Chengyi Strategy & Finance's core viewpoint: The United States became the world's largest economy at the end of the 19th century, and subsequently established its hegemonic position through a series of wars. The US stock market has thrived under the crucible of war. This report systematically studies the wars the US has participated in over the past century and their impact on the US stock market, summarizing patterns. The US's global hegemony is built on its ultra-imperialist policy: At the end of the 19th century, the US gradually transformed its economic advantages into political and military power; in the early 20th century, World War I gave the US a dominant position in the capitalist system; in the 1940s, with the defeat of Nazi Germany in World War II, few major capitalist powers could threaten the US's position, and ultra-imperialism officially entered the historical stage, consolidating itself as a cartel among Western industrial powers in conflicts with the Soviet-led socialist bloc. Under the ultra-imperialist system, the US could leverage the post-World War II alliance system to dominate international politics and exert intervention through military deterrence, thereby achieving its interests. By systematically reviewing the gains and losses of the United States in various wars and the performance of US stock indices and industries, three patterns emerge: First, the US benefited from wars other than the Vietnam War, gradually shifting from a participant to an initiator. Before the Vietnam War, only the Spanish-American War was initiated by the US, and the US reaped substantial benefits in these four wars. The Vietnam War was the only war in which the US suffered a loss and gained nothing, marking a turning point in US war strategy. Subsequent conflicts were all initiated by the US under the guise of conflict, characterized by short time and spatial spans, primarily revolving around oil, and ultimately achieving their objectives. Second, the main impact of war on the stock market has shifted from direct sentiment to indirect economic factors. The magnitude of stock index fluctuations during wartime varies significantly depending on the time span, indicating a shift in the primary impact of war on the stock market from direct sentiment to indirect economic factors. Before World War II, war-related events directly disrupted the market through emotional factors. From the Korean War onwards, the marginal impact of war events diminished, and wars increasingly guided stock market trends through economic means. Third, the characteristics of war patterns and the historical context endow specific industries with unique characteristics. Upstream resource sectors have historically benefited from both military orders and war-induced inflation, while consumer sectors have shown higher frequency of performance among lagging industries. During World War II, coal was the primary resource. During the Korean War, oil consumption began to increase significantly. During the Vietnam War, inflation led to excess returns for upstream resource industries. During the Kosovo War, raw materials and energy industries still yielded the best returns. During the Gulf War, the transmission mechanism of war to the stock market changed, and consumer stocks, which were less affected by the negative impact, outperformed in the short term.Tobacco and grocery stores ranked among the bottom five performing sectors during World War II and the Korean War; during the Kosovo War, discretionary consumption ranked among the bottom five performing sectors, with health and essential consumer goods also among them. Risk warning: Historical experience is not indicative of future results; industry progress may fall short of expectations; trade protectionist policies in various countries may intensify. [Caitong Securities]
Geopolitical Conflicts and Market Performance: Implications for Crypto Investors
The recent analysis from Caitong Strategy examining the historical relationship between US military engagements and stock market performance offers valuable insights for cryptocurrency investors navigating an increasingly complex global landscape. While the report focuses on traditional markets, its findings provide a framework for understanding how geopolitical tensions might impact the nascent crypto ecosystem differently than established financial markets.
The Hegemonic Framework and Crypto’s Position
Caitong Strategy’s analysis highlights how the US transformed economic advantages into political and military dominance through the 20th century, establishing an “ultra-imperialist” system that leveraged post-WWII alliances to exert global influence. This historical context is particularly relevant for crypto investors as decentralized assets exist outside this traditional hegemonic framework, potentially positioning them as both beneficiaries and casualties of geopolitical power struggles.
The crypto market’s borderless nature creates a dynamic where:
– Crypto as geopolitical hedge: Similar to how certain resource sectors benefited from historical wars, crypto may serve as a hedge against traditional financial systems influenced by geopolitical power plays
– Decentralization advantage: Crypto’s distributed architecture may be less vulnerable to direct military disruption compared to centralized financial infrastructure
– Regulatory arbitrage: Crypto markets may capitalize on jurisdictional conflicts between global powers
Evolving Market Sentiment: From Direct Impact to Indirect Factors
The analysis identifies a crucial shift in how wars impacted US stock markets—from direct sentiment-driven fluctuations to more indirect economic mechanisms. This pattern is particularly telling for crypto markets, which have historically demonstrated extreme sensitivity to direct regulatory announcements but are increasingly influenced by broader economic factors.
For crypto investors, this suggests:
1. Maturing market dynamics: Early crypto cycles were driven by direct sentiment (exchange hacks, regulatory tweets), but the market is gradually developing more sophisticated response mechanisms
2. Macroeconomic sensitivity: Similar to how post-WWII wars influenced markets through economic channels rather than direct sentiment, crypto markets are increasingly correlated with traditional macroeconomic indicators
3. Regulatory evolution: While direct regulatory actions still move markets, the industry is developing more resilient structures that can withstand geopolitical headwinds
Sector-Specific Opportunities in Geopolitical Tensions
Caitong’s analysis demonstrates how different industries benefited uniquely from various conflicts based on historical context. For crypto investors, this pattern suggests sector-specific opportunities during geopolitical tensions:
Potential Beneficiaries:
- Privacy coins: Historically performed well during periods of heightened surveillance and geopolitical tensions (e.g., Monero during the Russia-Ukraine conflict)
- Decentralized infrastructure: Projects emphasizing censorship resistance may attract capital during conflicts that threaten traditional financial systems
- Commodity-backed tokens: Similar to how resource sectors benefited historically, tokens backed by strategic commodities may see increased demand
- Cross-border payment solutions: Projects facilitating transactions in contested regions or under sanctions may experience accelerated adoption
Lagging Sectors:
- Regulated DeFi: Projects requiring extensive compliance may face headwinds during heightened geopolitical tensions
- Centralized exchange tokens: May underperform during periods of exchange scrutiny or geopolitical targeting of specific jurisdictions
The Vietnam War Precedent: Market Turning Points
The analysis identifies the Vietnam War as a critical turning point where US war strategy shifted, marking the only instance where the US “gained nothing” from military engagement. This historical parallel suggests potential inflection points for crypto markets:
- Regulatory Vietnam: The ongoing crypto regulatory battles may represent a similar turning point, where excessive crackdowns could backfire by accelerating innovation and capital flight to friendlier jurisdictions
- Market adaptation: Just as the US adapted its war strategy post-Vietnam, crypto markets may develop increasingly sophisticated mechanisms to navigate regulatory environments
Risk Considerations for Crypto Investors
While historical patterns can inform investment strategies, crypto markets present unique risk factors during geopolitical tensions:
- Network fragmentation: Geopolitical tensions could lead to balkanization of crypto networks, with different regions adopting incompatible standards
- Sanction spillover: Projects or entities inadvertently caught in sanctions crosshairs may face sudden deplatforming
- Information warfare: Disinformation campaigns targeting crypto projects could create unnecessary volatility
- Infrastructure vulnerabilities: Physical attacks on mining facilities or nodes could create supply disruptions
Strategic Implications
Caitong’s analysis suggests a framework for crypto investors to consider:
- Positioning for indirect economic impacts: Rather than reacting to immediate geopolitical headlines, focus on how broader economic factors (monetary policy, supply chains) may indirectly influence crypto markets
- Geographic diversification: Crypto assets and protocols with truly decentralized governance structures may offer better resilience during regional conflicts
- Regulatory scenario planning: Develop investment theses that perform well across multiple regulatory environments, similar to how war-time strategies evolved with changing circumstances
Conclusion
The historical patterns identified by Caitong Strategy—particularly the evolution from direct sentiment to indirect economic factors and the sector-specific opportunities that emerge—offer valuable insights for crypto investors. As the global geopolitical landscape continues to evolve, understanding how decentralized assets may react differently than traditional markets will be crucial for navigating both opportunities and risks.
The crypto market’s unique characteristics—decentralization, borderless nature, and technological innovation—position it to respond differently to geopolitical tensions than traditional financial markets. While historical patterns don’t guarantee future outcomes, they provide a framework for developing more resilient investment strategies in an increasingly uncertain world.
For experienced crypto investors, the key takeaway is that geopolitical tensions may not necessarily be headwinds for the entire crypto ecosystem. Instead, they may accelerate the maturation of the market while creating specific opportunities for those who understand the nuanced relationship between global power dynamics and digital assets.