Stay flexible, flowing with the circumstances like water.

Author: 0xkyle

Translation: Deep Tide TechFlow

Good morning! Predicting the future has never been an easy task, but as traders and investors, we need a clear plan. Like all plans, this one will adjust with changes in the market environment—after all, the market is a constantly evolving ecosystem. This memo is merely a preliminary reflection on 2025 based on my current perspective, for reference only, and does not constitute investment advice.

Before discussing 2025, let me first review the plans for 2024. If you're not interested, feel free to skip ahead.

To be honest, there were quite a few issues with my 2024 plan. Let's go through them one by one:

1. The impact of Bitcoin halving was underestimated

Many debated whether Bitcoin halving would be "good news turning bad" or if it would become "good news expectations" like in history. It turned out that this halving did not create much of a stir but became the starting point of a bull market.

2. Misjudgment of interest rate cuts as negative

This judgment was clearly wrong. However, before the rate cuts, I had publicly adjusted my viewpoint. The initial assumption was: "With inflation remaining high, rate cuts might only occur after significant deterioration in economic data, becoming a passive response."

It turned out that the Federal Reserve's actions broke this assumption. For most of 2024, the correct strategy was to trust the Federal Reserve's statements.

3. Failure in executing scenario planning

My core plan for 2024 was: "Reduce risk by partially cutting positions before rate cuts, then buy back after prices drop, while keeping some positions unchanged."

But in reality, I completely failed to execute this plan, haha.

The market movements in 2024 completely exceeded expectations—from the initial sell-off after the ETF launch, to the rebound in the first quarter, followed by summer weakness, and finally, the positive impact of rate cuts on the stock market, which threw the crypto market into chaos. Bitcoin's price hovered between $50,000 and $60,000 until the election at the end of the year, which finally brought a real breakout.

Looking back, my biggest mistake was not realizing that 2024 was the year traditional financial institutions gradually embraced Bitcoin. This should have been the main theme of 2024—traditional finance slowly but surely entering the Bitcoin space.

4. Judgment on narratives:

• ETF beneficiaries: COIN (stock)/BTC/ETH

I mentioned some tokens like STX and TRAC, but they performed poorly. COIN, however, performed exceptionally well, with its price around $120 when I wrote the article.

Additionally, niche narratives like BRC-20 and LST, although they didn't last long, performed well in the first quarter of 2024.

• The success of SOL

At that time, SOL's price was $60! This might be one of my most successful trades. I wrote this article when the price was only $20, predicting that "SOL would reach triple digits in the next cycle." It turned out that this prediction was completely correct.

• Regulatory alignment with product market

While I captured the regulatory narrative, I chose the wrong tokens. The idea was to select projects that had passed DeFi regulatory thresholds but had not yet fully proven market demand. However, I chose MMX and dYdX, which was clearly the wrong decision.

• Mistake in decentralized AI

I was very optimistic about decentralized AI, but at the peak in the first quarter of 2024, I realized that the actual developed products were far from my expectations. Projects like Render and Akash lacked real application scenarios and were more like "air tokens."

• The success of GameFi v2

In the first quarter of 2024, GameFi-related assets performed very well, with BEAM's price rising significantly, and many GameFi projects experienced a wave of enthusiasm. However, only those who sold at the peak could profit.

• Other potential narratives

  • DePIN / RWAs

  • DeSci

  • Meme (BONK / DOGE / PEPE / HPOS10INU)

  • RUNE / CACAO

  • GambleFi

  • Airdrops (LayerZero / Starknet / ZKSync)

Among these narratives, there seems to be nothing particularly outstanding except for Meme—Meme performed very well in the first quarter of 2024, with Bonk's price basically increasing 2-3 times since I mentioned it. DePIN also had its shining moments, with projects like Geodenet and Helium; however, I did not pay much attention to them. A few months ago, decentralized science (deSci) began to emerge, and the BIO token even launched on Binance. However, to be honest, I am not particularly optimistic about this field.

5. Cycle peak

At the end of the article, I wrote: "There is one thing I haven't talked about, which is how I think this cycle will end—recently, I have been thinking more about a viewpoint from GCR, which is that 'the pico-top of the last cycle was the entry of funds, while the pico-top of the next cycle will be when countries start buying.'"

Looking back now, with the benefit of hindsight—I find this viewpoint very convincing and plan to incorporate it into my 2025 investment plan. This is definitely on my list of "main signals for this cycle." The logic is very clear and reasonable.

2025 Plan

Now that the review of 2024 is over, let's get straight to the point. As usual, I will start with macro and scenario planning analysis, then discuss specific investment narratives.

Scenario Planning

The 2024-?? cycle has already begun. Personally, I believe it started at the end of 2023, but that's just a detail. So far, the market has moved as follows: On January 10, Bitcoin ETF launched → reached an all-time high, triggering altcoin season (altszn), followed by a period of volatility in the second and third quarters of 2024, with Bitcoin's price fluctuating between $50,000 and $60,000. By election day, Bitcoin broke its historical high, rising to $100,000, but failed to break through further, currently fluctuating around $90,000.

It is worth noting that altcoin season or the so-called "good times" often accompanies Bitcoin reaching a peak. The first time was when Bitcoin surged to $69,000 but failed to break through; the second time was when it surged to $100,000.

The next altcoin cycle may begin after Bitcoin successfully breaks through $100,000. While I hope this happens in the first quarter of 2025, it may also repeat the volatile market like in the second/third quarter of 2024. This is something I need to prepare for mentally in advance. Therefore, I have planned the following possible market scenarios:

Here are my viewpoint diagrams:

• Scenario 1: Bitcoin and altcoins rise together. If 2025 becomes a one-sided bullish market, with Bitcoin continuing to rise and altcoins performing well, we may see a repeat of the comprehensive rise of the past two months.

  • Probability: 30%-40%

  • Action Plan: Buy quality altcoins on dips, seizing opportunities to position.

• Scenario 2: Bitcoin rises, altcoins have limited gains. This is similar to the market in 2024, where the market may still experience volatility in the coming months, but overall is more optimistic than in 2024 (because Bitcoin continues to rise). Certain areas will perform well.

  • Probability: 50%-60%

  • Action Plan: Buy selected altcoins on dips, avoid overheated areas, and look for the next potential direction.

• Scenario 3: Bitcoin rises, altcoins fall. If this is the peak for altcoins, Bitcoin may continue to rise strongly while altcoins perform weakly.

  • Probability: 20%-30%

  • Action Plan: Decisively liquidate altcoins; although there may be some drawdown, if altcoins lack upward momentum, timely stop-loss is still necessary.

• Scenario 4: Bitcoin and altcoins both fall. If the market peaks, all assets will enter a downward cycle.

  • Probability: 10%-20%

I believe that Bitcoin's breakthrough to a new high will not take as long as it did in 2024, as the current macro environment has provided favorable support for Bitcoin. During the "summer slump" of 2024, although the ETF had just launched, traditional financial institutions were still trying to tell their clients the value story of Bitcoin. However, at that time, there was no global consensus on the importance of Bitcoin.

Now, with Trump in office, discussions about a "Strategic Bitcoin Reserve" (SBR) are gradually heating up, and this narrative has changed significantly.

While I won't speculate on the likelihood of SBR being established, it is undeniable that this new political environment has brought more attention to the digital asset space. Especially when the president of the world's largest economy frequently talks about Bitcoin, people are more easily persuaded to buy it.

Recognizing this regime change is extremely important. Therefore, I believe BTC will continue to sail smoothly in 2025, while for altcoins, it is a similar but different story.

From the performance of the total market capitalization of altcoins (Total3), it reached the historical high of 2021 in the first quarter of 2024 and set a new cycle high in the fourth quarter. The overall trend is similar to historical cycles. Frankly speaking, the difference between my Scenario 1 and Scenario 2 is not significant.

The key lies in how to manage positions and timing. I am optimistic about 2025, but I cannot predict how long it will take. Although I believe that a one-sided upward trend will come faster than in 2024, altcoins may still experience significant declines during periods lacking catalysts.

My strategy is: As long as the cycle has not peaked, maintain a net long position, whether in Bitcoin or other assets. I do not believe that 2025 will repeat the "summer slump" of 2024, but similar periods of volatility may occur—market sentiment may be low, but prices can still remain relatively stable.

For on-chain assets, their volatility is greater, and they may experience declines of up to 70% during market adjustments. Therefore, my goal is to sell on-chain assets when they are at their hottest, switch back to large altcoins (top 20 by market cap), and then gradually reposition.

I do not believe that altcoins have reached their peak here, as I cannot imagine Bitcoin (BTC) continuing to rise while altcoins perform poorly. Moreover, I do not think Bitcoin will peak at this stage.

Conclusion:

• Bitcoin will continue to rise, and its gains are expected to exceed those of 2024.

• Regarding altcoins—maintain an offensive stance, but be mindful of when to switch to defense. However, compared to 2024, the defensive measures can be somewhat relaxed.

Risks

1. Cycle Peak

Cycle peaks are often a self-fulfilling phenomenon. While I believe we are far from the peak, this needs to be reassessed weekly. A cycle peak is not necessarily a specific "event," but rather a state that gradually approaches over time.

2. Risk of Strategic Bitcoin Reserve (SBR)

With the new president taking office, everyone is focused on his policy direction. Although Bitcoin currently has favorable factors, if the president completely ignores Bitcoin, it would be a rather unfavorable signal.

I believe the risks mainly manifest in two aspects: either the SBR plan is shelved, or the SBR is not implemented, but some alternative plan is introduced. If it is the latter, although it may bring negative effects initially, as long as it is beneficial to Bitcoin, it will ultimately turn positive.

3. Supply Risk

In the summer of 2024, global stock markets reached new highs, but the crypto market faced significant selling pressure, mainly from suppliers like Mt. Gox, Germany, and Grayscale GBTC.

Supply risk is always present; there will always be institutions or individuals holding large amounts of Bitcoin, such as the UK government, Silk Road liquidation assets, FTX distributions, etc. While these events may bring short-term pressure, if everything goes smoothly, they could also become good buying opportunities.

4. Macroeconomic Risk

I believe that even if the rate cuts are small, as long as interest rates continue to decline, market liquidity will improve, which is still a positive signal.

If the signals lean towards being bearish (inflation rises again, and the Federal Reserve has to raise rates), it could negatively impact digital assets.

Themes and Tokens

Now we enter the most anticipated part. But before we dive into the discussion, I want to emphasize again: "Be offensive, but know when to switch to defense." In this cycle, active investment management will far outperform passive management.

The old strategy of "buy and hold for the long term" is no longer applicable. For example, although Solana rose tenfold in 2023, its performance throughout 2024 was almost on par with Bitcoin. Similarly, top tokens like TAO did not benefit from the recent AI boom. Meanwhile, Memes have lost their former glory, such as "Dogecoin is no longer popular," "Calm Brother is no longer calm," and "Dwarf Hippo seems to be out of the spotlight."

It is foreseeable that there are almost no assets suitable for "buy and hold for the long term" in this cycle.

Additionally, I like to think: who are the marginal buyers in the market? Currently, there are three main types of marginal buyers in the market: institutional investors (traditional financial institutions), funds (liquidity funds/crypto-native funds), and speculators (perpetual contract traders, on-chain players, etc.).

A successful investment narrative needs to attract the attention of at least one of these types of buyers. Based on this, let’s start the analysis:

1. AI Theme

AI remains an important investment theme. But as mentioned earlier, we have already gone through several rounds of speculation. If you read my views on AI tokens, you will know that I believe the next wave is about to come.

• Macro Trend: From "speculation" to "fundamentals" to "actual utility."

• Micro Trend: From "social buzz" to "fundamentals-driven" to "actual applications and virtual personas."

However, "buy and hold for the long term" is not a good strategy. For example, as the beginning of all this, Goat has already dropped 60% from its peak and may continue to perform poorly.

Recommended tokens: application technology/clusters/games/consumer-facing AI

For instance, ALCH (game development), Griffain (an agent that helps manage wallets), Digimon, Ai16z (a leader in the AI field). Of course, there are many potentially overlooked tokens, but these are my top picks.

2. DeFi

DeFi (decentralized finance) remains an important investment theme, but it is more challenging to invest in. The number of tokens that can truly benefit from it is very few, and even if these tokens have potential, their prices may not rise significantly (e.g., performance in the LST-related field).

From a risk and return perspective, DeFi is not my first choice, but I believe this field will continue to develop in 2025.

Recommended tokens: AAVE, ENA, Morpho, Euler, USUAL

Secondary tokens: stablecoins, payment-related tokens

3. Layer 1 (L1) Trading

While it may spark controversy, I believe L1 trading will once again become the market's focus in the future. The speculative potential in the L1 space is evident. Take Sui as an example; the price increase from $1 to $4 indicates that market interest in L1 is rebounding.

L1 trading is a currently undervalued area with huge potential, just like Hype has already risen tenfold.

Recommended tokens: SUI, Hype

Secondary tokens: Abstract

I am not very enthusiastic about Monad and Berachain, but I am very optimistic about Abstract—I believe it could become a breakout project.

4. NFT Tokens and Game Tokens (New Round)

I am also very optimistic about this field. Recently, I invested in some gaming projects and believe that the NFT token space is worth paying attention to. For example, the price of Pengu is gradually recovering, Azuki launched $ANIME, and Doodles also have their own features. While I do not believe NFTs themselves will make a comeback, their related tokens may see new opportunities.

Game tokens are also worth watching. Off-The-Grid has proven that it is possible to develop an interesting game. Given that this field is currently undervalued, I think it is a good strategy to dig deep into high-quality gaming projects that are about to issue tokens.

Recommended tokens: Pengu, Anime (Azuki), Spellborne, Treeverse

Secondary tokens: Prime, Off the Grid (if they issue tokens), Overworld

5. Other Narratives

Here are some narratives I am paying attention to, although I am not particularly optimistic, they still have some appeal:

• Data Tokens: Kaito, Arkm

• Meme: Currently, the only one I am interested in is PEPE; most others have become outdated.

• Decentralized Internet of Things (DePIN): PEAQ, HNT

• Ordinals

• Classic Altcoins (Dino Alts): XRP, etc.

• Old DeFi Projects: CRV, CVX

2025 Predictions

Here are some bold predictions I have for 2025. These ideas may sound a bit incredible, but they are not entirely impossible:

1. DePIN (Decentralized Internet of Things) is officially implemented by a large company through acquisition or other means.

2. Binance's market share in the exchange market declines, but it is surpassed by Bybit or OKX rather than Hyperliquid.

3. With advancements in VR technology, metaverse tokens regain vitality.

4. ICOs (Initial Coin Offerings) become popular again.

5. The prosperous season on the ETH chain fails to arrive.

6. Sui's price breaks into double digits (at least $10).

7. ETH staking yields are approved through ETFs, leading to more staking tokens and yield aggregation products, similar to the situation in 2021.

8. A well-known artist interacts with fans and rewards them using NFTs and tokens.

9. Bitcoin's price reaches $200,000.

10. More CEOs or founders of L1 projects choose to leave under the influence of Aptos.

11. Base loses in on-chain competition, being replaced by another L1 project, while Solana maintains its leading position.

Summary Thoughts

Thank you for sticking with me to the end! This is the investment plan I have formulated for 2025. I expect these plans may adjust with changes in the market, just like the plans for 2024.

The most important advice here is: stay flexible, flowing with the circumstances like water. Enjoy the journey; market changes are inevitable, but that is precisely what makes investing so fascinating. As the saying goes:

"No one can step into the same river twice, for the river is changing, and so are we."

Good luck, and safe travels! If you gain life-changing profits on this journey, don't forget to use those profits to truly change your life.

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