The market has opened 2025 amid a series of unfavorable beginnings and unresolved price movements. Under the shocking market narrative of DeepSeek and Trump's occasional tariff threats, risk assets are struggling to find direction.
Economic data is currently of secondary importance; January's non-farm payroll data came in slightly below expectations, but the unemployment rate also dropped to 4%, resulting in a muted market reaction. Federal funds futures currently price in only a 9% chance of a rate cut at the March FOMC meeting, with a complete rate cut priced in only after five meetings in September, weakening the Fed's influence in the current narrative.
On the other hand, the unpredictability of tariff policy continues. Trump announced today (Monday) that he will impose a 25% tariff on all steel and aluminum imports and immediately implement reciprocal tariff policies. As the market prepares for a challenging opening in U.S. stocks, there was selling pressure in U.S. stocks on Friday night.
Against the backdrop of tariff risks and continued global central bank buying, gold prices are expected to rise to new highs this week. Since Trump took office, the People's Bank of China has increased its gold reserves for the third consecutive month. Notably, even as terminal rates rise and cryptocurrency momentum weakens, gold's upward trend continues, indicating that the structural change in demand is no longer solely driven by central bank liquidity.
Despite the fluctuations at the beginning of the year, retail investors and day traders in the U.S. remain actively engaged in the stock market, with daily options trading volume rebounding to a historic high. Apart from events such as CPI/Powell and Nvidia's earnings report, implied volatility for stocks remains low.
The extremely optimistic market sentiment seems to be nearing the 'sell' signals triggered by various sell-side trading models. In fact, the earnings outlook for the SPX index shows a downward trend in both Q4 2024 and 2025 forecasts, and we are cautious about the near-term outlook for the stock market.
In the cryptocurrency space, price trends are disappointing. Although the market is still excited about BTC potentially being included as a reserve asset and mainstream institutional participation, major altcoins have dropped 15–20% since the beginning of the year. We had previously expressed concerns about the issuance of the $TRUMP Memecoin and its potential negative impact on the cryptocurrency industry. So far, this concern has been confirmed, as trading volume in cryptocurrencies has significantly dropped since the new year, and the recent large-scale liquidations have severely damaged the profits and losses of trading accounts.
BTC's strong performance relative to other assets is most pronounced compared to ETH. Currently, ETH is facing record short pressure and strong FUD sentiment, having dropped 23% since the beginning of the year, far behind BTC's +2.5%. The lack of L1 catalysts and narrative dominance may continue to put pressure on Ethereum.
Worse still, analysts point out that over $30 billion in altcoin supply will be released in the next 12 months. These unlocked tokens will flow into a market with limited demand and significant wallet losses. However, the TradFi money entering the market may focus solely on BTC or the top three tokens, making it unlikely to spill over into the altcoin market. This weak market state is also reflected in the performance after new tokens are listed, even on Binance. This time, it seems different for the current cycle that is maturing.
Finally, let’s talk about a lighter topic. After the issuance of $TRUMP, will more countries issue their own memecoins to raise budget funds? I sincerely hope this is just a joke and not a phenomenon that will be normalized in the coming year!
