The US economy operated steadily in December, with core economic data within expectations, but hawkish remarks from the Federal Reserve exacerbated short-term market volatility; in the greenhouse of the macroeconomic environment, both US stocks and Bit reached new historical highs this month, and investors received a year-end windfall; looking ahead to 2025, institutions generally have an optimistic outlook, believing that Bit may break through $200,000 by 2025.
The economic data released in the US in December was basically within expectations: non-farm payrolls increased by 227,000 in November, slightly better than market expectations (expected 220,000); November CPI rose 2.7% year-on-year and 0.3% month-on-month, both in line with expectations. Subsequently, it was announced that the federal funds rate target range would be lowered by 25 basis points to 4.25%-4.50%, in line with expectations. However, the Fed "stabbed again" after announcing the rate cut, saying that the rate cut in 2025 may narrow to 50 basis points. This undoubtedly poured cold water on the market, as it means that the number of rate cuts expected in 2025 has decreased from 4 to 2, which also led the market to expect that the Fed will not cut rates in January next year. Affected by the hawkish rate cut in the US, the US stock market and crypto market experienced a sharp decline that day.
On the day of the rate cut announcement, the Fed also released the latest economic outlook, forecasting US economic growth of 2.5% and 2.1% in the current and next year, up 0.5 and 0.1 percentage points respectively from the September forecast. The unemployment rate is expected to be 4.2% and 4.3% in the current and next year, slightly lower than the previous forecast. The inflation rate measured by the personal consumption expenditure price index is forecast to be 2.4% and 2.5% respectively, and the core inflation rate excluding food and energy prices is forecast to be 2.8% and 2.5% respectively, both exceeding the long-term inflation target of 2%. This indicates that the US economy is currently operating steadily, but inflation is still some distance from the 2% target.
Complementing this economic forecast is the December PMI index: the US December Markit Services PMI flash reading 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 manufacturing PMI flash reading recorded 48.3, lower than the expected 49.5 and the previous value of 49.7. The composite PMI flash reading was 56.6, also exceeding the expected 55.1 and the previous value of 54.9. The service sector economy is experiencing the fastest growth since the lifting of the pandemic lockdown in 2021, while the underperformance of the manufacturing PMI is due to insufficient export demand.
In the "greenhouse" of the macroeconomic environment, US stocks have been steadily rising, with the Nasdaq index successfully breaking through 20,000 points. Among the Big 7 US stocks, five companies - Apple (APPL), Amazon (AMZN), Google (GOOG), Tesla (TSLA) and Meta - all set new highs in December. OpenAI's consecutive 12-day release event has also pushed AI to another peak. When the macroeconomic environment is not in crisis and the market does not have a new narrative, the market will still move in the direction of least resistance, and this direction may only be the strongest consensus on AI.
The new high in the Nasdaq is behind the "super optimistic" investor sentiment. Bank of America's December global fund manager survey found that investor sentiment was "super optimistic" in December. The report said that investor allocation to cash is at a historical low, while allocation to US stocks is at a historical high. The report said that optimism about economic growth driven by Trump's second term and Fed rate cuts has driven global risk appetite to a three-year high. Bank of America also listed Nvidia (NVDA) and other chip stocks as top investment options for 2025.
It is worth noting that the Dow Jones Index experienced a "10-day losing streak" this month, setting the worst consecutive losing record since 1974. The divergence between the Dow Jones and the Nasdaq and S&P 500 is mainly due to the difference in component stocks. This month, the healthcare giant UnitedHealth was embroiled in political turmoil, leading to a continuous sharp decline in its stock price, while Nvidia, which was newly added to the Dow Jones, performed poorly this month, contributing to the consecutive decline in the Dow Jones.
This month, there was another US stock event that caught the attention of the crypto community - MicroStrategy (MSTR) was officially included in the Nasdaq-100 index. In the WealthBee November Monthly Report, we had analyzed that MicroStrategy's "digital gold standard" strategy and capital operation model, if the market continues to rise, may become an industry pioneer, driving Bit to be recognized as a top predator asset. This month, MicroStrategy's inclusion in the Nasdaq-100 index is undoubtedly another victory for the crypto world, and also another step forward for the traditional financial world. This may just be a prelude, and there may be some bigger things happening in the crypto world in the future, which we will wait and see.
On December 5th Beijing time, Bit finally reached its historic moment - officially breaking through $100,000.
At the same time, Ethereum also broke through $4,000. It can be said that Bit breaking through the $100,000 psychological barrier has completely ignited the market sentiment.
This surge in Bit is mainly driven by political factors. We don't know if Trump will actually fulfill his promises in the crypto currency area after taking office, but at least the "emotional value" part is really pulling the market to the limit. Currently, there is a serious FOMO sentiment spreading among the general public abroad, with the proportion of crypto currency holders in South Korea already reaching 30%, equivalent to 3 out of every 10 people holding crypto currencies (data from the Bank of Korea), which is higher than the proportion of stock investors in China.
The current FOMO situation is evident to all, and institutions are making future predictions at this juncture: Bitwise, the largest crypto fund index in the US, predicts that Bit will reach $200,000 by 2025. The Bitwise team believes that Coinbase will enter the S&P 500 index, and 2025 will be an even more exuberant year than this year.
At the end of 2024, the Fed will enter a rate cut cycle, creating a more friendly macroeconomic environment for high-risk assets, and Bit will also be favored by domestic and foreign institutional liquidity, with 17 US and Japanese icon companies already announcing plans to hold or have their boards approve Bit as a reserve asset. In the first quarter of 2025, the market may continue to support high-risk trading, and capital may continue to flow into crypto assets such as Bit.
Looking ahead to 2025, the key storylines in the crypto field that are most closely watched have already emerged - the changing role of Bit in global asset allocation, where the new incremental market is, the new price ceiling, and regulation. These storylines also have new important clues worth continuing to follow.
Currently, only 0.01% of publicly listed companies hold Bit, meaning this is just the tip of the iceberg of institutional buying power, and the market is still in the "elite experiment stage". The OKX Research Institute predicts that the statistically measurable funds entering Bit in the next year will be about $2.28 trillion. This amount of funds could push the Bit price to around $200,000, which is roughly consistent with the predictions of Bernstein, BCAicon Research, and Standard Chartered Bank. The well-known Wall Street investment firm JMP Securities predicts that over the next three years, a Bit spot ETF could see inflows of up to $220 billion. Overall, institutions generally expect Bit to reach around $200,000 by 2025, and Bit is still a "non-mainstream" investment, indicating that the incremental market is still unimaginably large.
During the 2024 bull run, Bit added value to multi-asset investment portfolios, but it is still a highly volatile and risky asset. Citi analysts say that the returns on crypto assets need to be several percentage points higher than the expected returns on stocks to justify a 1% portfolio allocation, and if the allocation is larger, the returns on crypto assets need to be much higher. Therefore, the allocation of Bit in the portfolio may still be relatively low, but for investors seeking high-risk, 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 Bit prices. With the inauguration of Trump, regulation will be the main theme of 2025. The US will reach a critical moment in establishing regulatory clarity for the crypto industry, and bipartisan support for crypto assets means that regulation is likely to shift from a hindrance to a driver. The EU's Crypto Asset Markets (Mica) regulation will be fully implemented in 2025, unifying member states' crypto regulations. Japan and South Korea in Asia are also continuing to encourage innovation while increasing regulation of exchanges and wallet service providers. Clarity in global regulation will help attract more institutional and individual investors to the market.
In addition to Bit, institutions predict that AI and stablecoins will be new highlights in 2025. Many banks are envious of the profits of USDT and are choosing to enter the market. According to Bloomberg, Societe Generale, Oddo BHF, Revolut, and even the Hong Kong Monetary Authority in China have all started to layout the stablecoin market, hoping to get a share of this field. Stablecoins may be the tool with the most prominent application scenarios in the crypto world, and this may be a key step for the crypto world to break out and become a new consensus.
In the current bullish market sentiment, even the most optimistic predictions seem so reasonable. However, we need to understand that even if the future is bright, the road is still full of thorns, and we also need to pay attention to the risks that short-term market volatility may bring. Starting from 2008, the crypto world has grown up for 16 years - by human standards, it is about to enter the "coming of age" ceremony. At the time of adulthood, Bit has become a consensus investment product in the mainstream financial circle, and stablecoins may also soon become a real application tool. The crypto market in 2025 will be more interesting than 2024!
