I. The transmission mechanism of the failure of manufacturing repatriation and the debt crisis
1. Structural obstacles to manufacturing repatriation
The manufacturing repatriation policies promoted by Trump are in trouble due to the high labor costs in the US (8 times that of Chinese workers, 15 times that of Vietnamese), supply chain disruptions (e.g., TSMC's US factory delayed due to lack of supporting industries), and the financial capital's crowding out effect on the real economy (78% of foreign capital flows into financial assets). This has led to the US's failure to reduce the trade deficit through industrial revival, with the trade deficit with China still reaching $859.1 billion in Q1 2025, and the debt scale surpassing $36 trillion, with annual interest payments reaching $1.8 trillion.
2. The triggering logic of the dollar's credit crisis
The failure of manufacturing repatriation has made the US economy more reliant on debt expansion and dollar hegemony, but the foundations of dollar credit have been shaken due to the following factors:
◦ Intensification of the Triffin dilemma: The dollar needs to maintain global liquidity through trade deficits, but the goal of manufacturing repatriation requires reducing the deficit, leading to a contradiction that has caused the dollar's reserve share to drop to 59%.
◦ A wave of US debt sell-offs: The yield on 30-year US Treasuries has surpassed 5%, reflecting market concerns over the risk of a dollar explosion. Major creditor countries such as China and Japan are continuously reducing their holdings of US Treasuries, weakening the attractiveness of dollar assets.
◦ Inflation and exchange rate contradictions: Tariffs drive up the prices of imported goods (e.g., the US CPI rose 3.8% year-on-year), while expectations of dollar depreciation strengthen (gold prices surge), further damaging the dollar's credit.
II. The direct impact of the dollar's credit collapse on virtual currencies
1. Surge in risk aversion demand and reconstruction of decentralized trust
When the credit of the dollar collapses, the value storage function of virtual currencies as non-sovereign assets becomes prominent:
◦ The 'digital gold' attribute of Bitcoin: In 2025, the US government strategically reserves 200,000 Bitcoins, signaling a crisis in the dollar system; cases from Argentina, Lebanon, and other countries show that Bitcoin has become a settlement tool in the absence of sovereign currency (e.g., 70% of luxury home transactions in Argentina use USDT).
◦ The alternative payment function of stablecoins: On-chain stablecoins like USDT achieve cross-border payments through smart contracts (e.g., lightning network millisecond-level settlement), challenging the SWIFT system and partially replacing the dollar's international payment functions.
2. Structural differentiation in the virtual currency market
◦ Mainstream currencies benefit from institutional integration: Bitcoin and Ethereum gain long-term value support due to technological iterations (e.g., Ethereum 2.0's energy consumption reduction of 99.95%) and sovereign recognition (e.g., El Salvador's bond yields fell 450 basis points due to Bitcoin's legal tender status).
◦ Risks of altcoins exposed: Policy concept coins like Trump coin plummeted (e.g., Bitcoin dropped 25% to $80,000 in a month), reflecting the market's abandonment of tokens with no practical application scenarios; events like the $40 billion collapse of Terra stablecoin have heightened investor vigilance towards low-credit tokens.
III. Reconstruction of the monetary system after the collapse of dollar hegemony
1. Competition between sovereign digital currencies and the crypto ecosystem
◦ China's institutional advantages: The digital renminbi (e-CNY) embeds smart contracts for cross-border trade, accelerating local currency settlement with 'Belt and Road' countries and weakening the dollar's dominant position in regional trade.
◦ The US's passive adjustment: The Federal Reserve's 'digital dollar plan' attempts to accommodate privacy technology but is constrained by domestic political divisions and intergenerational technological gaps (e.g., blockchain settlement efficiency far exceeds that of traditional banking systems), making it difficult to reverse the trend.
2. The trust revolution of crypto technology
Blockchain technology shifts the monetary trust mechanism from 'state violence endorsement' to 'mathematical consensus verification':
◦ The rise of decentralized finance (DeFi): Ethereum DeFi protocols clear an average of $3 billion daily without the need for bank intervention, forming a parallel market independent of the traditional financial system.
◦ Ethical controversies of algorithmic governance: Bitcoin's energy consumption (annual electricity use exceeds that of Norway) and the FTX exchange fraud scandal expose the dark side of technological utopia, but advancements such as expanding the lightning network to 5,000 Bitcoins show self-repair capabilities.
IV. Profound impacts on the global economy
1. Short-term market fluctuations and long-term paradigm shifts
◦ Sharp fluctuations in asset prices: US stocks fell 8% due to tariff policies, A-shares dropped 1.98% under liquidity shocks, and gold and Bitcoin became safe havens for funds.
◦ Opportunities in emerging economies: Southeast Asian and African countries are bypassing dollar settlement restrictions through cryptocurrencies (e.g., Nigeria ranks third globally in Bitcoin P2P trading volume), accelerating regional economic integration.
2. Geopolitical landscape reshaping
◦ The domino effect of the end of dollar hegemony: Events like Russia's energy trade 'dedollarization' and Saudi oil transactions in renminbi demonstrate that the dollar's global reserve currency status is accelerating disintegration after losing oil pricing power.
◦ Shift of focus in US-China technological competition: China consolidates the foundation for the internationalization of the renminbi through advantages in physical industries such as new energy vehicles and industrial robots, while the US is trapped in a vicious cycle of 'financial hollowing out → failure of manufacturing repatriation → collapse of dollar credit.'
Conclusion: The 'crisis' and 'opportunity' of virtual currencies
The failure of manufacturing repatriation and the chain reaction of the dollar's credit collapse push virtual currencies to the core of the global monetary system's reconstruction:
• Risks: Policy interventions (e.g., the US's speculative operations in Bitcoin reserves), technical vulnerabilities (e.g., quantum computing threats to encryption algorithms), and market bubbles (e.g., the crash of Trump coin) may trigger short-term crises.
• Opportunity: The scarcity of Bitcoin (capped at 21 million), the regulatory evolution of Ethereum smart contracts, and the integration of sovereign digital currencies with the crypto ecosystem are constructing a new trust system based on mathematical consensus. If this system succeeds, it may fulfill Hayek's prophecy of 'currency denationalization' and end the dollar hegemony cycle.$BTC
