Bitcoin March 2025 Update

Market Commentary

The Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) price index, rose 0.3% monthly with a 12-month rate of 2.5%, matching the increases seen in January. Core inflation, excluding food and energy, fell to 3.1% from 3.3% in January. Energy prices rose slightly at 0.2% monthly while shelter costs continued to be a problem for inflation, rising 0.3% on the month and accounting for about half of the monthly all-items increase. Food prices jumped 0.2% (down from 0.4%), pushed by a 10.4% surge in egg prices related to ongoing problems with avian bird flu that have forced farmers to destroy millions of chickens. These figures reflect a moderation in overall inflation, with notable decreases in certain areas like gasoline and airline fares, while sectors such as shelter and medical care services continued to see price increases. This mixed picture underscores the Fed’s challenge: while core inflation is trending downward, energy volatility and sticky services costs require cautious policy calibration. Consumer spending, which accounts for more than two-thirds of economic activity, climbed 0.4% (0.5% expected) after a downwardly revised -0.3% (prev.- 0.2%) decline in January. 

Powell stated that tariffs were bigger than expected, risking higher inflation, and the impact on the economy would also be greater than expected. Furthermore, the US economy added 228K jobs in March, yet unemployment ticked up to 4.2% (from 4.1% in February). These are the strongest numbers for 2025 thus far, although the full effect of DOGE-related layoffs is not yet apparent. Expectations for a May rate cut are 25%, while a June rate cut is more likely at 60%. As of April 2025, there is an implied 75% probability that the Fed will cut at least twice in 2025. 

BTC's correlation materially rose in the middle of March as the prices fell in tandem with the broader stock market and for seemingly similar macro-related reasons and has remained there since. Furthermore, with a beta above 1, BTC is operating as a leveraged NASDAQ 100 play. It should be noted that BTC is not always a correlated asset, but as it becomes more integrated into the financial system, it increasingly moves in response to geopolitical factors that affect other major assets. Below we show the 7-day rolling correlation between the NASDAQ QQQ ETF and BTC over the last ninety days.

Historically, March has been a mixed month for BTC, with an average return of +12.2% and a median of -2.3%. March 2025 didn’t break the trend as BTC recorded a 2.3% decline, but February was still the worst in five years. April is usually a better month for BTC, but this “cycle” doesn’t seem to match historical trends.