Author: 0xKyle
Compiled by: Azuma, Odaily
Editor's Note: This article is a market forecast and action plan for 2025 by the well-known analyst and trader 0xKyle.
In the following text, 0xKyle analyzes and hypothesizes multiple possible scenarios for Bitcoin and Altcoins in 2025, discusses why active portfolio management will outperform passive portfolio management in the new year, and lists the sectors and tracks he is optimistic about, which may help with the layout for the new year.
The following is the original content by 0xKyle, compiled by Odaily.
GM.
Predicting the future is difficult, but as traders and investors, we should have a plan. Like all other plans, this plan will also change as the underlying scenarios change - the market is constantly evolving. This plan is based solely on my prediction of the market's development in the coming year, and it provides insights into my thinking about 2025, but should not be interpreted as financial advice.
Let me first review my 2024 plan (Odaily note: Since this part is mainly Kyle's personal operation review, this article chooses to pass it directly).
Let's get right to the point. As usual, I will first discuss the macro expectations/scenario assumptions, and then move on to the thematic narrative.
Scenario Assumptions
The new cycle of "2024 - ??" has already begun. I personally believe this cycle started at the end of 2023, but if we analyze this cycle more strictly, the progress so far has been:
- → January 10th, Bitcoin ETF launched;
- → BTC hit a new high, briefly triggering an Altcoin season;
- → Subsequently entered a volatile period in Q2 and Q3, with BTC fluctuating between $50,000 and $60,000;
- → After the election, BTC hit a new high and rose all the way to $100,000;
- → Temporarily unable to effectively break through the $100,000 mark, currently fluctuating above $90,000.
It should be noted that Altcoin seasons often start at the peak position of Bitcoin, the first time was in the process of BTC attacking $69,000 but failing to break through effectively; the second time was in the process of BTC attacking $100,000.
The next round of Altcoin cycle is likely to start after BTC stabilizes above $100,000. I cannot predict the future, although I hope this will happen in the first quarter of 2025, but based on the facts, we may also see a replay of the volatile market in 2024 Q2 and Q3 in the coming months - I must be prepared for this. Therefore, here are all the scenario assumptions I have drawn up.
Scenario Assumption 1: Bitcoin and Altcoins rise together
In that case, the rise will be the only theme in 2025, and we will also enter another round of Altcoin season. Due to the continued rise of Bitcoin, all coins will perform well, and we will repeat the market performance of the last two months of 2024, with the entire market "rising, rising, rising".
- Probability: 30% - 40%;
- Corresponding strategy: Buy during the current "panic", get on board the strong Altcoins.
Scenario Assumption 2: Bitcoin rises, other coins rise less
This will replay the plot of 2024, in the coming months we will see Altcoins continue to fluctuate, but Bitcoin will be more bullish (because only Bitcoin is rising). Some Altcoin sectors will also perform well.
- Probability: 50% - 60%;
- Corresponding strategy: Still buy during the current "panic", but need to get on board specific Altcoin sectors, the key is to avoid the high-profile areas and look for the next possible emerging narrative.
Scenario Assumption 3: Bitcoin rises, Altcoins fall
This means that the current time is the top of Altcoins, although Bitcoin will continue to perform well.
- Probability: 20% - 30%;
- Corresponding strategy: Sell all Altcoins. Although we have to bear some of the drawdown, if Altcoins don't rise, we may have to sell them all.
Scenario Assumption 4: Bitcoin falls, Altcoins fall
- Probability: 10% - 20%.
I believe a few things will happen. I believe that BTC's next new high will not take as long as in 2024, because the macro tailwind background really exists. In a cycle where the regulatory environment is hell-like, although the ETF has been launched, TradFi still needs to work hard to sell the story about BTC to clients, because the whole world does not believe in the importance of Bitcoin.
Now that Trump is about to take office, the talk of a Strategic Bitcoin Reserve (SBR) has been hyped up. The market sentiment has already changed, and I won't speculate on the possibility of establishing a strategic Bitcoin reserve system - I have no experience in the interweaving of politics and finance.
What I care about is the narrative - the fact is that the incoming new administration has brought a lot of new attention to digital assets, and it is now easier to convince people to buy Bitcoin because even the president of the world's largest country is frequently discussing it.
This change in the macro background is very important. Therefore, I believe that Bitcoin will continue to have tailwinds in 2025, while Altcoins is a similar but different story.
Total3 (note: excluding BTC and ETH, the total value of Altcoins) reached the 2021 high in the first quarter of 2024, and then reached the cycle high in the fourth quarter of 20424. To be honest, my Scenario Assumption 1 and Scenario Assumption 2 are not much different.
The key is positioning and timing. I am optimistic about 2025, but I don't know how long it will take for the market to arrive - although I do believe that the bull market will come faster than in 2024, but without catalysts, Altcoins will still bleed heavily.
Whether it's Bitcoin or other coins, as long as the cycle hasn't peaked, my plan is to always maintain a net long position. I don't think 2025 will see a repeat of the summer of 2024, but I think we'll encounter periods similar to the current one - the market is just relatively quiet, but the prices are still well maintained.
The on-chain world is completely different, when the tide goes out, the on-chain market is easy to see -70% volatility. Therefore, for the on-chain market, my goal has always been to sell at the peak of attention, and then reinvest the funds in the top Altcoins (top 20), and then slowly start to deploy further.
I don't think Altcoins will top out here, because I don't think Bitcoin will continue to rise while Altcoins die, and I don't think Bitcoin will reach a cyclical top at this position.
So my conclusion is: BTC will continue to rise, and the gains will exceed 2024; for Altcoins, my theme is still to attack, but I need to know when to switch to defense, but the defensive tendency will be lower than in 2024.
Risks
Cyclical Top Risk
Predictions about the cycle top need to be constantly self-corrected. Although I don't think we are close to the cycle top, I must re-evaluate every week. The cycle top may not be an "event", but more like a spectrum that gradually approaches over time.
SBR Materialization Risk
With the new president taking office, everyone will be watching his actions. Although Bitcoin is expected to have regulatory tailwinds, if the president completely forgets about it, that would be quite bearish. The risks I see may include: SBR is forgotten; or more likely, SBR will not happen, but will be advanced in some other way.
For the latter case (changing the SBR plan), this could be an initially bearish but ultimately bullish event, as long as the plan itself supports Bitcoin.
In summary: the appearance of bullish signals means the bull market continues; the appearance of bearish signals means the plan needs to be re-examined - the bull market may continue, but the probability will decrease.
Supply Risk
In 2024, we witnessed the crazy macroeconomic conditions in the summer, with the stock market reaching new highs, but the Altcoin market saw more declines than gains, due to the continuous selling pressure from large suppliers such as Mt.Gox, the German government, and Grayscale GBTC.
Supply risk can never be eliminated. There will always be entities holding large amounts of BTC - the British government, the Dark Web Silk Road, FTX holdings, or any other entity. This is something you must keep an eye on, but in my view, if everything goes well, these events will be good buying opportunities at low prices.
Macroeconomic Risk
I believe that smaller rate cuts are still rate cuts. While this may not be "so bullish," the fact is that as long as interest rates continue to decline, liquidity will improve.
Again, the appearance of bullish signals means the bull market will continue. Unless there is a rate hike or no rate cut, the macroeconomic environment should be favorable for digital assets.
Themes and Tokens
Now we come to the part that everyone has been eagerly waiting for. But before listing specific themes and tokens, I want to reiterate the "attack, but know when to switch to defense" mindset I mentioned earlier - in this investment cycle, active portfolio management will outperform passive investment.
The "buy and hold forever" era is long gone. Although Solana rose 10-fold in 2023, its overall performance in 2024 was almost on par with BTC; so-called blue chips like TAO did not benefit from the AI hype we've seen in the past few months; and for meme tokens, the dogs are no longer wearing hats (WIF), the Chill guy is no longer chill, and the Hippo (MOODENG) seems to be on its last legs...
Nothing on this list is likely to let you "buy and hold."
In addition, I also like to ponder a question - who are the marginal buyers? In this market, there are basically 3 main marginal buyers - institutions (traditional finance players), funds (liquid funds/crypto-native funds), and speculators (contract traders, on-chain players, etc.).
A good narrative must be bought by at least one of them. Let's get right into it.
Theme 1: AI
Yes, AI will still be a hot topic. As mentioned earlier, we've already experienced several waves of AI hype, but if you've read my paper on AI tokens (link here), I believe the next wave is about to come.
- Macro level: Hype > Fundamentals > Utility;
- Micro level: Reply guy > Infrastructure > Applications/Avatars.
Buying and holding will not yield good results. GOAT is the start of all this, but it has fallen 60% from its highs and may continue to underperform.
- Top picks: AI-centric on applications, Swarms, gaming, and consumer-focused.
Picks like ALCH (game development), Griffain (helping control wallet agents), Digimon, and ai16z (the king of all AI) are top choices in my view, and there may be many more I've missed.
Theme 2: DeFi
This also needs no further explanation. DeFi will continue to be a great narrative, but investing in DeFi is very difficult, as very few tokens actually benefit from it. Even if they do benefit, they may not appreciate (look at the LST race).
To be honest, this would not be my top choice in terms of risk-reward, but I believe this will be a growing narrative through 2025.
- Top picks: AAVE / ENA / Morpho / Euler / USUAL;
- Secondary picks: Stablecoins / Payment-related tokens.
Theme 3: Layer 1
I may get a lot of hate for saying this, but I believe the trading opportunities in Layer 1 are back. HYPE has undoubtedly performed excellently, but SUI was actually underestimated by many when it was around $1, and it has now risen to $4. I think the market has been consistently missing Layer 1 trades - it's one of the areas that no one is paying attention to, but it's full of huge opportunities (as evidenced by HYPE's 10x gain).
- Top picks: SUI/HYPE;
- Secondary pick: Abstract.
I don't know how much I like Monad and Berachain. But I'm very excited about Abstract, and I think it could be a big bomb.
Theme 4: NFT Tokens and Gaming Tokens
I also really like this theme. I've been buying some gaming projects lately, and I think the NFT token space is worth watching. PENGU has been slowly recovering, Azuki will have ANIME, and Doodles will also issue a token... I don't think NFTs will rebound, but I think their tokens will.
Gaming tokens are also interesting, with Off-The-Grid showing us the possibility of making an interesting game. Given how out of favor this sector is, I think we should dig deeper and find the truly interesting games that are about to launch tokens.
- Top picks: PENGU / ANIME (Azuki) / Spellborne / Treeverse;
- Secondary picks: PRIME / Off-The-Grid (if they issue a token) / Overworld.
Theme 5: Other Narratives
The following are on my watchlist, and I don't particularly like them, but they are interesting.
- Data tokens: Kaito / Arkm;
- Meme tokens: I only like PEPE, the others... seem to be outdated;
- DePIN: PEAQ / HNT;
- Ordinals;
- Old Altcoins: XRP;
- Old DeFi: CRV / CVX.
2025 Predictions
This is really just for fun, just some things I think sound a bit incredible, but not impossible.
- DePIN is seriously implemented by a serious company, possibly through an acquisition;
- Binance loses market share as the top exchange, not to Hyperliquid, but to Bybit/OKX;
- With new advancements in VR technology, metaverse tokens see a resurgence;
- ICOs become popular again;
- The "Ethereum on-chain season" does not happen;
- SUI price reaches double digits (at least $10);
- Ethereum staking yields are approved for inclusion in ETFs, leading to more yield products for staking other tokens, as well as yield aggregators like we saw in 2021;
- A major artist uses NFTs and tokens to track and reward their fan community;
- BTC reaches $200,000;
- More Layer 1s see their CEO/founders leave after seeing Aptos;
- Base loses the on-chain race, and another Layer 1 takes its place. Solana maintains its position.
Conclusion
The above roughly summarizes my expectations for 2025. I expect the actual situation to differ significantly from my predictions, just as my plans for 2024 did.
The best advice and insight is actually "stay flexible and enjoy the journey." The market will continue to change, but this is just part of the game of life.
"No one can execute the same trade twice. Because the trade is different, and the person is different."
Good luck, and I'll see you on the other side. If you make life-changing profits in the process, remember to use them to change your life.
