WealthBee 2025 Bi-Monthly Special: "Trump 2.0" Full Moon, the Market Stages "A Song of Ice and Fire"

In January and February 2025, as Trump 2.0 marked its first month in office, on one hand, the curtain was raised on Trump 2.0, with a wave of policy dividends, while on the other hand, the U.S. stock market, influenced by DeepSeek, faced a huge impact on the AI sector, triggering a series of financial avalanches. Especially in February, as key economic data was released, regulatory frameworks were adjusted, and technological iterations accelerated, the cryptocurrency market continued to experience turbulence, baptism, and reconstruction.

In February 2025, the U.S. macroeconomic situation underwent many changes, with a series of key economic indicators declining. At the same time, after Trump took office, he vigorously promoted the policy of increasing import tariffs, and these two factors intertwined, having a profound impact on the U.S. and global economy, triggering turmoil in global markets.

Although the U.S. fourth-quarter GDP revision maintained a robust growth rate of 2.3%, multiple indicators suggested that the U.S. economy had entered a "low growth channel," especially with the cooling of the labor market: in February, non-farm payrolls added 187,000 jobs, below the expected 200,000, and the month-on-month growth rate of hourly wages slowed to 0.2%, the lowest level since October 2023. Additionally, the University of Michigan Consumer Sentiment Index deteriorated for the rare third consecutive month, dropping to 98.3, reflecting the accumulating anxiety of residents regarding the decline in real purchasing power.

In January, the U.S. core CPI rose by 0.3% month-on-month and increased by 2.5% year-on-year, with the year-on-year growth rate decreasing by 0.1 percentage points compared to December last year, indicating a slight "cooling" of its pessimistic inflation. The annual rate of the core Personal Consumption Expenditures (PCE) price index in January was recorded at 2.6%, the lowest since June 2024, in line with market expectations, and was one of the few pieces of good news.

However, moving forward, the tariff war will become the biggest uncertainty factor for U.S. inflation. The Trump administration announced a 10% tariff on imported goods from Mexico and Canada (effective March 4), directly raising costs for key categories such as automobiles and agricultural products. According to estimates from the Cleveland Fed model, this policy could raise the U.S. CPI by an additional 0.3-0.5 percentage points in the second quarter.

Source: CME

Source: CME

In terms of interest rates, it is currently widely expected that the Federal Reserve's policy rate will remain unchanged for the time being. According to CME, the probability of the Fed maintaining rates in March is 95.5%, while the probability of a 25 basis point rate cut is 4.5%. The probability of maintaining the current rate unchanged until May is 73.2%, with a cumulative probability of a 25 basis point cut at 25.8% and a cumulative probability of a 50 basis point cut at 1.1%. However, given the uncertainty of inflation and the inflationary pressures that may arise from Trump's tariff policies, the Fed's decision on rate cuts remains uncertain.

The core contradiction of the U.S. economy in 2025 lies in the tug-of-war between "slowing growth" and "inflation resilience," as the Fed attempts to balance risks through prudent monetary policy. The series of tariff increases after Trump took office not only exacerbated the complexity of this issue but also continuously impacted the pricing logic of the global supply chain, amplifying the turbulence in the global economy. Historical experience shows that trade protectionism often fails to truly resolve structural economic issues; how to find certainty in policy games will be the core proposition for the global market in the next six months.

In the first two months of 2025, the hottest topic in the AI field is undoubtedly the emergence of DeepSeek, and the biggest impact DeepSeek has had on the U.S. stock market is undoubtedly breaking the previous market expectations for the future narrative of AI.

As the AI market has developed, bubbles have become inevitable. DeepSeek has punctured some of the AI bubbles, as its open-source model significantly reduces computational power dependence through algorithm optimization, driving the industry from a "computational power race" to a "algorithm efficiency" transformation, reshaping the market's demand logic for AI infrastructure. For example, DeepSeek-V3 completed training using only 2048 H800 GPUs, while traditional models required tens of thousands of similar chips, directly shaking the "moat" narrative supported by high capital expenditures of U.S. tech giants.

The impact of DeepSeek, combined with concerns over global supply chain turmoil triggered by Trump's tariff policies, has hit tech stocks, the most globalized sector, the hardest, resulting in a sluggish U.S. stock market: throughout February, the Nasdaq suffered the most due to its high weight in tech stocks, plummeting 4%, erasing the gains accumulated earlier in the year and marking the worst monthly performance since April 2024; the Dow Jones, due to its large proportion of traditional industries, fell only 1.58%, while the S&P 500 fell 1.42%, positioned between the two.

As of February 28, 2025, Nasdaq 100 five-day chart, source: finance.yahoo.com/

The market's re-examination of the competitive landscape of the U.S. AI industry has become evident, directly reflected in the performance of the big 7 in the U.S. stock market. From the earnings reports, there was nothing particularly noteworthy in the latest earnings reports of the big 7, even Nvidia, which performed the best, saw investors cashing out due to not exceeding expectations significantly, leading to sell-offs. Overall, as previously mentioned, the market currently lacks a clear trading direction, and the stock performance of the big 7 shows characteristics of "month-end policy and sentiment-driven crashes," summarized in the words of a Bespoke Investment Group analyst—"Fear has become a collective sentiment."

In this environment of low market sentiment, crypto assets have also inevitably become innocent victims. Dow Jones market data shows that the six-month rolling correlation between Bitcoin and Nasdaq recently rose to 0.5, a new high since 2023, indicating that the volatility of the U.S. stock market is intensifying, and the impact on the crypto market is becoming more pronounced. Once the stock market experiences fluctuations or panic due to unexpected variables like DeepSeek, investors' risk appetite decreases, and they withdraw funds from risk assets in the crypto market, which can easily lead to downward pressure on crypto prices. This chain reaction highlights the market's "over-defense" mentality towards the impact of DeepSeek and policy uncertainty.

With the rise of Trump, the "crypto president," the new U.S. government's crypto policy has shifted from campaign promises to substantive actions. It is often said that "a new official brings three fires," and currently, the hottest fire Trump is igniting is likely the announcement on January 18, when he tweeted about the sale of the official Meme token—$TRUMP.

The market cap of $TRUMP once exceeded $14.5 billion, followed by a subsequent drop of 60%. This wave of market frenzy has made some people wealthy through speculation while causing significant asset shrinkage for others. A deeper insight from this event is that cryptocurrencies are radiating from the financial sector to the political arena. If the U.S. SEC's approval of a Bitcoin spot ETF is a milestone for cryptocurrencies entering traditional finance, then Trump's issuance of a token is a testament to cryptocurrencies entering the political sphere, as he directly converts political influence into market liquidity through operations like "token swaps," demonstrating the potential of crypto assets as a new political tool. Whether it is various U.S. states competing to promote Bitcoin reserve bills or the EU's MiCA framework accelerating the compliance process, behind the global regulatory game, the important thread of "code is power" runs throughout.

In addition to Trump's token issuance, the crypto community is also closely monitoring the extent of policy fulfillment. After the new U.S. government took office, the crypto sector welcomed many favorable developments, such as the establishment of a cryptocurrency working group, drafting new digital asset regulatory plans, and exploring the establishment of a national cryptocurrency reserve. Meanwhile, the SEC's repeal of SAB 121 allows banks to custody digital assets after additional guidance from regulators. As a result, Bitcoin prices rose positively, with a month-on-month increase of 9.5% at the end of January. However, subsequent news about DeepSeek and tariffs impacted the market, and by February, the crypto market experienced a historic adjustment, with Bitcoin falling below $100,000, down 17.39% in February, closing at around $85,000, with the monthly decline concentrated in the last week of the month. This wave of plummet did not have a single independent cause; rather, it resembled a chain reaction of risk asset sell-offs under the impact of Trump's tariff policies, as well as the self-purification effect of the market after excessive leverage.

It is worth noting that Bitcoin still demonstrated some resilience during this wave of turbulence, while other alternative coins were more deeply affected by negative events within the market. Ethereum was dragged down by the Bybit incident, hitting a year-to-date low, and Solana also experienced significant fluctuations due to the political token issuance controversy. In mid to late February, some institutions viewed this short-term volatility as a long-term allocation window. For example, Strategy (formerly MicroStrategy) spent $1.99 billion to purchase 20,356 Bitcoins at an average price of $97,514 each from February 18 to 23. The gaming company Boyaa Interactive also announced on February 28 that the group further increased its Bitcoin holdings, acquiring about 100 Bitcoins for approximately $7.95 million, with a purchase cost of about $79,495 each.

If we extend the timeline, we find that since last year, the price trends of gold and Bitcoin have increasingly converged. Throughout 2024, the overall volatility of the two showed a certain degree of correlation. In February this year, gold prices also fell over $100 within a week after reaching a historical high of $2,942 per ounce. Previously, WealthBee analyzed the moderate linear correlation between Bitcoin prices and gold prices in 2023 (see: Crossing a 10-Year Cycle: 6 Charts to Understand the Correlation Between Bitcoin Prices and Mainstream Asset Trends), and we analyzed that Bitcoin was still positioned as a risk investment. The situation has now changed, with the price fluctuations of the two closely linked, indicating that Bitcoin's "digital gold" nature is becoming increasingly evident, fundamentally because they are both seen as alternatives to fiat currency. As the global economic situation and geopolitical landscape continue to evolve, the prices of the two may maintain a certain degree of correlation.

The current crypto market is caught in a kind of news vacuum, with the marginal effects of traditional narratives (such as halving cycles and ETF fund inflows) diminishing. From the signals released at the recently concluded Hong Kong Consensus Conference, although there is a lack of explosive narratives in the short term, three major trends are quietly reshaping the market: first, the transformation of regulatory paradigms, with a pro-crypto majority in the U.S. Congress pushing the FIT21 bill, and the SEC reducing the size of its enforcement division, shifting regulation from suppression to guidance, clearing obstacles for institutional entry; second, the crypto market in 2025 is at a critical turning point from "policy arbitrage" to "value creation," and from "speculation-driven" to "technology-driven"; finally, the integration of AI and crypto may become the most noteworthy new breakthrough. If the AI sector begins to rebound and integrates with the crypto market, new narratives may emerge. As the market completes the clearing of leverage and the collaborative narrative of AI and crypto takes shape, a new upward breakout may already be on the horizon. Historical experience repeatedly verifies that new dawns often emerge in the darkest moments interwoven with fervor and fear.

With Trump completing a month in office, the market has entered a chaotic period, with complexity far exceeding previous times. The crypto space has also been affected by this uncertainty, experiencing rare frequent fluctuations. Although the inherent weaknesses of human nature have sown the seeds of risk in the market, Bitcoin's immutable scarcity has never wavered, endowing it with a resilient vitality that penetrates the cyclical fog. As stated in "A Song of Ice and Fire": "Chaos isn't a pit, chaos is a ladder."