Trump predicts 5.4% growth at Davos, but the crypto market is crashing: Why can't optimistic remarks suppress market panic

Trump delivers a speech at Davos, releasing quite optimistic signals about the economy. He claims that the US core inflation rate is only 1.5%, and expects the economic growth rate in Q4 2025 to reach 5.4%. These figures look promising, but interestingly, the market’s reaction was completely opposite. Cryptocurrencies like Bitcoin and Ethereum plummeted significantly during the same period. What exactly happened behind the scenes?

The stark contrast between Trump’s optimistic outlook and market reality

The meaning of Trump’s statements

Trump’s projected 5.4% economic growth is quite impressive. If achieved, it would represent a strong performance of the US economy. The 1.5% core inflation rate is also relatively moderate, indicating controllable price pressures. In theory, such macroeconomic data should support the rise of risk assets.

But what actually happened? Around January 19, the crypto market experienced a sharp, concentrated decline. Bitcoin quickly retreated from last week’s high of $97,000, briefly falling below $92,000; Ethereum dropped below $3,200; Solana fell below $140. According to the latest news, the total liquidation across the network was about $593 million, with longs accounting for nearly 90%.

The real triggers behind the market decline

On the surface, Trump’s economic outlook should be positive news. But the market’s reaction indicates that investors are not focusing on these macroeconomic figures, but on other factors.

According to relevant information, the main triggers for this round of decline include:

• Rising geopolitical risks: Trump threatened to impose a 10% tariff on eight European countries, sparking concerns over a trade war
• Changing expectations for Federal Reserve policy: The likelihood of Jerome Powell becoming the next Fed chair has surged to about 60%, with expectations shifting from dovish to hawkish
• Obstacles to crypto-friendly legislation: The CLARITY Act faced setbacks in the Senate, potentially weakening policy support for the crypto industry
• Rapid cooling of risk appetite: Multiple uncertainties combined, leading investors to reduce their positions sharply

Why does the market ignore economic fundamentals?

Policy uncertainty weighs more heavily

Analysts generally believe that the current market is experiencing a “sentiment-driven correction caused by profit-taking at high levels.” The key point is that even if economic data look good, policy-level uncertainties can outweigh the positive macro signals.

Trump’s tariff threats are interpreted by the market as negotiation tactics, but such strategies inherently create volatility. Fannon credit analysts point out that the market is also paying attention to the so-called “TACO trade” (Trump retreating at the last moment), as Trump might use tariff threats as leverage in negotiations. This kind of uncertainty itself is a form of risk.

Crypto markets are more sensitive to policy changes

Compared to traditional assets, crypto markets are far more sensitive to policy shifts. Delays in the discussion of the CLARITY Act and changes in the Fed chair selection directly impact the expected returns in the crypto sector.

XRP’s performance is particularly notable. Although Ripple has obtained a preliminary Electronic Money Institution (EMI) license in Luxembourg, the threats of tariffs and delays in legislation still caused XRP futures open contracts to drop about 9% within 24 hours, down to $3.55 billion. This reflects market concerns over the short-term policy environment.

The credibility issues of Trump’s economic outlook

Ambiguity of data sources

It is worth noting that Trump’s economic projections made at Davos did not specify the sources or calculation methods of the data. The credibility of such forecasts has always been questioned, especially when these statements starkly contradict market realities.

The market’s actual response

From the actual market reactions, investors clearly trust their own risk assessments more than official economic forecasts. This phenomenon is especially evident in the crypto market, where participants are more sensitive to policy environment changes.

Summary

Trump’s 5.4% growth forecast and 1.5% inflation rate seem to be positive signals, but the market’s plunge indicates that investors’ focus has shifted to policy uncertainties. Geopolitical risks, changes in Fed chair expectations, and obstacles to crypto-friendly legislation have collectively suppressed risk appetite.

This phenomenon reflects an important market principle: in a highly uncertain policy environment, macroeconomic fundamentals are significantly weakened. For crypto investors, the current strategy should be to seek opportunities amid volatility rather than blindly trust official economic forecasts. Ultimately, the market will validate these expectations through action.