1. The transmission mechanism of the failure of manufacturing reshoring and the debt crisis

1. Structural barriers to manufacturing reshoring

Trump's policy of repatriating manufacturing has run into trouble due to high labor costs in the United States (eight times that of Chinese workers and 15 times that of Vietnamese workers), supply chain disruptions (such as the delay of TSMC's US factory due to lack of supporting industries), and the crowding-out effect of financial capital on the real economy (78% of foreign investment flows to financial assets). This has prevented the United States from reducing its trade deficit through industrial revitalization. In the first quarter of 2025, the trade deficit with China was still as high as US$859.1 billion, the debt scale exceeded US$36 trillion, and the annual interest expenditure reached US$1.8 trillion.

2. The triggering logic of the US dollar credit crisis

The failure of manufacturing reshoring has made the US economy more dependent on debt expansion and US dollar hegemony, but the credit foundation of the US dollar has been shaken by the following factors:

◦ Triffin’s dilemma intensifies: the US dollar needs to maintain global liquidity through trade deficits, but the goal of manufacturing repatriation requires reducing the deficit. This contradiction has caused the US dollar’s ​​share of reserves to drop to 59%.

◦ US debt selling wave: The yield on 30-year US Treasury bonds exceeded 5%, reflecting the market's concerns about the risk of a US dollar explosion. Major creditor countries such as China and Japan continued to reduce their holdings of US debt, weakening the attractiveness of US dollar assets.

◦ Inflation and exchange rate contradiction: Adding tariffs pushes up the prices of imported goods (e.g., the US CPI rose 3.8% year-on-year), while expectations of US dollar depreciation intensify (gold prices soar), further damaging the credit of the US dollar.

2. The direct impact of the US dollar credit collapse on virtual currencies

1. Surge in safe-haven demand and reconstruction of decentralized trust

When the credit of the US dollar collapses, the value storage function of virtual currency as a non-sovereign asset becomes prominent:

◦ Bitcoin’s “digital gold” attribute: In 2025, the US government strategically stored 200,000 bitcoins, sending a signal of a crisis in the US dollar system; cases in Argentina, Lebanon and other countries show that Bitcoin has become a private settlement tool when sovereign currencies collapse (for example, 70% of luxury home transactions in Argentina use USDT).

◦ Alternative payment function of stablecoins: On-chain stablecoins such as USDT realize cross-border payments through smart contracts (such as millisecond settlement of the Lightning Network), challenging the SWIFT system and partially replacing the international payment function of the US dollar.

2. Structural differentiation of the virtual currency market

◦ Mainstream currencies benefit from institutional integration: Bitcoin and Ethereum gain long-term value support due to technological iteration (e.g. Ethereum 2.0’s energy consumption drops by 99.95%) and sovereign recognition (El Salvador’s government bond yield drops by 450 basis points due to Bitcoin legalization).

◦ Risk exposure of altcoins: The plummeting of “policy concept coins” such as Trump Coin (e.g. Bitcoin fell 25% to $80,000 in a single month), reflecting the market’s abandonment of tokens with no actual application scenarios; events such as the $40 billion collapse of Terra stablecoin have heightened investors’ vigilance against low-credit tokens.

III. Reconstruction of the Monetary System after the Collapse of US Dollar Hegemony

1. Competition between sovereign digital currencies and the crypto ecosystem

◦ China’s institutional advantages: The digital RMB (e-CNY) is embedded in cross-border trade through smart contracts, accelerating local currency settlement with the Belt and Road countries and weakening the dominance of the US dollar in regional trade.

◦ Passive adjustments in the United States: The Federal Reserve’s “Digital Dollar Plan” attempts to be compatible with privacy technology, but it is constrained by domestic political divisions and technological generational gaps (such as blockchain settlement efficiency far exceeding that of the traditional banking system), and it is difficult to reverse the downward trend.

2. The Trust Revolution of Encryption Technology

Blockchain technology changes the currency trust mechanism from "state violence endorsement" to "mathematical consensus verification":

◦ The rise of decentralized finance (DeFi): Ethereum’s DeFi protocol clears an average of $3 billion per day without the intervention of banks, forming a parallel market independent of the traditional financial system.

◦ Ethical controversy over algorithmic governance: Bitcoin’s energy consumption (annual electricity consumption exceeds that of Norway) and the FTX exchange fraud scandal expose the dark side of technological utopia, but progress such as the expansion of the Lightning Network to 5,000 bitcoins shows its self-healing ability.

4. Profound Impact on the Global Economy

1. Short-term market shocks and long-term paradigm shifts

◦ Asset prices fluctuated dramatically: US stocks fell 8% due to tariff policies, and A-shares fell 1.98% due to liquidity shocks. Gold and Bitcoin became safe havens for funds.

◦ Opportunities in emerging economies: Southeast Asian and African countries use cryptocurrencies to bypass U.S. dollar settlement restrictions (for example, Nigeria’s Bitcoin P2P trading volume ranks third in the world), accelerating regional economic integration.

2. Reshaping the geopolitical landscape

◦ The domino effect of the end of the US dollar hegemony: Events such as the “de-dollarization” of Russia’s energy trade and the RMB settlement of Saudi oil show that after the US dollar lost its oil pricing power, its status as a global reserve currency has accelerated its collapse.

◦ The focus of Sino-US technological competition has shifted: China has consolidated the foundation for the internationalization of the RMB through its advantages in real industries such as new energy vehicles and industrial robots, while the United States has fallen into a vicious cycle of "financial hollowing out → failure of manufacturing repatriation → collapse of US dollar credit."

Conclusion: The dangers and opportunities of virtual currency

The chain reaction of the failure of manufacturing repatriation and the collapse of the US dollar credit has pushed virtual currency to the core of the reconstruction of the global monetary system:

• Risks: Policy intervention (such as the speculative operation of the United States to stockpile Bitcoin), technological loopholes (such as quantum computing threatening encryption algorithms), and market bubbles (such as the collapse of Trumpcoin) may trigger short-term crises.

• Opportunities: The scarcity of Bitcoin (up to 21 million), the regulatory evolution of Ethereum smart contracts, and the integration of sovereign digital currencies and the crypto ecosystem are building a new trust system based on mathematical consensus. If this system succeeds, it may realize Hayek’s prophecy of “denationalization of currency” and end the cycle of US dollar hegemony. $BTC