The logic of the bull market is changing, privacy coins and fundamental tokens may take over the market.

Written by: David Feld, Bankless

Translated by: Saoirse, Foresight News

A new cycle seems to have begun, and there are some realistic hidden dangers worth serious consideration surrounding Bitcoin, and the hidden dangers mentioned here are not just about quantum security vulnerabilities.

Many of my online peers and I have been contemplating a possibility: Bitcoin may underperform the market in the upcoming cycle. Just like in the last cycle, the vast majority of altcoins failed to achieve historically significant new highs.

The price of Bitcoin has already surged significantly; you might find my thoughts absurd, but please continue reading.

Bitcoin has become mainstream

The core story of the last cycle was the mainstream adoption of Bitcoin.

The market was kicked off by the approval of the spot ETF, allowing institutional funds to enter, resulting in impressive outcomes: BlackRock's IBIT became the fastest ETF in history to surpass $10 billion in assets. Following that, Trump ran for election and won, his campaign included a strategy to establish a Bitcoin Strategic Reserve (BSR), which became a major catalyst for Bitcoin's price to break the six-figure mark. At the same time, Saylor continued to make significant purchases of Bitcoin weekly, leading other companies to include digital assets in their corporate reserves and continuously hoard coins.

The key point is: in the last cycle, Bitcoin greatly broadened the group of individual and institutional holders. Neither within nor outside the market has any other crypto asset ever received such widespread support.

However, now I find it difficult to identify new incremental buyers. The DAT trading narrative has basically collapsed; the Bitcoin Strategic Reserve market has basically materialized, and governments are currently mainly relying on confiscated Bitcoin rather than direct purchases. Those who want to buy Bitcoin can already do so through ETFs. I’m not saying that buying interest will disappear; rather, the opening of these channels is itself a catalyst for the market, and such positive news cannot simply be repeated.

When Bitcoin commenced this round of market activity, it did not wait for a massive influx of new buyers but instead faced multiple unfavorable factors. What worries me the most is the unresolved quantum risk: a quantum computer powerful enough can derive a private key through a public key and access the Bitcoin under that address. Admittedly, Bitcoin developers have proposed protective solutions such as BIP-360, but a comprehensive migration plan across the whole network has yet to be adopted.

Additionally, there is potential selling pressure brought by Strategy. Saylor now operates his company as an actively managed fund, weighing between Bitcoin holdings, shareholder demands, preferred dividends, and debt repayments, no longer purely focused on "hoarding Bitcoin" as the sole objective. Strategy has already sold Bitcoin for dividends, and management has indicated that the company is transitioning from one-way hoarding to active capital management.

In a sense, the current situation of Strategy highlights a more challenging issue for Bitcoin: a crisis at the cultural level.

The cultural dilemma of Bitcoin

Bitcoin was initially created as a currency to break away from the traditional financial system. Now, fund managers are buying it in large amounts, packaging it into products, charging management fees, and selling the investment exposure to ordinary investors.

This certainly has obvious benefits, such as being able to purchase Bitcoin through an Individual Retirement Account (IRA). But the contradictions are also very clear: Bitcoin was originally intended to circumvent the traditional financial system, and now that financial system has become one of the main channels for ordinary people to access Bitcoin and profit from it.

Ben Sixsmith, a senior commentator in the UK, recently inspired this series of thoughts with his article, sharply commenting on this cultural contradiction: "Bitcoin believers are beginning to believe that Bitcoin has accomplished its mission and thus choose to compromise with reality."

I believe that there are far more people holding this view than many realize; the strengthening of Zcash is one signal. David Hoffman, co-founder of Bankless, also shared a similar perspective: after institutionalization, Bitcoin's original cypherpunk characteristics are fading. Zcash and Bitcoin share the same monetary underlying design: a total supply cap of 21 million, proof of work consensus, and additionally has native privacy features—which is a characteristic that Bitcoin has never truly achieved, making it harder for Zcash to be assimilated by the traditional financial system like Bitcoin.

Zcash is also more proactively addressing quantum security issues and is developing the next-generation shield protocol Tachyon, aiming to create a privacy solution for the post-quantum era.

In this context, Zcash is very likely to form a positive feedback loop: ZEC rises → the market questions Bitcoin more → more funds flow into ZEC, reinforcing the cycle. I believe Zcash has the opportunity to capture a significant portion of Bitcoin's monetary premium. I hope this competition forces the Bitcoin developer community to tackle the quantum security issue with sufficient urgency.

Altcoins finally have fundamentals

However, I am not simply singing the blues for Bitcoin. Altcoins also have strong logic; simply put, altcoins have reached maturity.

Hyperliquid has well demonstrated how critical token fundamentals are to the market. The crypto space has now birthed projects capable of generating stable income, and many leading projects prioritize returning protocol revenue to tokens. Hyperliquid is a typical case: about 97% of protocol fees are used for HYPE buybacks, with the total buyback amount already exceeding $1 billion. As Evanss6 mentioned in a recent article, buybacks have become a sufficiently large trend that even the Financial Times has begun to track such data.

Moreover, Uniswap utilizes protocol fees for buybacks and destruction of UNI; Lighter allocates all income for LIT buybacks; Aave launched automated buybacks last year; shturl.c continues to buy back PUMP; Ethena is implementing its own buyback mechanism.

This brings something that has been missing from the crypto market: tokens are tied to real businesses, the product usage increases, which can translate into demand for tokens or reduce the circulating supply of tokens. And these businesses still have enormous growth potential. The U.S. Commodity Futures Trading Commission (CFTC) has opened pathways for compliant platforms to offer crypto perpetual contracts to U.S. users; the SEC's newly introduced innovative exemption clause allows licensed automated market makers (AMMs) to trade tokenized U.S. stocks attached with rights within limits.

Products that U.S. users could not participate in last cycle due to legal risks are now gradually becoming available. Projects like Hyperliquid, Lighter, and Uniswap have something that Bitcoin is increasingly lacking: new markets yet to be explored.

Of course, not all altcoins have opportunities. Opportunities are concentrated in high-quality targets: projects have real users, generate stable income, have mechanisms to pass on business profits to tokens, and also have vast markets yet to penetrate.

This is the core argument of this article: Bitcoin does not necessarily have to collapse. Even if Bitcoin continues to rise, it is still possible to underperform the market. The last cycle was all focused on Bitcoin; whereas this round of market activity is likely to shift its focus to assets in a few target markets that are still expanding.