Economic Review of December 2024 and Outlook for 2025

The U.S. economy performed steadily in December, with key economic indicators largely meeting expectations. Non-farm payrolls increased by 227,000 in November, slightly better than market expectations; the CPI rose 2.7% year-on-year and 0.3% month-on-month in November, both in line with expectations. The Federal Reserve lowered the target range for the federal funds rate by 25 basis points to 4.25%-4.50% as expected. However, the Fed indicated that the rate cuts in 2025 may be narrowed to 50 basis points, which means the number of cuts may decrease from the previously expected four to two, causing short-term market fluctuations.

The Federal Reserve's latest economic forecast shows that the growth rate of the U.S. economy is expected to be 2.5% and 2.1% for 2024 and 2025, respectively, which is an upward adjustment from the September forecast. The unemployment rate is expected to be 4.2% and 4.3%, respectively, which is a downward adjustment from previous forecasts. The inflation rate forecast remains above the long-term target of 2%, indicating that while the economy is operating steadily, inflation still needs further improvement.

The December PMI data is a mixed bag. The preliminary services PMI reached 58.5, far exceeding expectations, indicating that the service sector is experiencing its fastest growth since the pandemic. However, the preliminary manufacturing PMI was 48.3, below expectations, mainly affected by insufficient export demand.

In a favorable macro environment, the US stock and cryptocurrency markets have performed remarkably. The Nasdaq index has surpassed 20,000 points, with several tech giants' stock prices reaching all-time highs. Bitcoin's price has first broken the $100,000 mark, and Ethereum has also surpassed $4,000. Investor sentiment is generally optimistic, with a Bank of America survey showing that investor allocation to US stocks is at a historical high.

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 structural differences in the constituent stocks, particularly the significant drop in the stock price of healthcare giant UnitedHealth.

Looking ahead to 2025, institutions generally hold an optimistic attitude. Several organizations predict that the price of Bitcoin could reach around $200,000. The main driving factors include increased participation from institutional investors, the establishment of new regulatory frameworks, and improvements in the macroeconomic environment.

Key highlights in the cryptocurrency space for 2025 include: the changing role of Bitcoin in global asset allocation, the emergence of new incremental markets, new price ceilings, and the development of the regulatory environment. Currently, only 0.01% of publicly listed companies hold Bitcoin, indicating significant potential for institutional investment.

In terms of regulation, the United States may be approaching a critical moment to establish a clear regulatory framework for the cryptocurrency industry. The European Union's "Regulation on Markets in Crypto-Assets" will come into full effect in 2025. Asian countries such as Japan and South Korea are also continuing to refine their relevant regulations. The clarity of regulation on a global scale is expected to attract more investors.

Apart from Bitcoin, artificial intelligence and stablecoins may become new highlights in the crypto market by 2025. Several traditional financial institutions are actively positioning themselves in the stablecoin market, indicating that cryptocurrencies may further integrate into the mainstream financial system.

Although the outlook is optimistic, investors still need to be wary of the risks brought by short-term market fluctuations. The crypto market is about to reach its "coming of age" moment, and Bitcoin is expected to become a consensus investment in the mainstream financial circle, while stablecoins may become practical application tools. The development of the crypto market in 2025 is worth looking forward to.