2024-2025 Market Analysis: Fed Policy, Trump Effect and Crypto Assets Outlook

The Bitcoin Halving cycle serves as a time reference, and the Fed's interest rate cut cycle was originally expected to begin in the fourth quarter of 2023. However, the government at the time influenced the US Non-farm Payrolls (NFP) by adjusting illegal immigrant employment policies and expanding the size of government employees, insisting on not cutting interest rates. To support the government's economic policies, the US Treasury issued a large amount of government bonds to raise funds, leading to a sharp decline in the 10-year Treasury yield (i.e., the market's actual interest rate), contributing to a seasonal bull run spanning the fourth quarter of 2023 and the first quarter of 2024.

In the second quarter of 2024, as the Treasury's bond issuance slows down and the systemic risks in non-US countries (such as the East Asian real estate market and the Japanese bond market) erupt, the demand for safe-haven assets surges. The US dollar, US Treasury bonds, and gold become hot assets. Coupled with the traditionally poor performance of risk markets in the second quarter, the cryptocurrency market falls into a slump.

As we enter the third quarter of 2024, in an effort to save the ruling party's electoral prospects, the Fed begins to cut interest rates. However, the yield on 10-year Treasury bonds rises sharply in the opposite direction, leading to a rare phenomenon where nominal interest rates decrease while real interest rates approach historical highs. Therefore, the market trend in the fourth quarter of 2024 is not driven by external capital but is influenced by the "Trump trade" and factors that activate the autumn market. This round of market activity began with Trump's election as president and ended with the depletion of on-chain liquidity for his eponymous meme coin.

By the first quarter of 2025, the main contradiction in the market is no longer the balance between economic data and the Fed's expectation management, but rather the divergence between the White House, government efficiency departments, and the Fed. This contradiction has far-reaching implications, coupled with the emerging AI technology challenging the United States' dominance in this field, even leading to a rapid sell-off of US Treasuries. The actual interest rate decline triggered by panic did not bring about a spring market, but instead resulted in a significant outflow of funds.

Currently, the United States is facing an unprecedented change in a century. If the reforms promoted by supporters succeed, it may allow this global power to extend a century of prosperity; if they fail, the consequences are hard to predict.

Facing such enormous systemic risks and the uncertainty of the US cryptocurrency regulatory framework in July, the major players in the crypto market, caught in a prisoner's dilemma, chose to take preemptive action and prioritize liquidity extraction.

A certain trading platform inconsistently promotes its own meme coin, another platform takes the risk of launching new projects, and many top-tier projects in the primary market have low-priced initial coin offerings, all following this logic.

The current situation is severe and not conducive to risk-taking, it is advisable to cautiously protect the principal.