My opinion on Crypto this year

12-24

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Author | Hao Fangzhou

In the past, the year-end review aimed to be comprehensive, listing various sectors, and elaborating on data, events, trends, and tendencies one by one. The author's own thoughts were somewhat obscured in the pursuit of objectivity and neutrality. Additionally, being immersed in daily work and short-term hot spots, there was little opportunity to think about the industry in the long term. This year, the approach has been changed - directly extracting the most important people, events, and things in the Web3 field in 2024 from the author's subjective impressions. The unremarkable ones are left unmentioned, while the memorable ones are briefly touched upon. The observations and expressions are then concisely summarized to organize the author's own thoughts and refine the understanding. If this can resonate with or provide a reference for the readers, it would be a pleasure.

Let's start with this image.

Crypto market structure in 2024

From the perspective of asset fluctuations, the biggest high point in 2024 will be BTC and Meme coins; in the middle segment, there are some new and old projects that the author has invested personal emotions in, but to be honest, they are tasteless, and it would be a pity to abandon them, so they will be let go in 2025.

BTC: New Highs, New Cycles, New Attributes, New Narratives

In 2024, the US election and crypto policies will leverage each other. Trump's golden rule "to list Bitcoin as a US strategic reserve asset" will elevate Bitcoin to the primary resource of the new international financial cold war, pushing traditional financial institutions that have been hesitant and superficial to dive into crypto.

The influx of Old money will be one of the narratives, or at least a stable consensus, for the rise of BTC prices. This tremendous positive news not only instills confidence in the value of BTC, but also defines the ceiling for its future growth and speed.

With the increase in institutional holdings, the expansion of CeFi products like ETFs, and the imitation of Macrostrategy's "stock-coin correlation" gameplay, the correlation between BTC and traditional financial markets like US stocks, US bonds, and the US dollar index will deepen. Its asset attributes will irreversibly shift towards a "digital universe version of gold", becoming less punk-like. Combining this with BTC's entry into the upper vacuum area, the profit expectations become vague, and the estimation of demand saturation, past cycle theories, and pricing models will all become invalid.

I assert that this bull market will be the last major high-volatility cycle for BTC. Thereafter, its explosiveness, volatility, and retracement will not be as strong as before.

Does that mean Crypto investment is no longer sexy? No, the Alpha is just moving away from BTC.

Policy Coins, Business Coins: Which Altcoins Can Withstand the Spillover?

If BTC's price trend is akin to the late stage of gold, then ETH is more like a fundamentally stable tech stock. (The fact that Ethereum focuses more on value than price is very tech stock-like, isn't it?)

2024 will also be a big year for crypto ETFs. Policy tailwinds will first blow on BTC and ETH, and institutions' interests will be explored: they require "product technology" to be proven safe and stable over a long period; have a "business" fundamental basis that can be benchmarked and valued; have small but sizable trading volumes, wide holding distributions, and clear cost structures... Coins like XRP, SOL, and DeFi leaders that are the remnants of past cycles will be on standby.

Since the source of funds is above, considering the long-term and prudent regulation, as well as the sluggish institutionalization, the upside of these targets will also be general. Reflected in investors' perception, although the old projects are making every effort to regain their dignity, clustering official announcements of progress, the old highs are too high, and the historical baggage and momentum are too heavy, so they cannot replicate the bountiful years, using an all-out violent pump to raise the Altcoin season and outperform the mainstream coins.

What about the new projects that rushed to issue coins on this bull market?

New Structural Opportunities: BTCFi, Regional Regulatory Dividends

This year, looking solely at the price, it's true that Altcoins didn't keep up too much. Fortunately, price and value have always been mutually proving. The price performance of BTC and the new Meme kings has made Mass Adoption a natural progression, with USDT issuance and active wallet numbers reaching new highs, as Old Money and new retail investors rushed in.

The steps (investment decision speed) were too big, causing a mismatch between funds (price) and cognition (value), creating a gap (time lag of value reversion). And the light (structural opportunities) shone through.

In this section, let's talk about two things from the industry and practitioner's perspective (the last section will discuss the major opportunities for investors from external and internal perspectives):

1. The broad sense of BTCFi, including the CeFi direction represented by MSTR, Coinbase, Microstrategy, ETFs, and the native direction represented by Rune, ORDI, etc., as well as Layer 2, sidechains, Lightning channels for scaling, and DeFi applications like re-pledging and lending.

The former has been quite brilliant; the latter has not yet gained full momentum, which is a great disappointment to me.

"The Bitcoin ecosystem" has combined the strongest positive factors of the mainnet token, and inherited the development experience of its predecessors, so they are already standing on the shoulders of giants, yet still playing the fool. You say cross-chain protocol assets are not interoperable, you say the $1 billion market cap suicide bet is not "doing things" enough, you say exchanges and investment institutions have already deeply deployed, the takeoff is in the future...

I say, the fundamental problem of product-market mismatch has not been well solved: BTC has entered the era of large holders, and large funds have their own safety margins and procedural norms, which is the current demand-side reality; the developer-style on-chain operations, using tiny liquidity pools to support huge institutional funds, exchanging precious BTC for "high-potential" derivative assets, and entrusting security to pirated VMs, this is the supply-side fantasy.

BTC ecosystem projects do not need to hastily copy the airdrop-centric playbook of other ecosystems in the golden age. They should recognize their target audience and switch the storytelling object, taking good care of the needs of institutions, and they also have the opportunity to sit at the table and share the cake with the BTC CeFi players.

2. The "policy clarity", BTC's strategic reserve status, the expansion of traditional financial channels to include crypto products, and the policy promises pre-paid during the election period... These "pioneering land-grabbing moves" by the US will soon be imitated and followed. The relevant proposals from Russian lawmakers, South Korea's postponement of virtual asset tax collection, China Hong Kong's frequent statements and high-frequency actions on exchange licenses, stablecoins, etc... It is clear that no one wants to be like the German government, which was ridiculed by both sides in the middle of the year.

The attitude towards the crypto industry, at the level of vision - lies in the foresight and mindset of policymakers; at the legal level - led by large traditional financial institutions and tech companies; at the operational level - through RWA and CeFi products; at the tool level - stablecoins, ETPs, indices and other specific crypto derivatives.

The latter three all have opportunities for practitioners from different backgrounds to align with.

The Biggest Alpha: Meme, New Token Distribution Mechanisms

Next, let me switch directions and talk about the annual representative "from bottom to top" - Meme.

Meaningless? Abstract? Edgy? Derivative? Meme is simply too close to the spiritual core of New Money (which I call the money of the future).The fun and excitement of Web3 this year has largely been brought by Meme.

Meme carries the foundation of a "tradable attention economy", and also inherits the operating memory of "buying new, not old". Funds quickly shift with attention, old project consensus is easily scattered, and new projects become increasingly short-lived. This is the inevitable result of lowered asset issuance thresholds. Just as Tik Tok has lowered the threshold for content creation, the massive content dilutes the quality rate, raising the screening and retention of high-quality content.

In the early stages of Meme's rise, the wealth effect of high multiples ebbing and flowing once made both buyers and sellers delusional, and investment observers and eager coin issuers secretly thought: "Can I win too?"

Unfortunately, in the high-speed era, the window for retail investors is short-lived. With the bipolarization of Meme, the success ratio of investors and issuers will quickly return to the average line. The opaque factors such as leverage tools, leverage narratives, and unequal leverage cognition levels will force the weary and red-eyed gamblers to the casino, and Meme will usher in a turning point at the tail of "adverse selection" in the economic sense.

Interestingly, "releasing a Meme" is now dragging my "serious projects" and "serious entrepreneurs" into the sea.

Here is a small story: British singer Lily Allen, who had nearly 8 million listeners on Spotify last month, joined Onlyfans in October, opening up photos of her feet to her 1,000 fans. "Music platforms are severely exploitative, selling feet can make much more than streaming, the whole music industry needs to reflect on this... Don't hate the player, hate the game."

Does the Web3 industry also need to reflect? Or embrace the void of "Why serious"?

Perhaps, attributing the rise of Meme does not require forcibly subordinating and upgrading it to culture, just talking about emotions can also explain something. Do you still remember that before Meme, the market sentiment was densely concentrated on "airdrops"? In the first half of the year, there was a lot of discussion in the circle about VC coins and listing controversies, the unlocking of institutions and KOLs' hidden chambers, the powerlessness of being PUA'd by points, and the dissatisfaction with token distribution. The prosperity of Meme and the more democratized token distribution form have hit the group emotions of those who have not benefited. The iteration of token distribution mechanisms is also one of the main lines of evolution in the crypto circle.

From such Alpha, let's gain inspiration and reflection. Exposing problems is always the first step in solving problems, and value dilution is also the prelude to value discovery.

Three "products" that will amaze me in 2024

We've talked enough about the vertical field, so let's relax a bit and review three products that have pleasantly surprised me: Polymarket, Macrostrategy, and pump.fun, corresponding to the business, BTCFi, and Meme categories mentioned earlier, as well as the small, medium, and large opportunities in this year's venture capital direction.

Polymarket: The profile is right, and the wind is coming

A star of the Ethereum ecosystem and V value-based (doing meaningful applications);
It's hard for the 128 million wallets holding Ethereum not to have finance as their main demand;
Friends who understand gambling know how real the demand is here;
Guessing coins and doing multiple-choice questions is much easier than writing a logically coherent investment memo;
Caught the Olympics and the US election...

With this combination, it's hard not to break out.

Macrostrategy: The CeFi luminary, with extraordinary strategies

I used to think that the only ones capable of triggering industry-level disasters were the three Greek gods who controlled the public chain, exchange, and stablecoin - Ethereum, Binance, and USDT. This year, congratulations to BTC for also having a heavyweight guest.

Given the trend towards concentration of BTC holdings in the future, and the exposure of whales to similar market risks (the US dollar economy), in 2025, I will gradually reduce my BTC holdings and closely monitor the leading indicators of the collapse of the Macrostrategy model.

pump.fun: Demand-driven, with sustained revenue

Meme × Infrastructure tools, is there any potential? pump.fun's over $100 million in monthly revenue tells you the answer.

pump.fun, the TikTok of the crypto world, supports the issuance of assets and stories, has a business, has a product, has the ability to generate sustained protocol revenue, has a reference valuation standard, and cleverly borrows the advantages of Solana, how can it lose?

The picture at the beginning, posted again

Looking back on this year, on one end of the dumbbell, innovative assets are maturing, with self-originating supporting infrastructure, and I still have a chance to participate before they become completely robotized; on the other end, core assets are going mainstream, driven by external policy boosts and traditional institutional allocations, I will timely move my BTC to the surrounding spillover sectors.

In terms of assets, the direct beneficiaries are BTC and Meme; in terms of model innovation, the jackpot goes to Macrostrategy and pump.fun.

In addition, I also like Ethena, Pendle, Jupiter, Hyperliquid, OKX Web3 Wallet, etc., which have also performed brilliantly this year. To avoid the feeling of "saying everything, but nothing", this article will not go into details.

2025, cherish the short-lived good times

As technology and finance have progressed to this day, major innovations are often where A stands on the shoulders of B, while minor innovations are the permutations and combinations of A×B, B×C... This kind of mixing and exhaustive search is very suitable for the "associative ability" of AI. The next two years will be the big years for AI, and Web3 innovation and investment can also be combined with the theme.

Imagining 2025, the biggest external factor is likely to be the penetration of AI into various links of Web3 tools and services; the biggest internal surprise may be MemeFi; as for the middle-tier Altcoins (such as copying and pasting the same business model on different underlying layers with little difference), I really lack imagination, and they may even be noticed by traditional capital and grow together with CeFi.

My boss often reminds me: a sense of repetition towards things is a kind of arrogant fatigue, and also a loss of acuity. I think it may depend on the perspective we choose to view the spirally rising industry - when I place myself in the perspective of the old, looking down at these concentric circles, they will eventually become dust under the wheels of history; if I put myself on the side, wow, the industry is accumulating users (farmers) and upgrading technology (applications)!

I'm proud that Crypto is still the fastest growing industry, without a doubt. No matter how you look at it, the most important thing is to do it. Immerse yourself in it, ride the waves, how joyful.

Towards the end, I set a new year's resolution for myself: clean up outdated experiences, update investment methods, establish a learning system for new assets, rebalance and concentrate firepower, and strive to upgrade my "SB wallet" to a Smart Money address.