There is about one month left before Trump takes office. As the market generally expects inflation to rise after he takes office, after the Fed cut interest rates by 25 basis points this time, Powell's hawkish remarks have reduced expectations for the Fed's interest rate cuts in 2025 to two 25 basis points, which is much lower than previous expectations.
The Federal Reserve even postponed its target of keeping inflation at 2% to 2027, which means that the Fed believes that there is great uncertainty about inflation under Trump's administration.
The United States now has high inflation, high interest rates, high debt, and high tariffs. These contradictory factors coexist, which is also a miracle. It seems that only the rich can enjoy the benefits of saving money and earning interest. The market believes that Trump and his team can immediately create economic and political miracles to solve these contradictions. This is also one of the reasons why cryptocurrencies and US stocks have risen sharply in the past few months. Now the capital market has priced in, but these contradictions may not be resolved so quickly.
If high interest rates are maintained for a long time, will the economy face problems? The United States has more than just a few large tech companies, and with such high funding rates, the cost of living for ordinary people and the operational costs for businesses are under significant pressure.
Since inflation cannot be suppressed, will the Fed's hawkish stance on maintaining high interest rates lead to a black swan event in 2025 that forces it to cut rates? Just like in 2008.
Currently, the bullish market for Bitcoin is supported by ETFs and publicly listed companies represented by MSTR. However, despite the Fed's 25 basis point rate cut, the financial environment remains tight. Since September, long-term bond yields and mortgage rates have been rising, and the appreciation of the dollar poses macro risks for Bitcoin, as the dollar's appreciation is also related to the contraction of global money supply, which is often detrimental to Bitcoin and other crypto assets, with the Fed's net liquidity continuing to decrease.
With Christmas approaching, the end of the 2024 fiscal year, and Trump’s imminent inauguration, the capital markets have already priced in this scenario, and historically, the capital markets tend to be relatively calm during this time window. Industry giant Arthur Hayes believes that the cryptocurrency market will experience a painful drop around January 20, 2025, just before Trump's inauguration, followed by a buying opportunity.
In the near future, Bitcoin may maintain a broad range of fluctuations between $80,000 and $110,000, similar to the fluctuations between $50,000 and $70,000 after March, until new events change this trend (black swan, massive monetary easing, strategic reserve assets, etc.). Meanwhile, altcoins remain in a bear market; this is merely a rebound, as the fundamentals remain unchanged with no ecosystem, no new funds, and venture capital continuously unlocking for cashing out, combined with major platforms launching many new coins to profit from, making it difficult for altcoins to establish a trending market.
