February Bloodbath

Recap and looking forward

February 27, 2025 • Estimated Reading Time: 4 minutes

February 2025 has been turbulent for crypto and stock markets, marked by significant declines and heightened volatility. Despite strong corporate earnings from tech giants like Nvidia, broader market concerns have overshadowed positive performances, leading to cautious investor sentiment.

Crypto Market Overview

The cryptocurrency sector has experienced notable downturns:

  • Bitcoin (BTC): Currently trading at $83,818, reflecting a month-over-month decline of 18% since the end of January at $102,412.

  • Ethereum (ETH): Currently trading at $2289, marking a 30% month-over-month decline from $3300.

  • Solana (SOL): Currently trading at $136, down 41% month-over-month from $231.

The crypto market has shed over $800 billion recently, with Bitcoin's value dropping 15% over the past month. Contributing factors include a significant $1.4 billion hack on the Bybit exchange, max extraction from bad actors (Solana memecoins), and unmet expectations for pro-crypto policies under the current U.S. administration. Outside of Bitcoin, crypto inflows have been minimal. With trade war uncertainties looming, many investors are starting to cut off risky assets, starting with crypto.

Stock Market Performance

In the equities market, tech stocks have been pivotal:

  • Nvidia Corporation (NVDA): Despite reporting a 78% surge in quarterly revenue to $39.33 billion, Nvidia's stock fell due to broader economic concerns and ongoing trade tariff issues.

  • S&P 500 Index: The SPDR S&P 500 ETF Trust (SPY) is currently priced at $593.84, experiencing marginal declines as market volatility persists.

The market's tepid response to strong earnings underscores investor apprehension amid geopolitical tensions and potential overspending in tech sectors. A few tech names have largely driven the stock market; when they decline, the entire market also declines.

Macroeconomic Factors

Several macroeconomic elements are influencing market dynamics:

  • Federal Reserve Policies: The Federal Reserve remains focused on its dual mandate of maximum employment and price stability. Inflation has decreased but remains slightly sticky, preventing the Fed from implementing rate cuts soon.

  • Trade Wars and Tariffs: The current administration's trade conflicts, including new tariff threats against Europe, have introduced additional inflationary pressures. These actions contribute to economic uncertainty, affecting both domestic and global markets.

  • Government Spending Cuts: Efforts to reduce government expenditures may lead to lower employment levels, further complicating the economic landscape.

The combination of these factors suggests a shift towards an economy-driven market devoid of stimulus measures. In this environment, strategic asset allocation and selective investment choices become paramount, as not all assets are poised to appreciate uniformly.

Outlook for the Remainder of 2025

Looking ahead, several scenarios could unfold:

  • Cryptocurrency may continue to face challenges due to regulatory uncertainties, security concerns, and macroeconomic pressures. Investors should be more selective and identify the winners early. If global liquidity in the market loosens, crypto can recover. We have seen the money supply in China increase recently, but the Fed and the US are in a challenging position with steady inflation and trade war fears. 

  • For Stocks: The performance of a few leading tech companies has been propping up the broader market. Any setbacks in these key players could trigger broader market corrections. Additionally, globally exposed tech firms might experience revenue pressures as trade wars intensify, influencing stock valuations.

In conclusion, complexity and heightened risk characterize the current market environment. Markets have been continuing their downward momentum, and there awaits lots of uncertainty in the future. It’s essential to stay nimble and not blow up your portfolio in this environment. Uncertainty is something that we handle well in Weekly Wizdom. Our community has individuals who have successfully traversed multiple bull and bear markets. Feel free to check out our newsletter and telegram if you want to stay up to date with our views of the market. Until then, stay agile and find the right opportunities and signals when they come.