The Encryption Industry in the Era of Tariffs: Challenges and Opportunities Coexist

The global economic situation is severe, and a trade war is about to break out. The market has already reacted, with gold prices rising 18% since the beginning of the year, reaching a new high. However, there are still opportunities amid the crisis. The Trump family's latest encryption business layout may hint at some opportunities, although current mining costs are high and profits are thin, the layout from stablecoins to mining machines seems to be accelerating the "Made in America" process.

Tariffs, as a macroeconomic tool, directly affect the prices of goods and circulation efficiency. For the encryption industry, it is important to not only pay attention to the price changes of directly related goods and technologies but also to consider their far-reaching impacts on the overall efficiency of the industry, supply chain liquidity, and market structure.

The cost of Bitcoin mining will increase directly by 17%

Bitcoin remains the leader in the encryption market, with a market value accounting for 59% of the entire encryption market as of April 2, 2025. Bitcoin relies on the Proof of Work (PoW) mechanism, making the price of mining machines and the supply chain key factors in the market. Although the share of computing power from U.S. mining pools has increased to 45.15%, the mining machine supply chain is still dominated by Chinese manufacturers, accounting for over 70% of the global market share. This poses significant challenges to the goal of "bringing Bitcoin mining back to the United States."

It is expected that if a 20% tariff is imposed on Chinese electronic products, the cost of mining machines will increase by about 17%, directly affecting the return on investment cycle for mining sites. New entrants in the mining field may need to reassess their profitability models. Although some mining machine manufacturers have begun establishing production centers in the United States and Malaysia, this shift has also brought about delivery delay issues.

The global semiconductor shortage and technology export restrictions have forced mining machine manufacturers to establish production bases in multiple countries to diversify risks. This has led to unstable supply of mining machines, and there may be supply bottlenecks in the short term. As costs rise and delivery delays occur, the industry may trend towards centralization, with large mining enterprises occupying more market share due to their financial advantages, while small mining farms face greater survival pressure.

Off-chain Locking and On-chain Opening

The United States' tariff policy not only affects the cost of goods but also profoundly reshapes the global financial order. The rapid rise of the U.S. dollar stablecoin has become a part of America's financial strategy, building barriers off-chain while accelerating openness on-chain.

The traditional global trade settlement system relies on bank networks and clearing systems. However, as geopolitical conflicts intensify, the United States is reshaping global trade through measures such as tariffs, data decoupling, and financial regulation. For example, an executive order signed in 2024 aims to restrict "countries of concern" from accessing American data, which not only impacts the cloud computing and chip industries but also severs data sharing in the supply chains of multinational corporations.

Against this backdrop, the US dollar stablecoin has become a new channel for global capital flows. While traditional banking networks are restricted, stablecoin networks can still provide dollar liquidity to the global market. Many financial companies and traders have begun to bypass the banking system, directly using USDC or USDT for supply chain payments. The low cost and instant settlement characteristics of stablecoins make them an ideal tool for cross-border trade.

In countries with strict capital controls, the demand for stablecoins is more urgent. In 2024, Argentina and Nigeria will need to pay a high premium when purchasing stablecoins, reflecting the urgent need of residents and businesses to bypass bank networks and protect their wealth.

Post-Tariff Landscape: Liquidity Expansion Beyond the Federal Reserve

After the implementation of the tariff policy, the market demand for US dollar stablecoins is expected to increase, and a "shadow dollar market" that bypasses Federal Reserve regulation is rapidly expanding globally.

The issuance of stablecoins relies on US Treasuries as collateral, and on the surface, it is still indirectly influenced by the Federal Reserve's policies. However, its liquidity creation mechanism is not directly controlled by the Federal Reserve. When market demand for the dollar surges, stablecoin issuers can quickly increase supply without needing Federal Reserve approval. This means that even if the Federal Reserve wishes to tighten liquidity through contractionary policies, the stablecoin market can still "indirectly inject liquidity", continuously expanding the global supply of dollars.

The liquidity of stablecoins is mainly concentrated within the encryption market, forming an "internal loop." A large amount of capital has not flowed back into the financial system regulated by the Federal Reserve, but is instead stagnating in this emerging on-chain dollar economy. The dollar deposit rates offered by many DeFi platforms are much higher than those of traditional banks, further weakening the Federal Reserve's interest rate transmission mechanism.

The demand from the stablecoin market has boosted the market demand for U.S. Treasuries and lowered their yields. With the introduction of RWA, the liquidity of stablecoins has started to enter a broader pool of assets, exacerbating this trend. This means that the interaction between the stablecoin market and the U.S. Treasury market will become more complex, potentially affecting the pricing logic of funds in future global capital markets.

Despite the restrictions that tariff policies impose on costs and circulation, the United States is quietly reshaping the global financial architecture by strengthening off-chain blockades and expanding on-chain dollar liquidity. From decoupling supply chain data to restricted bank clearing, and the rapid rise of stablecoins, we seem to be witnessing a financial revolution.

This series of changes may be realizing the vision described in the Bitcoin white paper: a completely peer-to-peer electronic currency that allows online payments to be sent directly from one party to another without going through financial institutions. We may already be standing at the threshold of this vision.