US National Security Strategy Sparks Bitcoin Drop as Geopolitical Risk and Inflation Fears Rise
Bitcoin fell sharply below $90,000 after the White House published a new US National Security Strategy, which signaled a shift in burden-sharing by urging allies to assume greater regional defense responsibility. The document—echoing President Trump’s prior rhetoric that the US will no longer shoulder global security alone—encourages NATO members to raise defense spending to as much as 5% of GDP. Traders interpreted the move as raising the prospect of increased government borrowing and higher inflation, which could delay central bank rate cuts and reduce demand for risk assets like Bitcoin. Despite the drop to about $89,000 and heightened negative sentiment, markets still price a high probability of a 25 bp Fed rate cut next week (CME FedWatch ~86%; Polymarket ~94%), and Reuters economist survey remains similarly optimistic. Analysts say the strategy is not legally binding but increases uncertainty and downward pressure on crypto prices. This development may amplify short-term volatility and selling pressure for BTC while longer-term effects will hinge on actual fiscal moves, inflation trajectory, and central bank responses.
Bearish
The new US National Security Strategy raised perceived geopolitical risk by signaling higher allied defense spending and a shift toward greater burden-sharing. Traders connected the prospect of increased government borrowing and higher defense budgets to rising inflation, which could force central banks to postpone rate cuts. Since lower interest rates are a key driver for investor appetite for risk assets like Bitcoin, the prospect of delayed easing reduces BTC’s bullish case. The document itself isn’t legally binding, but markets reacted to the increased macro uncertainty, driving a quick drop below $90,000 and heightened volatility. Historically, similar macro shocks—rising geopolitical risk or inflation surprises—have led to short-term sell-offs in crypto (e.g., risk-off moves during geopolitical escalations or inflation surprises). Short-term impact: amplified volatility, increased sell orders, potential liquidation cascades if price levels breach key supports. Medium-to-long term: depends on whether governments actually increase spending and whether inflationary pressures materialize; if central banks ultimately cut rates as expected, the bearish effect could be transient. Traders should watch on-chain flows, futures funding rates, options skew, macro prints (inflation, rates), and Fed communications for confirmation.