The U.S. economy runs smoothly in December, with core economic data generally meeting expectations, but hawkish comments from the Federal Reserve have intensified short-term market volatility; in the macroeconomic greenhouse, both U.S. stocks and Bitcoin reached historical highs this month, providing investors with a year-end windfall; looking ahead to 2025, institutions generally have an optimistic outlook, believing that Bitcoin may break through $200,000 in 2025.
The newly released economic data for the U.S. in December is basically in line with expectations: non-farm employment increased by 227,000 in November, slightly better than the market expectation (expected 220,000); the CPI in November increased by 2.7% year-on-year and 0.3% month-on-month, both meeting expectations. Subsequently, it was announced that the target range for the federal funds rate would be lowered by 25 basis points to between 4.25% and 4.50%, in line with expectations. However, after announcing the interest rate cut, the Federal Reserve added a remark: it is expected that the magnitude of rate cuts in 2025 may narrow to 50 basis points. This undoubtedly poured cold water on the market, as this means that the number of rate cuts in 2025 is expected to decrease from the previous estimate of four times to two times, leading the market to anticipate that the Federal Reserve will not cut rates in January. Affected by the hawkish rate cut in the U.S., both U.S. stocks and the crypto market experienced a significant decline that day.
On the day the Federal Reserve announced the interest rate cut, it also released the latest economic outlook, predicting that the U.S. economy will grow by 2.5% and 2.1% respectively in the next two years, an upward adjustment of 0.5 percentage points and 0.1 percentage points compared to the September forecast. The unemployment rate is expected to be 4.2% and 4.3% respectively in the next two years, lower than previous forecasts. The inflation rate measured by the personal consumption expenditure price index is projected to be 2.4% and 2.5%, while the core inflation rate, excluding food and energy prices, is expected to be 2.8% and 2.5%, both exceeding the long-term inflation target of 2%. This indicates that the U.S. economy is currently running smoothly, but there is still some gap between inflation and the 2% target.
Complementing this economic forecast is the December PMI index: the preliminary value of the U.S. Markit Services PMI for December reached 58.5, exceeding the market expectation of 55.8, and higher than the previous value of 56.1. However, at the same time, the preliminary value of the Manufacturing PMI recorded 48.3, lower than the expected 49.5 and the previous value of 49.7. The composite PMI preliminary value was 56.6, also exceeding the expected 55.1 and the previous value of 54.9. The services sector is experiencing the fastest growth since the lifting of pandemic lockdowns in 2021, while the underperformance of the manufacturing PMI is due to insufficient export demand.
In the macroeconomic 'greenhouse,' U.S. stocks are rising gradually, with the Nasdaq index successfully breaking through the 20,000 point mark. Among the Big 7 in U.S. stocks, Apple (AAPL), Amazon (AMZN), Google (GOOG), Tesla (TSLA), and Meta all reached new historical highs in December. OpenAI's series of 12 consecutive days of conferences this month has pushed AI to another peak. When there is no crisis in the macro environment and no new narrative in the market, the market will still operate along the path of least resistance, and that path may only be the strongest consensus around AI.
Behind the Nasdaq's new high is the 'super optimistic' sentiment of investors. Bank of America’s December global fund manager survey found that investor sentiment was 'super optimistic' in December. The report states that the allocation to cash is at a historically low level, while the allocation to U.S. stocks is at a historically high level. The report states that global risk appetite is at a three-year high, driven by optimism related to Trump's second term and interest rate cuts by the Federal Reserve. Bank of America has also listed several chip stocks, including Nvidia (NVDA), as top investment options for 2025. The highly optimistic market sentiment has created the current prosperity in U.S. stocks, but it also adds the possibility of a sharp decline due to black swan events in the complex and chaotic financial system.
It is noteworthy that this month the Dow Jones Industrial Average has experienced 'ten consecutive declines,' setting the worst consecutive decline record since 1974. The divergence in the performance of the Dow from the Nasdaq and S&P 500 is mainly caused by differences in constituent stocks. This month, the healthcare giant UnitedHealth faced political turmoil, leading to a continuous drop in its stock price, while Nvidia, newly added to the Dow, performed poorly this month, contributing to the Dow's consecutive decline.
Another event of interest in U.S. stocks this month is that MicroStrategy (MSTR) has officially been included in the Nasdaq 100 index. In WealthBee's November report, we analyzed that MicroStrategy's 'digital gold standard' strategy and capital operation model could become an industry pioneer in the context of a continuing market rise, promoting Bitcoin to be recognized as a top predator asset. This month's inclusion of MicroStrategy into the Nasdaq 100 index is undoubtedly another victory for the crypto world and a further step forward for the traditional financial world. This may just be a prelude, as there could be even bigger events happening in the future crypto world, and we are watching closely.
On December 5, Beijing time, Bitcoin finally迎来了自己的历史性时刻——正式突破10万美元。
At the same time, Ethereum has also broken through $4,000. It can be said that Bitcoin breaking through the psychological barrier of $100,000 has completely ignited market sentiment.
The recent surge in Bitcoin is primarily driven by political factors. We do not know whether Trump will truly fulfill his promises regarding cryptocurrencies after taking office, but at least the 'emotional value' has indeed filled the market. Currently, there is a significant FOMO sentiment among the public abroad; the proportion of cryptocurrency holders in South Korea has reached 30%, meaning three out of ten people hold cryptocurrencies (according to data from the Bank of Korea), which is even higher than the proportion of stockholders in our country.
The current FOMO situation is evident to all, and institutions are giving future forecasts at this critical moment: Bitwise, the largest crypto fund in the U.S., predicts that Bitcoin will reach $200,000 in 2025. The Bitwise team believes that Coinbase will enter the S&P 500 index, and 2025 will be a more festive year than this year.
By the end of 2024, the Federal Reserve will enter a rate-cutting cycle, creating a more favorable macro environment for high-risk assets. Bitcoin has also received favor from domestic and foreign institutional liquidity, with 17 U.S. and Japanese publicly listed companies already announcing plans to hold or seek board approval for Bitcoin as a strategic asset. The market may continue to support high-risk trading in the first quarter of 2025, with funds likely continuing to flow into Bitcoin and other crypto assets.
Looking ahead to 2025, several key storylines in the crypto space have already emerged—the changing role of Bitcoin in global asset allocation, where the new incremental markets are, the new price ceilings, and regulation. Each of these storylines currently has new important clues worth continued attention.
Currently, only 0.01% of publicly listed companies globally hold Bitcoin, which indicates that this is just the tip of the iceberg of institutional buying power, and the market is still in the 'elite experimental stage.' OKX Research Institute predicts that the statistical funds entering Bitcoin in the next year will amount to about $2.28 trillion. This amount of funds could push Bitcoin's price to around $200,000, which is consistent with forecasts from Bernstein, BCA Research, and Standard Chartered Bank. Well-known Wall Street investment firm JMP Securities predicts that in the next three years, Bitcoin spot ETFs may see an inflow of up to $220 billion. Overall, institutions generally expect Bitcoin to reach around $200,000 by 2025, and currently, Bitcoin is still a 'non-mainstream' investment, indicating that the incremental market remains unimaginably large.
During the rise in 2024, Bitcoin added value to multi-asset investment portfolios, but it remains a highly volatile and risky asset. Citigroup analysts state that the return on cryptocurrencies needs to exceed the expected return on stocks by several percentage points to justify a 1% allocation in the investment portfolio. If the allocation is larger, the return on cryptocurrencies must be significantly higher. Therefore, the allocation of Bitcoin in portfolios may still be relatively low, but for investors pursuing high risk and high return, it may be appropriate to increase their allocation.
The regulatory environment has always been an important factor supporting the long-term trend of Bitcoin prices. With Trump's inauguration, regulation will become a major theme in 2025. The U.S. is about to enter a crucial moment for establishing regulatory clarity for the crypto industry. The bipartisan support for cryptocurrencies means that regulation is likely to shift from being a hindrance to a driving force. The EU's regulatory framework for crypto assets (MiCA) will be fully effective in 2025, unifying the cryptocurrency regulations of member states. In Asia, Japan and South Korea continue to encourage innovation while intensifying regulation of exchanges and wallet service providers. Global regulatory clarity will help attract more institutional and individual investors into the market.
In addition to Bitcoin, institutions predict that AI and stablecoins will become new highlights in 2025. Currently, many banks are envious of the profits from Tether (USDT) and are entering the market. According to Bloomberg, Societe Generale, Germany's Oddo BHF, the UK’s Revolut, and even Hong Kong's Monetary Authority have started to layout in the stablecoin market, hoping to get a share of this field. Stablecoins may currently be the most demonstrably applicable tool in the crypto space, which is also a crucial step for further breaking the barriers of the crypto world to become a new consensus.
In the current market's optimistic atmosphere, even the most optimistic predictions seem reasonable. However, we need to understand that even if the future looks bright, the road ahead is still fraught with thorns, and we must be cautious of the risks posed by short-term market fluctuations. Since 2008, the crypto world has thrived for 16 years—by human age standards, it is about to enter 'adulthood.' As it reaches maturity, Bitcoin has become a consensus investment in the mainstream financial circle, and stablecoins may soon become real application tools. The crypto market in 2025 will be more interesting than in 2024!
