In January and February 2025, as Trump 2.0's administration reaches its first month, on one hand, the curtain rises on Trump 2.0, with a surge of policy dividends. On the other hand, U.S. stocks, under the influence of DeepSeek, face a huge impact on the AI sector, triggering a series of financial avalanches. Especially in February, as three main forces—key economic data landing, regulatory framework adjustments, and accelerated technological iterations—intertwined, the crypto market continuously experienced turbulence, baptism, and reconstruction.
In February 2025, various changes occurred in the U.S. macroeconomic situation, with a series of key economic indicators declining. At the same time, since Trump took office, he has vigorously promoted policies to increase import tariffs. These two factors intertwined have had a profound impact on the U.S. and even the global economy, triggering turbulence in global markets.
Despite the U.S. fourth-quarter GDP revision maintaining a solid growth rate of 2.3%, several indicators suggest that the U.S. economy has entered a 'low growth channel,' particularly with a cooling labor market: in February, non-farm payrolls added 187,000 jobs, below the expected 200,000, and hourly wage growth slowed to 0.2% month-on-month, the lowest level since October 2023. Additionally, the University of Michigan Consumer Sentiment Index has deteriorated for an unprecedented third consecutive month, dropping to 98.3, reflecting accumulating anxiety over declining purchasing power.
In January, the core CPI in the U.S. rose by 0.3% month-on-month and increased by 2.5% year-on-year, with the year-on-year growth rate down 0.1 percentage points compared to December last year, indicating a slight 'cooling' in its not-so-optimistic inflation. The year-on-year rate of personal consumption expenditures (PCE) price index in January was recorded at 2.6%, the lowest since June 2024, in line with market expectations, and is one of the few pieces of good news.
However, in the future, the tariff war will become the biggest uncertainty factor for U.S. inflation. The Trump administration announced a 10% tariff on imported goods from Mexico and Canada (effective March 4), directly raising costs for key categories such as automobiles and agricultural products. According to estimates from the Cleveland Fed model, this policy could raise U.S. CPI by an additional 0.3-0.5 percentage points in the second quarter.
Source: CME
Source: CME
Regarding interest rates, it is currently widely expected that the Federal Reserve's policy rate will remain unchanged for the time being. According to CME, the probability that the Fed will maintain the rate in March is 95.5%, with a 4.5% chance of a 25 basis point cut. The probability of maintaining the current rate unchanged until May is 73.2%, with a cumulative chance of a 25 basis point cut at 25.8%, and a cumulative 50 basis point cut at 1.1%. However, given the uncertainty surrounding inflation and the potential inflationary pressures from Trump's tariff policies, the Fed's interest rate cut decisions still hold uncertainties.
The core contradiction of the U.S. economy in 2025 lies in the tug-of-war between 'slowing growth' and 'inflation resilience.' The Federal Reserve attempts to balance risks through prudent monetary policy, but the series of tariff increases since Trump took office has not only exacerbated the complexity of this issue but also continuously impacted the global supply chain pricing logic, amplifying global economic turbulence. Historical experience shows that trade protectionism often fails to truly resolve structural economic issues, and finding certainty in policy games will be the core proposition for the global market in the coming six months.
In the first two months of 2025, the hottest topic in the AI field is undoubtedly the emergence of DeepSeek, and the greatest impact of DeepSeek on U.S. stocks has undoubtedly shattered the previous market expectations for the future of AI narratives.
To date, the development of the AI market has made bubbles inevitable. DeepSeek has burst some of the AI bubbles, as its open-source model significantly reduces computation dependence through algorithm optimization, promoting the industry's shift from 'computational power competition' to 'algorithm efficiency,' reshaping the market's demand logic for AI infrastructure. For example, DeepSeek-V3 completed training with just 2048 H800 GPUs, whereas traditional models required tens of thousands of similar chips, directly shaking the narrative of the 'moat' supported by high capital expenditures of U.S. tech giants.
The impact of DeepSeek, combined with the global supply chain turmoil caused by Trump's tariff policies, has hit tech stocks hardest as they are the most globalized sector. The entire U.S. stock market has shown a sluggish state: throughout February, the Nasdaq, heavily weighted in tech stocks, suffered the deepest losses, plummeting 4%, erasing the gains accumulated for the year and marking the worst monthly performance since April 2024. The Dow, with a larger proportion of traditional industries, had a cumulative decline of 1.58%, while the S&P 500 fell 1.42%, landing between the two.
As of February 28, 2025, Nasdaq 100 five-day chart, source: finance.yahoo.com/
The market's re-examination of the competitive landscape of the U.S. AI industry has become evident, directly reflected in the performance of the U.S. stock big 7. From the financial reports, there is nothing particularly noteworthy in the latest reports of the big 7, even Nvidia, which performed the best, did not exceed expectations significantly, leading investors to take profits and triggering sell-offs. Overall, as mentioned earlier, the market currently lacks a clear direction for trading, and the stock price performance of the big 7 shows characteristics of 'month-end policies and emotions dominating the plunge.' As an analyst from Bespoke Investment Group puts it—'Looking around, fear has become a collective emotion.'
In this environment of sluggish market sentiment, crypto assets inevitably become innocent victims. Dow Jones market data indicates that the six-month rolling correlation index between Bitcoin and Nasdaq recently rose to 0.5, a new high since 2023, which means that the volatility of U.S. stocks has intensified, and the impact on the crypto market has become more pronounced. Once the stock market experiences fluctuations or panic due to unexpected variables like DeepSeek, investors' risk appetite decreases, leading them to withdraw funds from risk assets in the crypto market, which can easily lead to downward price pressure in the crypto market. This chain reaction highlights the market's 'over-defensive' mentality towards the impact of DeepSeek and policy uncertainty.
With the rise of Trump, the 'crypto president,' the new U.S. government's crypto policy has shifted from campaign promises to substantive actions. It is said that 'a new official brings three fires,' and currently, the hottest fire that Trump is burning is perhaps the one ignited on January 18, when he tweeted about the sale of the official Meme token — $TRUMP.
$TRUMP's market value once exceeded $14.5 billion but later plummeted by 60%. This wave of market frenzy has enriched a group of people through speculation while causing severe asset shrinkage for others. The deeper implication of this event is that cryptocurrency is radiating from the financial realm to the political sphere. If the U.S. SEC's approval of a Bitcoin spot ETF is a milestone for cryptocurrency entering traditional finance, then Trump's issuance of a token serves as a testament to cryptocurrency stepping into the political arena, directly converting political influence into market liquidity through operations like 'token swaps,' showcasing the potential of crypto assets as a new political tool. Whether it is the competition among multiple U.S. states to promote Bitcoin reserve bills or the accelerated compliance process of the EU MiCA framework, behind the global regulatory game, the important clue that 'code is power' runs through it.
Aside from Trump's token issuance, the crypto space is also continuously monitoring the extent of policy fulfillment. After the new U.S. government took office, the crypto sector welcomed many favorable developments, such as the establishment of a cryptocurrency working group, drafting new digital asset regulatory proposals, and exploring the establishment of a national cryptocurrency reserve. As a result, Bitcoin prices rose actively, with a month-on-month increase of 9.5% at the end of January. However, following the news of DeepSeek and tariff-related reports impacting the market, by February, the crypto market underwent a historic adjustment, with Bitcoin dropping below $100,000, down 17.39% in February, closing at around $85,000, with most of the month's decline concentrated in the last week. This plunge does not have a single cause; it resembles the turbulence of a chaotic market itself, being both a chain reaction of risk asset sell-offs under the impact of Trump's tariff policies and driven by the market's self-purification after over-leverage.
It is worth noting that Bitcoin has still shown a certain degree of resilience amid this wave of turbulence. Other alternative cryptocurrencies have been more negatively impacted by adverse events within the market, with Ethereum hit by the Bybit incident reaching a yearly low, and Solana experiencing significant volatility due to political token issuance issues. In mid to late February, some institutions viewed this short-term volatility as a long-term allocation window. For instance, Strategy (formerly MicroStrategy) spent $1.99 billion purchasing 20,356 Bitcoins at an average price of $97,514 each between February 18 and 23. The gaming company Boya Interactive also announced on February 28 that the group further increased its Bitcoin holdings, acquiring approximately 100 Bitcoins for about $7.95 million, with an average purchase cost of approximately $79,495 each.
If we extend the timeline, we will find that since last year, the price trends of gold and Bitcoin have increasingly converged. Throughout 2024, the overall volatility of both has shown a certain degree of correlation. In February this year, gold prices also fell over $100 within a week after hitting a historic high of $2942 per ounce. Previously, WealthBee analyzed the moderate linear correlation between Bitcoin prices and gold prices in 2023 (see: Over a 10-year cycle, 6 charts to understand the correlation between Bitcoin prices and mainstream asset trends in U.S. stocks). At that 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 Bitcoin's 'digital gold' nature is becoming increasingly evident, fundamentally due to both being viewed as alternatives to fiat currency. As the global economic situation and geopolitical landscape continue to evolve, the prices of both may maintain a certain degree of linkage.
The current crypto market is trapped in a kind of news vacuum, with traditional narratives (such as halving cycles and ETF fund inflows) showing diminishing marginal effects. However, from the signals released at the recent 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 regulatory paradigm shift, with a pro-crypto majority in the U.S. 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 entry. Secondly, the crypto market in 2025 is at a critical turning point from 'policy arbitrage' to 'value creation,' from 'speculative-driven' to 'technology-driven.' Finally, the integration of AI and crypto may become the most noteworthy new breakthrough. If the AI sector begins to rebound and integrates with the crypto market, new narratives may emerge. As the market clears leverage and the narrative of AI and crypto collaboration takes shape, a new round of upward breakthroughs may already be on the horizon. Historical experience repeatedly validates that a new dawn often emerges in the darkest moments intertwined with enthusiasm and fear.
A month into Trump's administration, the market enters a chaotic period, with complexity far exceeding previous times. The crypto space has also been affected by this uncertainty, experiencing rare frequent fluctuations. Although the inherent weaknesses of human nature have planted the seeds of risk in the market, Bitcoin's immutable scarcity has never wavered, granting it a resilient vitality that penetrates through cyclical fog. As stated in 'A Song of Ice and Fire': 'Chaos isn't a pit, chaos is a ladder.'
