Inferences on Policy and Economic Aspects

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The impact of policies on cryptocurrency in 2025 will be significant

Decision-making tendency: In Q1-Q2, if the market really experiences a liquidity crisis and a substantial correction occurs, it will be a good opportunity for positioning, especially for those assets that have applied for ETFs.

The primary focus for the decision-maker is to resolve domestic and foreign affairs in the United States, and only then will they address the crypto space. The decision-maker may have a long-term positive effect on mainstream cryptocurrencies, but before the policies are implemented, market sentiment may undergo a cooling period. For the overall industry, future regulatory easing will only target "mainstream assets," while numerous non-compliant tokens may face scrutiny pressure.

After the Federal Reserve lowers interest rates by 25 basis points in December 2024, it may continue to pause for a while; Q1-Q2 may present liquidity risks. If the SLR exemption is implemented, it could free up $4 trillion in bank balance sheet space, but it may exacerbate inflation expectations. The decision-maker needs to create a controllable financial crisis before Q2 2025 (through debt ceiling negotiations or a surge in fiscal deficits driving up U.S. Treasury yields) to force the Federal Reserve to pivot.

Interest rates will remain at a high level (4%), which will lead to continued liquidity challenges for risk markets in 2025. We will only see a true resurgence of hot money in the market when interest rates genuinely decline.