#DEEPSEEK 2025 March Financial Market Analysis: The 'Song of Ice and Fire' between the US stock market and the crypto market

Since the beginning of 2025, the global financial markets have shown significant volatility and complexity under the intertwining of multiple variables. The US stock market and the crypto market, as the two core areas of risk assets, are facing not only macroeconomic policy adjustments and technological innovation impacts but also severe disturbances from geopolitical factors and market sentiment. From the perspectives of macroeconomic background, market structure evolution, core driving factors, and future trends, a comprehensive analysis of recent developments in the US stock market and the crypto market is conducted.
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1. US Stock Market: Volatile Adjustment Amid Slowing Growth and Liquidity Contraction
1. Macroeconomic Background: Slowdown in Growth Coexists with Inflation Resilience
The US economy in early 2025 showed the characteristics of 'slowing growth but persistent inflation.' Although the revised GDP growth rate remained solid at 2.3% in the fourth quarter of 2024, multiple indicators show that economic momentum is weakening: February's non-farm payroll added 187,000 jobs, lower than expected, and hourly wage growth slowed to 0.2%. The consumer confidence index deteriorated for three consecutive months to 98.3, reflecting residents' concerns about the decline in real purchasing power. At the same time, the core CPI increased by 2.5% year-on-year, still higher than the Fed's target. The Trump administration's imposition of import tariffs (such as a 10% tariff on Mexican and Canadian goods) further raised inflation expectations, with CPI expected to rise an additional 0.3-0.5 percentage points in the second quarter.
2. Policy and Liquidity: The Fed's "Dilemma"
The Federal Reserve policy interest rate remains high (the current federal funds target range is 5.25%-5.5%), with market expectations for interest rate cuts continuing to weaken. CME data shows that the probability of maintaining interest rates in March is as high as 95.5%, and the expected interest rate cut within the year is only 25-50 basis points. Liquidity tightening combined with a rise in neutral interest rates directly suppresses the valuation expansion space of US stocks. The research institute of China Merchants Bank pointed out that the current market liquidity is insufficient to support a significant rally similar to 2023-2024, and US stocks rely more on profit growth rather than valuation increase.
3. Technology Stock Adjustment: DeepSeek Impact and Industry Restructuring
Technological breakthroughs in the field of AI have become an important variable in the volatility of the US stock market. The open-source DeepSeek model significantly reduces computing power requirements through algorithm optimization (requiring only 2048 H800 GPUs for training, compared to tens of thousands for traditional models), shaking the narrative of the "computing power moat" held by tech giants such as Nvidia. The Nasdaq plummeted by 4% in February, marking its worst monthly performance since April 2024, with the stock prices of the "Big7" technology companies generally under pressure. The market is re-evaluating the competitive landscape of the AI industry, and investors are shifting from a "computing power race" to an "algorithm efficiency" logic, leading to a revaluation of high capital expenditure companies.
4. Market Outlook: Oscillating Pattern and Structural Opportunities
In the short term, U.S. stocks may remain volatile. Historically, the S&P 500 has generally been weak (with only one small gain) after two consecutive years of gains of more than 20%. At present, the market lacks a clear main line, and the rotation characteristics of hot plates are significant. Bank stocks and Bitcoin-related companies (such as MicroStrategy) may become a hot spot due to policy dividends and safe-haven demand. Be wary of recession risks in the long term: If the Fed's rate cuts lag behind the economic slowdown, the market could face the risk of a downward spiral of "deteriorating data→ rising rate cut expectations→ earnings downgrades→ valuation compression".
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Two, encryption currency market: the game of policy dividend and bubble clearance
1. Policy-driven: The 'encryption president' effect of Trump
After the Trump administration took office, the encryption policy shifted from campaign promises to substantive action:
- Regulatory easing: SEC revokes SAB 121, allowing banks to custody digital assets; Congress pushes for the FIT21 bill, shifting regulatory focus from suppression to guidance.
- Political issuance of coins: Trump issued the official Meme coin $TRUMP, with a market value once exceeding 14.5 billion U.S. dollars, although it subsequently plummeted by 60%, it symbolizes that encryption currency has officially become a political tool.
- Institutional entry accelerates: After the approval of Bitcoin spot ETF, traditional funds are flowing in at an accelerated pace. Strategy (formerly MicroStrategy) spent $1.99 billion in February to increase its Bitcoin holdings, with a cost price of about $97,514 per coin, demonstrating institutional recognition of long-term value.
2. Market dynamics: intensified volatility and narrative transformation
In January-February 2025, the crypto market experienced an epic adjustment: Bitcoin dropped from $100,000 at the end of January to $85,000, a 17.39% decrease, while alternative currencies such as Ethereum and Solana suffered deeper declines due to leverage liquidation and policy impacts. The underlying reasons include:
- Increased correlation with US stocks: Bitcoin's six-month rolling correlation with the Nasdaq has risen to 0.5, significantly increasing risk appetite synchronization.
- The old narrative is ebbing: the marginal effects of traditional driving forces such as halving cycles and ETF inflows are declining, and the market urgently needs new narratives to support it.
- Bubble clearance: Emerging concepts such as AI Agent encountered selling due to insufficient technological landing, and the market returned to value logic.
3. Technical Integration: AI and encryption's collaborative narrative
Despite short-term setbacks, the integration of AI and encryption is seen as the core breakthrough in the next phase:
- On-chain AI applications: scenarios such as DeFai (decentralized financial AI), chain-based data training, etc., may reshape the industry ecosystem.
- Computing Power Sharing Economy: After DeepSeek lowers the threshold of computing power, decentralized computing power networks are expected to become new growth points.
- RegTech: AI-driven compliance tools may become key infrastructure for institutional entry into the market.
4. Future Trends: From "speculation-driven" to "value creation"
encryption market is undergoing a transformation from "policy arbitrage" to "technology-driven".
- Regulatory paradigm shift: Global regulatory frameworks are accelerating improvement (such as EU MiCA), providing certainty for institutions.
- Asset attribute enhancement: the linkage between Bitcoin and gold prices has increased (synchronized sharp decline in February), further consolidating the positioning of "digital gold".
- Decentralized Finance (DeFi) Revival: DEX may usher in an on-chain prosperity cycle after the liquidity of Trump Coin is drained, benefiting platforms like Uniswap.
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Three, Risks and Prospects: The Ladder in Chaos
1. Common Risks in the US Stock Market and the Coin Circle
- Policy Uncertainty: The game between Trump's tariff policy and the Fed's interest rate path may trigger a chain reaction.
- Liquidity contraction: During a global deleveraging cycle, high-leverage assets face selling pressure.
- Technological disruptive impact: such as the overturning of computing power demand by DeepSeek, may reshape the industry's competitive landscape.
2. Differentiation Opportunity
- US stocks: Focus on the profit resilience of traditional industries (such as banks, energy) in the inflationary environment, as well as the benefit enterprises of AI algorithm optimization (such as cloud computing, edge computing).
- Coin Circle: Layout compliance main line (such as custody service providers, compliant exchanges) and technical innovation scenarios (such as ZK-Rollup, AI+DeFi).
3. Long-term logic
- US stocks: If the economy achieves a 'soft landing', profit growth may support a slow bull market; if it falls into recession, systemic risks need to be guarded against.
- The long-term effects of the Bitcoin halving cycle (completed in 2024) in the cryptocurrency market may lag behind, combined with the competition of global central bank digital currencies (CBDC), positioning encryption assets as a further strengthening of the "non-sovereign currency replacement" status.
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Conclusion: Seeking certainty in frenzy and fear
The financial market in 2025 is like a chaotic battlefield in "Game of Thrones", with both the "fire frenzy" brought by Trump's policies and the "ice chill" triggered by DeepSeek's impact. Investors need to stay alert amidst the volatility: US stocks need to beware of the double kill of profit expectation downward revisions and liquidity tightening, while the crypto market needs to focus on substantial progress in technology implementation and regulatory compliance. As the market adage goes: "Chaos is not a pit, but a ladder", only by penetrating short-term noise can one seize the opportunity for long-term value reconstruction. #BTC