In January and February 2025, Trump 2.0 was in office for a full month. On the one hand, Trump 2.0 kicked off and the policy dividends surged. On the other hand, under the influence of DeepSeek, the US stock market suffered a huge impact on the AI main line, triggering a series of financial avalanches. Especially in February, with the interweaving of the three major forces of key economic data landing, regulatory framework adjustment and accelerated technology iteration, the crypto market also continued to experience shocks, baptisms and reconstruction.
In February 2025, the U.S. macroeconomic situation underwent many changes, and a series of key economic indicators declined. At the same time, after Trump came to power, he vigorously implemented the policy of increasing import tariffs. These two factors were intertwined, which had a profound impact on the U.S. and even the global economy, causing global market fluctuations.
Although the revised GDP of the United States in the fourth quarter maintained a healthy growth rate of 2.3%, a number of indicators suggest that the US economy has entered a slow growth channel, especially the cooling of the labor market: non-agricultural employment increased by 187,000 in February, lower than the expected 200,000, and the month-on-month growth rate of hourly wages slowed to 0.2%, the lowest level since October 2023. In addition, the University of Michigan Consumer Confidence Index deteriorated for a rare third consecutive month, falling to 98.3, reflecting the accumulation of residents anxiety about the decline in actual purchasing power.
In January, the US core CPI rose by 0.3% month-on-month and 2.5% year-on-year, down 0.1 percentage point from December last year, indicating that its pessimistic inflation has slightly cooled down. The US core personal consumption expenditure (PCE) price index in January recorded an annual rate of 2.6%, the lowest since June 2024, in line with market expectations and one of the few good news.
But going forward, the tariff war will become the biggest uncertainty factor for U.S. inflation. The Trump administration announced a 10% tariff on Mexican and Canadian imports (effective March 4), which directly pushed up the costs of key categories such as automobiles and agricultural products. According to the Cleveland Fed model, this policy may increase the U.S. CPI by an additional 0.3-0.5 percentage points in the second quarter.
In terms of interest rates, it is generally expected that the Feds policy rate will remain unchanged for the time being. According to CME, the probability of the Fed keeping interest rates unchanged in March is 95.5%, and the probability of a 25 basis point rate cut is 4.5%. The probability of maintaining the current interest rate unchanged by May is 73.2%, the probability of a cumulative 25 basis point rate cut is 25.8%, and the probability of a cumulative 50 basis point rate cut is 1.1%. However, given the uncertainty of inflation and the possible inflationary pressure brought about by Trumps tariff policy, the Feds decision to cut interest rates is still uncertain.
The core contradiction of the US economy in 2025 lies in the tug-of-war between slowing growth and inflation resilience. The Federal Reserve attempts to balance risks through prudent monetary policy, and a series of tariff increases by Trump after he took office have not only exacerbated the complexity of this issue, but also continued to impact the pricing logic of the global supply chain, amplifying the turmoil of the global economy. Historical experience shows that trade protectionism is often difficult to truly solve structural economic problems. How to find certainty in policy games will be the core proposition of the global market in the next six months.
In the first two months of 2025, the hottest topic in the field of AI was the emergence of DeepSeek. The biggest impact of DeepSeek on the US stock market was undoubtedly breaking the markets previous expectations for the future of AI narratives.
As AI market develops to this day, bubbles are inevitable. DeepSeek has punctured some of the bubbles in AI. Its open source model significantly reduces the reliance on computing power through algorithm optimization, driving the industry to transform from computing power competition to algorithm efficiency, and reshaping the market demand logic for AI infrastructure. For example, DeepSeek-V3 only uses 2048 H800 GPUs to complete training, while traditional models require tens of thousands of similar chips, which directly shakes the moat narrative supported by high capital expenditures of US tech giants.
The impact of DeepSeek, coupled with concerns about global supply chain turmoil caused by Trumps tariff policy, has hit technology stocks, as the most globalized sector, the hardest, and the entire U.S. stock market is sluggish: throughout February, the Nasdaq was hit hardest due to its high weight in technology stocks, plummeting 4%, wiping out the accumulated gains for the year and creating the worst monthly performance since April 2024; the Dow Jones Industrial Average was relatively resistant to declines due to its large proportion of traditional industries, with a cumulative decline of 1.58%, while the SP 500 was between the two, down 1.42%.
Nasdaq 100 five-day chart as of February 28, 2025. Source: finance.yahoo.com/
The markets re-examination of the competitive landscape of the U.S. AI industry has become explicit, which is directly reflected in the performance of the big 7 U.S. stocks. From the financial reports, there is nothing particularly noteworthy in the latest financial reports of the big 7 U.S. stocks. Even Nvidia, which has the most outstanding performance, has not significantly exceeded expectations, causing investors to take profits and trigger a sell-off. In general, as mentioned earlier, the market currently has no clear trading direction. The performance of the big 7 stock prices shows the characteristics of a sharp drop led by policies and emotions at the end of the month. To sum it up in one sentence from an analyst at Bespoke Investment Group - Looking around, fear has become a collective emotion.
In this environment of depressed market sentiment, crypto assets are inevitably innocent victims. Dow Jones market data shows that the six-month rolling correlation index between Bitcoin and Nasdaq has recently risen to 0.5, a new high since 2023, which means that the volatility of US stocks has intensified, and the crypto market has been increasingly affected by it. Once the stock market fluctuates or even panic spreads due to unexpected variables such as DeepSeek, investors risk appetite decreases, and they withdraw funds from the crypto market among risky assets, it is easy for the crypto market to be under downward price pressure. This chain reaction highlights the markets over-defensive mentality against the impact of DeepSeek and policy uncertainty.
With the coming to power of Trump, the crypto president, the crypto policy of the new US government has shifted from campaign promises to substantive actions. It is said that a new official starts with three things, and the most burning one of Trumps is probably on January 18, when Trump tweeted announcing the sale of the official Meme token - $TRUMP.
$TRUMPs market value once exceeded $14.5 billion, and then plummeted by 60%. This wave of crazy speculation in the market has made a group of people rich, but also caused some people to suffer a serious shrinkage of their assets. The deeper revelation of this incident is that cryptocurrencies are radiating from the financial world to the political world. If the US SECs approval of the Bitcoin spot ETF is a milestone for cryptocurrencies to enter the traditional financial world, then Trumps coin issuance is a witness to cryptocurrencies entering the political world. Through operations such as token swaps, it directly converts political influence into market liquidity, showing the potential of crypto assets as a new political tool. Whether it is the competition among multiple states in the United States to promote the Bitcoin Reserve Act, or the EU MiCA framework to accelerate the compliance process, the important clue of code is power runs through the global regulatory game.
In addition to Trumps currency issuance, the crypto community is also paying close attention to the extent to which his policies are fulfilled. After the new U.S. government took office, the crypto field ushered in many positive news, such as the establishment of a cryptocurrency working group, the formulation of a new digital asset regulatory plan, and the exploration of the establishment of a national cryptocurrency reserve. At the same time, the SEC revoked SAB 121, allowing banks to custody digital assets after regulators issue additional guidance. Affected by this, the price of Bitcoin rose positively, with a month-on-month increase of 9.5% at the end of January. However, the Deepseek news and tariff-related news subsequently hit the market. In February, the crypto market experienced an epic adjustment, with Bitcoin falling below $100,000, falling 17.39% in February and closing at the $85,000 mark. The decline for the whole month was concentrated in the last week of the month. This wave of plunges did not have an independent and single main cause, but was more like the fluctuations of the chaotic market itself. It was both a chain reaction of the sell-off of risky assets under the impact of Trumps tariff policy and the self-purification force of the market after excessive leverage.
It is worth noting that Bitcoin still showed a certain resilience in this wave of fluctuations. Other alternative currencies were affected by negative events in the market, and most of them fell more deeply. Ethereum hit its low point of the year due to the Bybit incident, and Solana also fluctuated sharply due to the political coin issuance storm. In mid-to-late February, some institutions regarded this short-term fluctuation as a long-term configuration window. For example, Strategy (formerly MicroStrategy), from February 18 to 23, Strategy spent $1.99 billion to purchase 20,356 bitcoins at an average price of $97,514 per bitcoin. Game company Boyaa Interactive also announced on February 28 that the group further increased its holdings of bitcoins, purchasing about 100 bitcoins for about $7.95 million, with a purchase cost of about $79,495 per bitcoin.
If we extend the timeline, we will find that the price trends of gold and Bitcoin have become increasingly similar since last year. Throughout 2024, the overall fluctuations of the two showed a certain synergy. In February of this year, the price of gold also hit a record high of $2,942 per ounce and then plummeted by more than $100 in a week. Previously, WealthBee analyzed the moderate linear correlation between Bitcoin prices and gold prices in 2023 (see: Across a 10-year cycle, 6 pictures to understand the correlation between Bitcoin prices and mainstream asset trends such as US stocks ). At that time, we analyzed that Bitcoin was still positioned as a venture capital. Now the situation has changed, and the price fluctuations of the two are closely linked, which means that the digital gold nature of Bitcoin has become more and more obvious. The fundamental reason is that they are both regarded as substitutes for credit currencies. As the global economic situation and geopolitical situation evolve further, the prices of the two may continue to maintain a certain degree of linkage.
The current crypto market is in a news vacuum, and the marginal effect of traditional narratives (such as halving cycles and ETF capital inflows) is decreasing. Judging from the signals released by all parties at the Hong Kong Consensus Conference that ended not long ago, although there is a lack of explosive narratives in the short term, three major trends are quietly reshaping the market: first, the regulatory paradigm shift, the pro-crypto majority in the US Congress promotes the FIT21 Act, the SEC reduces the size of the law enforcement department, and the regulation shifts from suppression to guidance, clearing the way 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 encryption may become the most noteworthy new breakthrough. If the AI sector begins to rebound and is combined with the crypto market, a new narrative may also emerge. When the market completes leverage clearance and the collaborative narrative of AI and encryption takes shape, a new round of upward breakthrough may be imminent. Historical experience has repeatedly verified that a new dawn is often bred in the darkest moments of fanaticism and fear.
A month after Trump took office, the market has entered a period of chaos, with far greater complexity than before. The cryptocurrency market has also been affected by this uncertainty, experiencing rare and frequent fluctuations. Although the inherent weaknesses of human nature have planted the seeds of risk in the market, the immutable and scarce nature of Bitcoin has never wavered, and has given it the tenacious vitality to penetrate the cyclical fog. As A Song of Ice and Fire said: Chaos isnt a pit, chaos is a ladder.
