GuShiio.com Cryptocurrencies seem inevitable to become mainstream, with BTC’s market value reaching US$10 trillion.
Author: Michael Nadeau, The DeFi Report
Compiled by: Deng Tong, Golden Finance
Cryptocurrency should have entered a “golden age”. But over the past few months, I have been unable to shake off this persistent worry.
This week, I will share a report explaining why this happened.
Why am I worried?
Previously, we shared our views on important themes in 2025. That is, uncertainties related to inflation/tariffs, interest rates, fiscal expenditures/DOGE, US dollar, global liquidity, business cycles, etc.
Why? We want to have an argument. We want it to be rooted in data and game theory/incentives.
In other words, we want to have faith. Just like this.
However, when we sifted through data, we were unable to build beliefs about pointing to favorable conditions for the cryptocurrency market in the short to medium term.
It’s just that my beliefs are moving in the other direction-we’re in the late stages of the cycle.
Of course, we shared the “Bear Market Case” with you on January 15. At the time, we felt that the market had become quite bubbly. So we started to build cash positions. But we’re not ready to call it a “top” yet.
So, let’s move on to discuss why I can’t get rid of this “constant worry.” We will start with a specific perspective on cryptocurrencies and then discuss macro/economic issues.
Specific issues in cryptocurrency
We have been in a bull market for more than 2 years. Things that were unimaginable a few years ago (such as government support for cryptocurrencies) are now happening. But the feeling is bearish and “peaked”.
Trump. Is Trump’s launch of memecoin the beginning of a new paradigm for the industry? Will we see memecoin’s new innovations adding practicality to novel new capital formation strategies? It seems that we may be moving in this direction. But this is not the case. Instead, the president/his company has not provided any communication or guidance to the public about Trump’s plans-which has caused huge harm to the industry. Why? Others are following his poor example (like Milei). In addition, the lack of any attempt to bring practicality to Trump fuels opponents and critics of our industry. This seems like an untenable scam. In my opinion, the counterattack here has not even begun.
Just last week, the U.S. Securities and Exchange Commission announced that it would drop several cases against major cryptocurrency companies such as Coinbase, Uniswap and Consensus. This is very optimistic. But then Trump tweeted that he would establish a strategic cryptocurrency reserve, promising to include XRP, ADA and SOL. There is a reason why we didn’t mention XRP or ADA in the DeFi report. They are zombie chains. In addition, Elon/DOGE is tasked with cleaning up excessive fiscal expenditures related to fraud, waste and abuse. But will we use taxpayer money to buy speculative centralized crypto tokens? There is no ambiguity here-this is stupid. And it undermines the good work done by Elon and DOGE (more on DOGE later in this report). Many cryptocurrency investors cheered this over the weekend, seeing it as a sign that the cycle is still on. We think this is an illusion.
David Sachs. He should be the cryptocurrency czar. But do you think he knew Trump would tweet on Sunday about strategic reserves? Doesn’t seem to know. In addition, it is clear that there is no consensus among the industry on which tokens should be included in reserves (or how regulation should work). Going on the path to new regulations is one thing, and we are optimistic about that. But correct execution is another matter, and it takes some time.
Kanye。Dave Portnoy。Eric Trump won’t stop talking about cryptocurrencies now. When he does this, he makes sure to use a lot of buzzwords such as “revolutionary.” This is a red flag for anyone who has gone through several cycles. We see many such “cases” later in the cycle.
World Liberty Financial。I don’t know if this is a scam. But it does look like it. If you want to try to distract people from a scam, you can call it “World Liberty Financial.” All jokes aside, the site simply provides a way to purchase WLF tokens. Seriously. There was nothing there. There is no business model. Not practical. Just a group of people in suits and a link to buy WLF tokens. It is indeed revolutionary.
Pump.fun。This is a fun time. But it appears Solana’s speculative peak is over.
This is starting to look more and more like OpenSea in the previous cycle (the picture below never rebounds).
In both cases, trading volume/on-chain activity is clearly linked to the price of the L1 asset. So what will trigger Solana’s next wave of activity and keep the casino lively?
If you can see it coming soon, please let us know.
Hope on the timeline. I continue to see people talking about why we are still in the early stages of the cycle: regulation and SBR. What’s the problem? It has been included in the price. When people make that claim, I want to cash in.
emotions. Notice that few people nowadays say that the market has peaked? But people like Eric Trump are optimistic.
Hacking and fraud. The exposure of Bybit hackers + memecoin trenches suggests that the ratio of fraudsters/scammers to actual builders is unbalanced-just as it was at the end of the previous cycle. We think it’s time for a much-needed cleanup (bear market).
Overall, cryptocurrencies currently feel a bit “dirty”. At the same time, speculation is weakening. We look for this trend later in the cycle.
macro specific issues
In addition to the unique “peak” signals we see in the cryptocurrency market, our concerns about the economy in the short to medium term are also deepening. We believe the risk of a recession is increasing. According to Scott Bessent in a recent interview with Bloomberg, he said that in 6 to 12 months, the recession will dominate “our economy.”
DOGE。Our views are constantly evolving. The original idea was that Musk could not have a significant impact on government spending. We updated this view based on what we now see, as Musk’s disruptive behavior appears to have Trump’s full support. This is not good for growth. Regardless of your stance on cutting government spending, huge deficits over the past few years have been driving the economy, while the Federal Reserve has implemented quantitative tightening. Eliminating “fraud, waste and abuse” is a good thing-but we also need to acknowledge that this is the expense of some people in the economy and the income of others. So we have to ask the question: What growth catalysts will offset this? We think deregulation will help, but it will take some time for policy changes + it to work in the economy. In short, balancing budgets in the short term = austerity. Please note that the 25-year budget predicts a deficit decline of approximately $300 billion. At the same time, the recent collapse in GDP growth was mainly due to slowing consumer spending growth and blocked net exports (the tariff-related import preemption effect).
Inflation/tariffs. Our view is that concerns about inflation and concerns about the impact of tariffs are largely exaggerated. That being said, as the facts change, so will our views. Trump confirmed that a 25% tariff on all goods in Canada and Mexico will take effect today. He also doubled tariffs on China imports from 10% to 20%. This will definitely affect inflation and market uncertainty.
Rate cut/yield/dollar. Our view is that interest rate cuts will exceed market expectations this year and the dollar will fall (due to concerns about economic growth). Our confidence in this remains strong-mainly because we see it from Elon and DOGE. That being said, this may be bad for risky assets. Details will be described below.
Federal Reserve/Liquidity. If fiscal spending falls and markets sell off, the Fed will need to adopt easing. We think they will go easy, but they may wait too long to respond (inflation concerns will come into play). In this case, interest rate cuts may not be enough to offset the impact of the economic slowdown. Even if the Fed cuts interest rates, risky assets may be affected. This was not the case when the Federal Reserve cut interest rates late last year. Some have pointed out that since reverse repos have exhausted, the TGA will be the next driver of liquidity. This may provide some short-term relief, but will need to be refilled immediately once the debt ceiling debate is over.
The business cycle. In our report released on February 14, we shared some data (ISM, CAPEX spending, small business confidence, bank loans) that indicate that a new business cycle is about to begin. We think this is true. But we are concerned that slowing growth could lead to a greater market correction/recession before recovery begins. Without reductions in DOGE/fiscal spending and tariffs, we would prefer to predict a smoother transition.
Overall, concerns from the outside world are quite high. From a reverse perspective, this may indicate that the situation will improve. We still believe that now is the time to be cautious. Despite the recent correction in the cryptocurrency market (BTC fell 30%, SOL fell 50%, and other altcoins fell even more), we are not convinced that the cryptocurrency market has hit bottom. Why? Because traditional markets have just begun to pull back. It is worth noting that traditional financial markets lead the economy. As a result, further selling could eventually push us into recession. If this is the case (probably in the second quarter), we expect a major Fed/Treasury response, but don’t feel the need to chase the sword of decline at this time.
portfolio management
As mentioned above, in addition to holding BTC for a long time, we have also been moving to cash. We are looking for opportunities to deploy into our favorite assets. The problem is that we haven’t seen any “fat dates” yet.
We think they will come. So now is the time to do an in-depth research and make a shopping list.
Keep in mind that we have been adapting to the current bull market since the end of 22.
If you have only started to interact with cryptocurrencies in the past 6 months or so, here are our suggestions:
Be careful when chasing a falling blade. If you miss out on a surge, don’t think it’s a “buy” after a sharp correction. Could be. But the market may also be against you. The attention of cryptocurrencies is volatile. Most tokens will never come back. If you are going to make this mistake, you’d better use BTC to make it.
If you “buy the highest price,” don’t blame yourself. Many new market participants encounter this situation. You’re learning. What you learn today is likely to be realized in the future-but you need to remain interested in this area. The key is to invest in assets you want to hold for the long term.
Many retail investors enter cryptocurrencies late in the cycle, leave in the bear market (missing all the best opportunities), and then return late in the next cycle. Please don’t do this.
Pay attention to your psychology. If you find yourself blindly agreeing with the bulls and angered by the bears, you are more likely to make mistakes. Keep in mind that people like Raoul Pal (who usually does a good job), at a similar stage in the last cycle, called for ETH to reach $30,000. Influential VCs may have portfolio projects that have not yet launched tokens. They have motivation to tell you that the cycle is still strong. Try not to outsource your beliefs to others who may have competitive motivations.
Focus on your income/job. Make sure you have some capital to deal with a correction/bear market.
summary
Please note that my preference is to switch to cash. If everyone starts to agree that prices will fall, it may indicate that those market participants have also sold. This will point to a higher bottom/low. It is worth noting that there is currently record cash on the money market:
Ultimately, as an investor, my job is to make the best decisions based on the best information available-and that information is always evolving.
Some on-chain indicators point to the mid-term cycle-so there is reason to support a bull market. But since the end of 2022, we have been irresponsibly long. The risks/rewards at this stage are simply not worth staying in the market or deploying new capital. We believe that it would be wiser to take profits, enter in cash and wait for a “fat deal.”
In addition, in the future, thinking about “cycles” may no longer be so important.
From now on, we can see a possible scenario of further correction (BTC falling to $65,000-$70,000, possibly lower, depending on the Fed’s speed of response), followed by a few months of consolidation and another wave of gains before the end of the year into 2026. If we see a major response from the Federal Reserve, BTC could go much higher in this situation. This will follow the 21st century cycle-the market peaking in the first quarter after Coinbase went public.
Since then, NFT has suddenly emerged, driving increased activity on Ethereum-which has led to a fierce “altcoin season.” The problem with this altcoin prediction is that we have seen some “meta” play out (Meme coins, AI tokens). So, what’s the next thing that will bring “craze” to online activity?
If the market has peaked, then in our view this is a disappointing cycle. Our bull market forecast is a market value of US$10 trillion (US$200,000 per BTC). The basic situation is $7.5 trillion ($150,000 per BTC). Not to mention ETH’s poor performance. Our sense is that many professional investors are struggling-because over the past few years, you really have to get into BTC and SOL early to do well.
Although this report is relatively calm, we are still very optimistic about the long term. Infrastructure is ready for prime time, which was not the case in the previous cycle.
The reality is that cryptocurrency as an industry is indeed entering a “turning point.” Regulation and policy development highlight a “turning point”-marking the end of the “installation period” and the beginning of the “deployment period” of new technologies.
At this point, it seems inevitable that cryptocurrencies will become mainstream, and the market value of BTC will reach US$10 trillion. But it may take longer than we think.
Finally, you may be wondering, at what price will we be bullish again? It’s hard to say. We will re-evaluate as we move forward. Generally speaking, we want to buy BTC and buy discounted altcoins when the MVRV is close to or below 1.
