Economic Review of December 2024 and Outlook for the 2025 Crypto Market

The US economy remained stable in December, with major economic indicators generally meeting expectations. However, the Federal Reserve's hawkish remarks intensified short-term market volatility. Nevertheless, US stocks and Bitcoin both reached historical highs, providing substantial returns for investors. Looking ahead to 2025, the majority of institutions hold an optimistic outlook, anticipating that Bitcoin may break through the $200,000 mark.

In November, the number of non-farm jobs in the United States increased by 227,000, slightly above the market expectation of 220,000. In the same month, the CPI rose by 2.7% year-on-year and by 0.3% month-on-month, both in line with expectations. The Federal Reserve subsequently announced a reduction of the federal funds rate target range by 25 basis points to 4.25%-4.50%, in line with market expectations. However, the Federal Reserve indicated that the rate cut in 2025 may narrow to 50 basis points, which means that the number of rate cuts in 2025 could be reduced from the previously expected 4 times to 2 times, also suggesting that there may not be a rate cut in January next year. This statement triggered short-term fluctuations in the market.

The Federal Reserve's latest economic forecast shows that the U.S. economic growth rate is expected to be 2.5% and 2.1% for this year and next, respectively, both up from the September forecast. The unemployment rate is expected to be 4.2% and 4.3%, down from previous predictions. The inflation rate is forecasted to be 2.4% and 2.5%, while the core inflation rate is expected to be 2.8% and 2.5%, all exceeding the long-term target of 2%. This indicates that the U.S. economy is running smoothly, but inflation still needs further control.

The December PMI data shows that the service sector PMI preliminary value reached 58.5, higher than expected and previous values, reflecting that the service sector is experiencing the fastest growth since the pandemic was lifted in 2021. The manufacturing PMI preliminary value is 48.3, lower than expected and previous values, mainly affected by insufficient export demand. The composite PMI preliminary value is 56.6, exceeding expectations and previous values.

Against the backdrop of a relatively stable macroeconomic environment, U.S. stocks have steadily risen, with the Nasdaq index breaking through 20,000 points. Several tech giants' stock prices have reached historical highs. The continued progress in the field of artificial intelligence has further fueled market enthusiasm. Investor sentiment is generally optimistic, with allocations to U.S. stocks at historical highs, but this may also increase the market's sensitivity to black swan events.

It is worth noting that the Dow Jones Index has experienced a rare "ten consecutive declines," marking the worst streak since 1974. This is mainly due to the structural differences in its constituent stocks, particularly the political turmoil surrounding major players in the healthcare sector and the weak performance of newly added constituent stocks.

The crypto market has also seen significant breakthroughs, with the price of Bitcoin first breaking through the $100,000 mark and Ethereum surpassing $4,000. Political factors have become the main driving force behind this round of price increases. Global investors generally exhibit a strong bullish sentiment, with the proportion of cryptocurrency holders in South Korea reaching 30%.

Multiple institutions are optimistic about the crypto market in 2025. Some analyses predict that Bitcoin could reach $200,000 by 2025. It is expected that the Federal Reserve will enter a rate-cutting cycle by the end of 2024, which will create a more favorable environment for high-risk assets. Currently, only 0.01% of listed companies globally hold Bitcoin, indicating that there is still significant growth potential for institutional investment.

Looking ahead to 2025, key topics in the encryption field include the changing role of Bitcoin in global asset allocation, exploration of new incremental markets, breakthroughs in price ceilings, and the evolution of the regulatory environment. Regulation is expected to become a major theme in 2025, with greater clarity in regulations worldwide likely to attract more institutional and individual investors.

Apart from Bitcoin, artificial intelligence and stablecoins may become the new highlights of the crypto market in 2025. Several traditional financial institutions have begun to lay out plans for the stablecoin market, which could be a key step in further integrating encryption technology into the mainstream financial system.

Although the market outlook is generally optimistic, investors still need to be wary of short-term volatility risks. The crypto market is about to迎来 its "成人礼", and Bitcoin is expected to become a consensus investment product in the mainstream financial circle, while stablecoins may achieve broader real-world applications. The crypto market in 2025 is expected to be more attractive and influential than in 2024.