumer spending [5] Group 6: Debt Crisis and Market Confidence - U.S. public debt as a percentage of GDP has escalated from 60% in 2007 to an estimated 98% in 2024, with projections suggesting it could reach 535% by the end of the century [6] - The relationship between rising debt levels and interest rates creates a "debt vicious cycle," where increased debt leads to higher interest payments, further expanding the deficit [7] Group 7: Policy Choices and Structural Challenges - Current policy measures may provide short-term relief but could exacerbate long-term structural risks, particularly through trade and immigration policies that may hinder economic growth [8] - The extension of tax cuts and potential cuts to social welfare programs could lead to increased deficits and reduced economic resilience [8]

Core Viewpoint - Long-term government bond yields in major European economies are rising sharply, with the UK, Germany, and France reaching their highest levels since the financial crisis, driven by concerns over expanding fiscal deficits and policy uncertainty [1][4]. Group 1: Economic Indicators - The UK 30-year bond yield has risen to 5.72%, the highest since 1998, while Germany and France's yields have reached 3.41% and 4.51%, respectively, marking their highest levels since 2011 and 2009 [1]. - The UK's budget deficit is projected at £35 billion, raising investor concerns about fiscal sustainability [5]. - France's budget deficit was 5.8% of GDP last year, complicating fiscal consolidation efforts [5]. Group 2: Political and Fiscal Context - Political instability in the UK and France is exacerbating market concerns regarding fiscal coherence and the ability to manage debt pressures [4][5]. - The UK government is facing challenges in establishing effective fiscal policies amid cabinet reshuffles and budgetary shortfalls [5]. - France's government is attempting to implement a $51 billion budget cut plan to curb deficits, but political divisions hinder progress [5]. Group 3: Market Reactions - The rising yields have led to a decline in demand for long-term bonds, with the UK Debt Management Office reducing the issuance of ultra-long bonds to historical lows [5]. - Traditional buyers, such as pension funds, are showing decreased demand, contributing to market volatility [5]. - European stock markets are under pressure, and there is an increase in risk-averse sentiment among investors [1]. Group 4: Inflation and Central Bank Policies - Persistent inflation concerns and uncertainty regarding central bank policies are significant factors driving up yields [6][7]. - High inflation in the UK may limit the Bank of England's ability to cut interest rates further, impacting economic stimulus [7]. - The Eurozone's inflation data exceeded expectations, leading to market speculation that the European Central Bank will maintain high interest rates [7]. Group 5: Global Context - US Treasury yields are also rising, reflecting a global decline in risk appetite among investors [8]. - Concerns over high debt levels and trade policies in both the US and Europe may contribute to new inflationary pressures, further elevating global long-term interest rates [8]. - Analysts warn of a "chronic vicious cycle" in the European bond market, where debt concerns lead to higher yields, which in turn exacerbate fiscal burdens [8].