In January and February 2025, marking the first month of the Trump 2.0 administration, on the one hand, the policy dividends of the Trump 2.0 era have been unleashed, while on the other hand, the US stock market has suffered a huge shock to the AI sector due to the impact of DeepSeek, triggering a series of financial collapses. Particularly in February, as key economic data, regulatory framework adjustments, and accelerated technological iterations converged, the crypto market also experienced repeated shocks, baptisms, and reconstructions.
In February 2025, the US macroeconomic situation underwent various changes, with a series of key economic indicators declining, and the Trump administration's aggressive implementation of increased import tariff policies, these two factors intertwined, profoundly impacting the US and global economies, triggering market turmoil worldwide.
Although the revised Q4 GDP of the US maintained a healthy 2.3% growth rate, multiple indicators suggest the US economy has entered a "low-growth channel", particularly the cooling of the labor market: in February, non-farm new employment increased by 187,000, lower than the expected 200,000, and the year-on-year wage growth rate slowed to 0.2%, the lowest since October 2023. Additionally, the University of Michigan consumer confidence index unexpectedly deteriorated for the third consecutive month, falling to 98.3, reflecting growing public anxiety over declining real purchasing power.
In January, the US core CPI rose 0.3% month-on-month and 2.5% year-on-year, with the year-on-year growth rate down 0.1 percentage points from December, indicating a slight "cooling" of the worrying inflation. The US core personal consumption expenditures (PCE) price index in January recorded a year-on-year rate of 2.6%, a new low since June 2024, in line with market expectations, which is one of the few pieces of good news.
However, the trade war will become the biggest uncertainty factor for US inflation going forward. The Trump administration announced a 10% tariff on imports from Mexico and Canada (effective March 4), directly driving up the costs of key categories such as automobiles and agricultural products. According to the Cleveland Fed model, this policy could push the US CPI up an additional 0.3-0.5 percentage points in the second quarter.
Source: CME
Source: CME
On interest rates, it is generally expected that the Fed's policy rate will remain unchanged for now. According to CME, the probability of the Fed keeping rates unchanged in March is 95.5%, and the probability of a 25 basis point cut is 4.5%. By May, the probability of maintaining the current rate is 73.2%, the probability of a cumulative 25 basis point cut is 25.8%, and the probability of a cumulative 50 basis point cut is 1.1%. However, given the uncertainty of inflation and the potential inflationary pressure from Trump's tariff policies, the Fed's rate cut decision remains uncertain.
The core contradiction in the US economy in 2025 lies in the tug-of-war between "growth slowdown" and "inflation resilience", and the Fed is trying to balance the risks through prudent monetary policy, while Trump's series of tariff-increasing actions have not only exacerbated the complexity of this problem, but also continued to disrupt the pricing logic of the global supply chain, amplifying global economic turmoil. Historical experience shows that protectionism is often unable to truly solve structural economic problems, how to find certainty in the policy game will be the core issue for the global market in the next half year.
In the first two months of 2025, the hottest topic in the AI field was the emergence of DeepSeek, and the biggest impact of DeepSeek on the US stock market was undoubtedly the disruption of the market's previous expectations for the future of the AI narrative.
As the AI market has developed, bubbles are inevitable, and DeepSeek has burst part of the AI bubble. Its open-source model has significantly reduced the dependence on computing power through algorithm optimization, driving the industry's transformation from a "computing power race" to "algorithm efficiency", reshaping the market's demand logic for AI infrastructure. For example, DeepSeek-V3 only requires 2,048 H800 GPUs to complete training, while traditional models need tens of thousands of similar chips, directly undermining the "moat" narrative supported by the high capital expenditure of US tech giants.
The impact of DeepSeek, coupled with the global supply chain disruption concerns triggered by Trump's tariff policies, has hit the tech sector, which is the most globalized, the hardest, and the entire US stock market has been in a slump: in the entire February, the Nasdaq, with its high weighting in tech stocks, was hit the hardest, plunging 4%, wiping out its year-to-date gains and recording its worst monthly performance since April 2024; the Dow Jones, with a larger proportion of traditional industries, was relatively resilient, with a cumulative decline of 1.58%, while the S&P 500 fell in between, down 1.42%.
As of February 28, 2025, Nasdaq 100 5-day chart, source: finance.yahoo.com/
The market's re-examination of the competitive landscape of the US AI industry has become explicit, which is directly reflected in the performance of the US stock market's big 7. From the financial reports, there is nothing particularly noteworthy about the latest reports of the big 7, and even the best-performing Nvidia did not see a significant beat, leading to profit-taking by investors and triggering sell-offs. Overall, as mentioned earlier, the market currently does not have a clear trading direction, and the performance of the big 7 stocks exhibits the characteristic of "policy and sentiment-driven plunge at the end of the month", as Bespoke Investment Group analyst succinctly put it - "Fear has become a collective sentiment as far as the eye can see."
In this gloomy market sentiment, crypto assets have inevitably become innocent victims. The Dow Jones market data shows that the six-month rolling correlation between Bitcoin and the Nasdaq has recently risen to 0.5, a new high since 2023, meaning that the volatility of the stock market is increasingly affecting the crypto market. Once the stock market experiences volatility or even panic due to unexpected variables like DeepSeek, and investors' risk appetite declines, leading to capital outflows from risky assets like the crypto market, it is easy to put downward pressure on crypto prices. This chain reaction highlights the market's "over-defensive" mentality towards the impact of DeepSeek and policy uncertainties.
With the ascent of Trump, the "Crypto President", the new US administration's crypto policies have transitioned from campaign promises to concrete actions. As the saying goes, "a new official takes office and lights three fires", and the hottest fire Trump is burning right now is likely the launch of the official Meme token - $TRUMP, announced via tweet on January 18.
Here is the English translation:The market value of $TRUMP once exceeded $14.5 billion, but then plummeted by 60%. This wave of crazy speculative wealth has enriched a group of people, but has also caused serious shrinkage of assets for some. The deeper implication of this event is that crypto is radiating from the financial sector to the political sector. If the US SEC's approval of the Bitcoin spot ETF is a milestone for crypto's entry into the traditional financial sector, then Trump's issuance of a token is a witness to crypto's entry into the political sector. Through operations such as "token swaps", he directly converted political influence into market liquidity, demonstrating the potential of crypto assets as a new political tool. Whether it's the competition among multiple US states to promote Bitcoin reserve bills, or the EU's MiCA framework accelerating the compliance process, the important clue of "code is power" runs through the global regulatory game.
In addition to Trump's token issuance, the crypto circle is also closely watching the degree of policy implementation. After the new US administration took office, the crypto field has seen many positive developments, such as the establishment of a crypto working group, the formulation of a new digital asset regulatory plan, and the exploration of establishing a national crypto reserve. At the same time, the SEC's withdrawal of SAB 121 has allowed banks to custody digital assets after the regulatory agency issues additional guidance. Affected by this, the Bitcoin price has risen positively, with a month-on-month increase of 9.5% at the end of January. However, subsequent Deepseek news and tariff-related news have impacted the market, and by February, the crypto market has experienced a historic adjustment, with Bitcoin falling below $100,000, down 17.39% in February, closing at the $85,000 level, with the bulk of the monthly decline occurring in the last week. This plunge does not have a single independent cause, but is more like the volatility of the chaotic market itself, both a chain reaction of the sell-off of risk assets under the impact of Trump's tariff policy, and the self-purification force of the market after excessive leverage.
It is worth noting that Bitcoin has shown certain resilience in this turbulence, while other altcoins have been more deeply affected by negative events within the market, with Ethereum touching its annual low due to the Bybit incident, and Solana also experiencing significant fluctuations due to the political token issuance turmoil. In mid-to-late February, some institutions viewed this short-term volatility as a window for long-term allocation. For example, Strategy (formerly MicroStrategy) spent $1.99 billion to purchase 20,356 Bitcoins at an average price of $97,514 per coin between February 18 and 23. Game company Boyaa Interactive also announced on February 28 that the group had further increased its Bitcoin holdings, purchasing about 100 Bitcoins for about $7.95 million, at a cost of about $79,495 per Bitcoin.
If we extend the timeline, we will find that since last year, the price trends of gold and Bitcoin have become increasingly similar. Throughout 2024, the overall volatility of the two has shown a certain degree of synchronization, and in February this year, the gold price also plummeted by more than $100 per ounce within a week after hitting a historical high of $2,942 per ounce. Previously, WealthBee had analyzed the moderate linear correlation between Bitcoin prices and gold prices in 2023 (see: Understanding the Correlation Between Bitcoin Prices and Mainstream Assets Over a 10-Year Cycle in 6 Charts), and at the time we analyzed that Bitcoin was still positioned as a risk investment. Now the situation has changed, and the price fluctuations of the two are closely linked, indicating that the "digital gold" nature of Bitcoin is becoming more and more evident, and the fundamental reason is that they are both seen as alternatives to fiat currency. As the global economic situation and geopolitical situation continue to evolve, the two prices may continue to maintain a certain degree of linkage.
The current crypto market is in a certain informational vacuum, with the marginal effects of traditional narratives (such as halving cycles, ETF capital inflows) diminishing. Looking at the signals released by various parties 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 the regulatory paradigm, with the pro-crypto majority in the US Congress pushing the FIT21 bill, the SEC reducing the scale of its enforcement department, and regulation shifting from suppression to guidance, clearing obstacles for institutional participation; second, the crypto market in 2025 is at a critical juncture of transitioning 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 starts to rebound and becomes connected with the crypto market, new narratives may also emerge. When the market completes the deleveraging and the synergistic narrative of AI and crypto takes shape, a new round of upward breakthrough may be imminent. The experience of history repeatedly verifies that a new dawn is often nurtured in the darkest moment of frenzy and fear.
One month after Trump took office, the market has entered a chaotic period, with complexity far exceeding the past. The crypto circle has also been affected by this uncertainty, experiencing rare and frequent volatility. Although the inherent weaknesses of human nature have sown the seeds of risk in the market, the immutable scarcity of Bitcoin has never been shaken, and has endowed it with the tenacious vitality to penetrate the cyclical fog. As "A Song of Ice and Fire" says: "Chaos isn't a pit, chaos is a ladder".
