2024 Turning Point for the US Economy: The crypto market faces significant challenges and opportunities

The Bitcoin halving cycle is often regarded as an important time node in the crypto assets market. According to this indicator, the Fed's rate cut cycle was supposed to begin in the fourth quarter of 2023. However, the actual situation has been different.

The government is influencing non-farm employment data by easing illegal immigration employment policies and expanding the size of government employees, thereby postponing the interest rate cut. Nevertheless, in order to raise funds to support the government's economic stimulus policies, the 10-year Treasury yield (which reflects the market's actual interest rate) has seen a significant decline, contributing to a seasonal bull market spanning the fourth quarter of 2023 and the first quarter of 2024.

As we enter the second quarter of 2024, with the government's bond issuance slowing down and the emergence of systemic risks in other countries worldwide (such as the East Asian real estate market and the Japanese bond market), the demand for safe-haven assets has surged. The US dollar, US Treasury bonds, and gold have become the favored safe-haven assets for investors. Meanwhile, the second quarter has historically been a period of lackluster performance for risk markets, leading the entire crypto assets market into a downturn.

In the third quarter of 2024, in order to boost the election prospects, the Fed began to cut interest rates. However, the yield on 10-year Treasury bonds rose abnormally, resulting in a rare phenomenon where nominal interest rates decreased but real interest rates approached historical highs. Therefore, the market conditions in the fourth quarter of 2024 were not driven by external funds, but were influenced by political factors and seasonal fluctuations.

By the first quarter of 2025, the main contradiction in the market has shifted from the discrepancies between economic indicators such as employment data and inflation index and the Fed's expectations, to contradictions between various government departments. The impact of this contradiction is so significant that, coupled with breakthroughs in the field of artificial intelligence challenging the technological advantage of the United States, it has even led to a rapid sell-off of US government bonds. This decline in real interest rates triggered by panic has not only failed to bring about the expected spring rally but has instead resulted in large-scale capital outflows.

Currently, the United States is facing a major change not seen in a century. Some reform proposals put forward by tech entrepreneurs could successfully extend America's global leadership for another century, while the consequences of failure are hard to predict.

In the face of such enormous systemic risks and the uncertainty of the upcoming Crypto Assets regulatory framework, major participants in the crypto market have chosen to adopt a proactive strategy, prioritizing the assurance of their own liquidity.

The actions of multiple trading platforms and project parties reflect this logic, such as a certain trading platform suddenly changing its strategy to promote specific tokens, another platform taking risks to launch a controversial project, and several well-known primary market projects choosing to conduct token generation events under unfavorable conditions.

In this turbulent market environment, a conservative strategy may be wiser, and investors should act cautiously, prioritizing the protection of their principal.