"Don't give up at this time, there will be profit-taking opportunities in Q1👀"
The weakening market in early January was mainly due to the emergence of risk aversion in the market. The core reasons were the stagnant global inflation, the UK's debt woes and the tightening of the US interest rate cut path, which caused the US dollar to rise strongly and global government bond yields to reach new highs (Figure 1, Not only have U.S. bond interest rates soared, but UK and German government bond yields have also hit recent highs, excluding China). In the end, the positive recovery of liquidity in Q4 was offset. As can be seen in Figure 2, the lowest level of the SOFR futures interest rate curve is only one month away and has increased by nearly 1.5 yards. The expectation for 2025 Q1 has also increased by nearly 0.5 yards. Currently, institutions generally believe that the lower limit of the interest rate in 2025 will be around 4%. The high interest rate environment is expected to remain for some time.
The current market expectation is that the probability of a 1-cent rate cut in March is 19.7% (no cut is expected in January), which is a good thing at the moment, as will be explained below. The Bank of Japan may raise interest rates this month (if the rate increase is best), but it may also adjust interest rates together with the United States in March. This week's PPI, CPI and end-of-month meetings need to be focused on!
As the Spring Festival approaches, more and more fund managers will start thinking about this year’s asset allocation when they return. I believe that the crypto market will continue to be one of the key options for fund managers (favorable policies and market adoption), so ETFs bring The funds will continue to grow, which is additional price support for BTC ETH.
I think the crypto market will reach its first cycle high in about four to six weeks, especially as most altcoins may peak in Q1. I guess there are several main reasons:
1️⃣ Economic data began to show signs of deterioration, and the central bank was forced to give a dove
2️⃣ The implementation of Trump’s encryption policy did not bring surprises
3️⃣ The wave of token issuance and unlocking adds seasonal selling pressure
Of course I may be wrong, but I may only be optimistic about altcoins until March. I will choose to exchange the altcoins back to stablecoins to collect interest or wait for the Bitcoin correction to buy.
$BTC ’s Holy Grail may have been discovered by me 🏆. According to the Fidelity research report, Bitcoin is highly correlated with global liquidity, followed by inflation expectations, as shown in Figure 3. Therefore, it can be considered that the combination of these two factors (global liquidity and inflation expectations) can explain most of Bitcoin’s price trend changes. I took advantage of the trend and took a look at the chart (Figure 4, USGGBE10 INDEX inflation, GLOMKTCP liquidity, XBTUSD Bitcoin) and found that these two factors are indeed highly identifiable with the trend of Bitcoin.
If liquidity strengthens and inflation expectations rise, Bitcoin will strengthen. When liquidity weakens and inflation expectations fall, Bitcoin weakens. If liquidity and inflation expectations go against each other, Bitcoin will often fall into tangles and shocks, as has been the case recently. At present, inflation is expected to return to the 2024/04 high and liquidity has stagnated. This is also the reason why it has started to rebound this week. If liquidity further increases in the future, the upward trend of the market will be unstoppable. When the current economic data performs well and inflation does not decline, the Fed has no reason to increase the dovish rate (that is, to accelerate interest rate cuts). But once it does so, the economy may have problems... so the best situation is to maintain the current situation. The pace of interest rate cuts uses fiscal stimulus to suppress the dollar and release liquidity.
Finally, what can we expect from this year’s market? I calculated the views of some well-known institutions on 2025 and concluded that AI and stablecoins are the most promising tracks this year, followed by DeFi, RWA, and ETH L2. The ratio of mentions of gaming to BTCFi dropped the most compared to last year. In addition, the investment amount of VC in 2024 Q4 has returned to the level at the beginning of 2021, and the trend development status is very consistent😎.
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