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 macroeconomic greenhouse, US stocks and Bit reached new all-time 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 largely 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 between 4.25% and 4.50%, in line with expectations. However, the Federal Reserve "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 the previous 4 times to 2 times, which also led the market to expect that the Federal Reserve will not cut rates in January next year. Affected by the hawkish rate cut in the US, US stocks and the crypto market experienced a sharp decline that day.
On the day of the rate cut announcement, the Federal Reserve also released its latest economic outlook, forecasting US economic growth of 2.5% and 2.1% for this year and next year respectively, 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% for this year and next year respectively, 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 preliminary value reached 58.5, exceeding the market expectation of 55.8 and higher than the previous value of 56.1. However, the manufacturing PMI preliminary value 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 service 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 macroeconomic "greenhouse", 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 conference this month has also pushed AI to another peak. When the macroeconomic environment is crisis-free and the market has no new narratives, the market will still move in the direction of least resistance, and this direction may only be the strongest consensus - AI.
The new high in the Nasdaq is driven by "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 Federal Reserve rate cuts has pushed global risk appetite to a three-year high. Bank of America also listed chip stocks like Nvidia (NVDA) as top investment options for 2025. The highly optimistic market sentiment has created the current prosperity of the US stock market, but it has also added the possibility of a crash due to a "black swan" event in the complex and chaotic financial system.
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 of the Dow Jones from the Nasdaq and S&P 500 is mainly due to the difference in component stocks. This month, the healthcare giant UnitedHealth was embroiled in a political storm, leading to a continuous sharp decline in its stock price, while Nvidia, which was newly added to the Dow Jones, also performed poorly this month, contributing to the consecutive decline of the Dow Jones.
Another US stock event of interest to the crypto community this month was the formal inclusion of MicroStrategy (MSTR) 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 could become an industry pioneer and drive Bit to be recognized as a top-tier predator asset if the market continues to rise. This month, MicroStrategy's inclusion in the Nasdaq 100 index is undoubtedly another victory for the crypto world and further progress for the traditional financial world. This may just be a prelude, and there may be even bigger things to come in the future crypto world, which we await with anticipation.
On December 5th Beijing time, Bit finally reached a historic milestone - 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 on cryptocurrencies after taking office, but at least the "emotional value" part is truly pulling the market. Currently, there is a serious FOMO sentiment among the general public abroad, with the proportion of cryptocurrency holders in South Korea already reaching 30%, equivalent to 3 out of every 10 people holding cryptocurrencies (according to data from the South Korean central bank), which is higher than the proportion of stock investors in China.
The current FOMO situation is evident to all, and institutions are making forecasts for the future: the largest US crypto fund index Bitwise 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 Federal Reserve will enter a rate cut cycle, creating a more favorable macroeconomic environment for high-risk assets, and Bit will also be favored by domestic and foreign institutional liquidity, with 17 US and Japanese listed 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, several key storylines in the crypto field 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 currently also have new important clues worth continued attention.
Currently, only 0.01% of listed companies globally hold Bit, meaning this is just the tip of the iceberg of institutional buying power, and the market is still in the "elite experimentation stage". OKX Research Institute predicts that the statistically measurable capital entering Bit in the next year will be about $2.28 trillion. This capital volume could push the Bit price to around $200,000, roughly consistent with the forecasts of Bernstein, BCA Research and Standard Chartered financial institutions. The well-known Wall Street investment firm JMP Securities also predicts that over the next three years, the capital inflow into Bit spot ETFs could reach as high as $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 provided value to multi-asset portfolios, but it remains a highly volatile and risky asset. Citi analysts stated that the returns of crypto assets need to be several percentage points higher than the expected returns of stocks to justify a 1% portfolio allocation, and if the allocation is larger, the returns of 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 its allocation appropriately.
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 in 2025. The United States will reach a critical moment in establishing regulatory clarity for the crypto industry, and the bipartisan support for crypto assets means that regulation is likely to shift from a hindrance to a driving force. The EU's Mica (Crypto Asset Markets Regulation) will be fully implemented in 2025, unifying the crypto regulations of member states. Japan and South Korea in Asia are also continuing to encourage innovation while increasing regulation of exchanges and wallet service providers. Regulatory clarity globally will help attract more institutional and individual investors to the market.
In addition to Bit, institutions predict that AI and stablecoins will be the new highlights in 2025. Many banks are eyeing 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 begun to layout the stablecoin market, hoping to get a share in 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 further break out and become a new consensus.
In the current bullish market sentiment, even the most optimistic forecasts seem so reasonable. However, we need to understand that even if the future is bright, the path 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 in 2024.
