Economic Review of December 2024 and Outlook for 2025

The U.S. economy showed steady performance in December, with core economic indicators generally meeting expectations. However, the Federal Reserve's hawkish remarks intensified short-term market volatility. Nevertheless, both the U.S. stock market and Bitcoin reached historic highs, providing investors with substantial year-end returns. Looking ahead to 2025, most institutions maintain an optimistic outlook, expecting Bitcoin to potentially break the $200,000 mark.

The economic data released in December by the United States generally met expectations: Non-farm payrolls increased by 227,000 in November, slightly higher than the market expectation of 220,000; the CPI in November rose by 2.7% year-on-year and 0.3% month-on-month, both in line with expectations. Subsequently, the Federal Reserve announced a 25 basis point reduction in the target range for the federal funds rate to between 4.25% and 4.50%, which was in line with market expectations. However, the Fed subsequently indicated that the magnitude of rate cuts in 2025 may narrow to 50 basis points, suggesting that the number of rate cuts in 2025 may decrease from the previously expected 4 times to 2 times, also implying that there may not be a rate cut in January next year. This statement had a significant impact on the market, leading to a sharp decline in both the stock market and the cryptocurrency market on that day.

The Federal Reserve announced the latest economic outlook while also declaring interest rate cuts. It forecasts that the U.S. economy will grow by 2.5% and 2.1% in the next two years, which is an upward adjustment of 0.5 and 0.1 percentage points compared to the September forecast. The unemployment rate is expected to be 4.2% and 4.3%, slightly down from previous predictions. The inflation rate, measured by the Personal Consumption Expenditures Price Index, is forecasted to be 2.4% and 2.5%, while the core inflation rate is expected to be 2.8% and 2.5%, both exceeding the long-term inflation target of 2%. This indicates that the U.S. economy is running smoothly, but inflation still needs further control.

The December PMI index also reflects the complex situation of the economy: the preliminary value of the services PMI reached 58.5, far exceeding the expected 55.8 and the previous value of 56.1; the preliminary value of the manufacturing PMI was 48.3, below the expected 49.5 and the previous value of 49.7; the comprehensive preliminary PMI was 56.6, higher than the expected 55.1 and the previous value of 54.9. The service industry is experiencing the fastest growth since the lifting of the pandemic lockdown in 2021, while the manufacturing PMI fell short of expectations mainly due to insufficient export demand.

Against the backdrop of a relatively stable macroeconomic environment, the US stock market has shown a steady upward trend, with the Nasdaq index breaking through 20,000 points. Several tech giants such as Apple, Amazon, Google, Tesla, and Meta reached historical highs in December. The continued progress in the field of artificial intelligence has also injected new momentum into the market.

It is worth noting that the Dow Jones Index has experienced a "ten consecutive declines" this month, setting the worst consecutive decline record since 1974. This is mainly due to the differences in the composition of its constituent stocks, particularly the political turmoil surrounding healthcare giant UnitedHealth and the weak performance of newly added NVIDIA.

In December, Bitcoin broke through the $100,000 mark, and Ethereum also surpassed $4,000, igniting market sentiment. This surge was mainly driven by political factors, particularly expectations regarding potential policies from Trump. Data from the Bank of Korea shows that the proportion of cryptocurrency holders in the country has reached 30%, reflecting a global "fear of missing out" sentiment.

Looking ahead to 2025, key trends in the cryptocurrency space include the changing role of Bitcoin in global asset allocation, the emergence of new incremental markets, breakthroughs in price ceilings, and the evolution of the regulatory environment. Institutions generally expect Bitcoin to reach around $200,000 by 2025. A clearer regulatory environment may act as a driving force rather than a hindrance.

Apart from Bitcoin, artificial intelligence and stablecoins are expected to be the highlights of 2025. Several traditional financial institutions have begun to enter the stablecoin market, which could be a key step for cryptocurrencies to further integrate into the mainstream financial system.

Despite the optimistic outlook, investors must remain vigilant about the risks posed by short-term market fluctuations. The cryptocurrency industry is about to reach its "coming-of-age" moment, with Bitcoin expected to become a consensus investment in mainstream finance, and stablecoins potentially becoming practical application tools. The crypto market in 2025 is expected to be even more exciting than in 2024.