WealthBee Macro Monthly Report: U.S. Hawkish Rate Cuts Trigger Uncertainty, Outlook on Key Trends in Crypto for 2025
The U.S. economy remained stable in December, with core economic data in line with expectations, but hawkish comments from the Federal Reserve intensified short-term market volatility; in the macroeconomic "greenhouse," both U.S. stocks and Bitcoin reached historic highs this month, bringing investors a year-end bonus; looking ahead to 2025, institutions are generally optimistic, believing that Bitcoin may break $200,000.
The newly released economic data for December in the U.S. was mostly in line with expectations: Non-farm payrolls increased by 227,000 in November, slightly better than the market expectation of 220,000; the November CPI rose by 2.7% year-on-year and 0.3% month-on-month, both meeting expectations. Subsequently, the Federal Reserve announced a 25 basis point cut to the federal funds rate target range, bringing it to between 4.25% and 4.50%, which was also in line with expectations. However, after announcing the rate cut, the Fed added a remark: it expects the rate cut in 2025 to be narrowed to 50 basis points. This undoubtedly dampened market sentiment, as it meant the number of rate cuts in 2025 was reduced from the previously expected four to two, leading the market to anticipate that the Fed would not cut rates in January next year. Affected by the hawkish rate cut stance from the U.S., both the stock market and the cryptocurrency market saw significant declines that day.
On the same day the Fed announced the rate cut, it also released its latest economic outlook, predicting that the U.S. economy would grow by 2.5% and 2.1% in the next two years, respectively, which was an upward revision 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% for the next two years, slightly lower than previous forecasts. The inflation rate measured by the personal consumption expenditure price index is predicted 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 operating smoothly, but inflation is still some distance from the 2% target.
Complementing this economic forecast is the December PMI index: the preliminary value of the U.S. December Markit Services PMI 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, below 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 sector is experiencing the fastest growth since the lifting of pandemic lockdowns in 2021, while the underperformance of the manufacturing PMI is attributed to insufficient export demand.
In the macroeconomic "greenhouse," U.S. stocks have been inching upward, with the Nasdaq index successfully breaking through the 20,000 point mark. Among the Big 7 U.S. stocks, Apple (AAPL), Amazon (AMZN), Google (GOOG), Tesla (TSLA), and Meta all continued to set historic highs in December. OpenAI's series of 12 consecutive days of announcements this month has also pushed AI to another peak. When there is no crisis in the macro environment and no new narratives in the market, it will still operate in the direction of least resistance, which may only be the strongest consensus around AI.
Behind the Nasdaq's new high is the "super optimistic" sentiment among investors. A Bank of America global fund manager survey in December found that investor sentiment was "super optimistic." The report stated that investors' allocation to cash is at a historical low, while their allocation to U.S. stocks is at a historical high. The report noted that optimism about economic growth related to Trump's second term and the Fed's rate cuts has pushed global risk appetite to a three-year high. Bank of America 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 worth noting that the Dow Jones Industrial Average experienced a "ten-day losing streak," setting the worst consecutive decline record since 1974. The divergence in the performance of the Dow compared to the Nasdaq and S&P 500 is mainly due to differences in constituent stocks. This month, 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 noteworthy event in the U.S. stock market this month that caught the attention of the cryptocurrency community was that MicroStrategy (MSTR) was officially added to the Nasdaq 100 index. In the WealthBee November report, we previously analyzed that MicroStrategy's "digital gold standard" strategy and capital operation model could become an industry pioneer, promoting Bitcoin's recognition as a top predator asset in a rising market. MicroStrategy's inclusion in the Nasdaq 100 index this month is undoubtedly another victory for the crypto world and a further step forward for traditional finance. This may just be a prelude to greater events happening in the future of the crypto world, and we look forward to it.
On December 5th, Beijing time, Bitcoin finally welcomed its historic moment—officially breaking through $100,000.
At the same time, Ethereum also broke through $4,000. It can be said that Bitcoin's breakthrough of the $100,000 psychological barrier has completely ignited market sentiment.
This surge in Bitcoin is primarily driven by political factors. We do not know whether Trump will truly fulfill his promises regarding cryptocurrency after taking office, but at least the "emotional value" has indeed filled the market. Currently, there is a serious FOMO sentiment among the public abroad, with the proportion of cryptocurrency holders in South Korea reaching 30%, meaning that three out of ten people hold cryptocurrencies (according to Bank of Korea data), 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 predictions at this critical moment: Bitwise, the largest cryptocurrency fund index in the U.S., predicts that Bitcoin 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 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 gained favor from domestic and foreign institutional liquidity, with 17 U.S. and Japanese listed companies already announcing plans to hold Bitcoin as a strategic asset or having board approval for it. 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, new price ceilings, and regulation. Each of these storylines currently has new important clues worth continuous attention.
Currently, only 0.01% of publicly listed companies globally hold Bitcoin, indicating that this is just the tip of the iceberg for institutional purchasing power, and the market is still in the "elite experimental stage." OKX Research Institute predicts that the statistically measurable funds entering Bitcoin within the next year will be approximately $2.28 trillion. This amount of funds could push Bitcoin's price to around $200,000, which aligns with predictions from Bernstein, BCA Research, and Standard Chartered Bank. The well-known Wall Street investment firm JMP Securities predicts that in the next three years, Bitcoin spot ETFs could see inflows of up to $220 billion. Overall, institutions generally expect Bitcoin to reach around $200,000 in 2025, while Bitcoin is still considered 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 a portfolio; if the allocation is larger, the return on cryptocurrencies must be much higher. Therefore, the allocation of Bitcoin in portfolios may still be relatively low, but for investors seeking high risk and high returns, 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 taking office, regulation will become a major theme in 2025. The U.S. is expected to reach a critical moment in establishing regulatory clarity for the crypto industry, with bipartisan support for cryptocurrencies indicating that regulation is likely to shift from being a hindrance to a driving force. The EU's Markets in Crypto-Assets Regulation (MiCA) will come into full effect in 2025, unifying cryptocurrency regulations among member states. Japan and South Korea in Asia are also continuing to encourage innovation while increasing regulatory scrutiny on 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. Many banks are envious of the profits from Tether (USDT) and are choosing to enter the market. According to Bloomberg, Société Générale, Germany's Oddo BHF, the UK's Revolut, and even Hong Kong's Monetary Authority in China have begun to lay out plans in the stablecoin market, hoping to get a piece of the pie. Stablecoins may be the most demonstrably applicable tool in the crypto space, which has become a key step for the crypto world to further break into new consensus.
In the currently rising market sentiment, even the most optimistic predictions seem reasonable. However, we need to understand that even if the future is bright, the road ahead is still fraught with thorns, and we must be cautious of the risks that short-term market fluctuations may bring. Since 2008, the crypto world has grown robustly for 16 years—by human age standards, it is about to enter "adulthood." At this coming of age, Bitcoin has become a consensus investment in the mainstream financial circle, and stablecoins may soon become a truly practical application tool. The crypto market in 2025 will be more exciting than in 2024!
