The original text is from The Defi Report
Compiled by Odaily Golem (@web3_golem)
Editor's Note: March 12, 2025, sunny, nothing happened in the crypto market. The old-timers who experienced the 312 crypto crash in 2020 will reminisce about that "fear-dominated day" every year on March 12, and hope to get through the day peacefully. But calmness may not necessarily be a good thing. Looking at the long-term trend, although the Trump administration frequently shilled for the crypto industry, Bitcoin fell 17.67% in February, reaching a low of $78,258, and the situation did not improve in March, with Bitcoin still hovering around $80,000.
So, the terrifying thought is, will January 2025 already be the peak of this bull market? Will the next year bring us an endless bear market? Although there are still many positive voices in the market, the researchers at The Defi Report believe that the next 9-12 months will be a bear market, and Odaily will compile their full analysis of the market as follows, condolences~
Review of the Market: How Did We Get Here?
Before understanding the current on-chain data, let's first do a qualitative analysis of the current crypto cycle.
Early Bull Market Phase: January 2023 to October 2023
This is roughly the period from January 2023 to October 2023, which is the period after the FTX collapse when the market hit bottom and became very quiet (low trading volume, crypto Twitter dormant), but the market has actually started to rise.
During this period, BTC rose from around $16,500 to $33,000.However, no one called this a bull market, as during the "early bull market" period, most people were still in a wait-and-see mode.
Wealth Creation Phase: November 2023 to March 2024
This is roughly the period from November 2023 to March 2024.
During this time, we saw some big moves and some exaggerated wealth creation. SOL went from $20 to $200, the Jito airdrop (December 2023) created a huge wealth effect in Solana and repriced the value of Solana DeFi (Pyth, Marinade, Raydium, Orca, etc.). The venture capital market reached a peak of frenzy during this period (which is very typical).
BTC went from $33,000 to $72,000; ETH went from $1,500 to $3,600; Bonk's market cap went from $90 million to $2.4 billion (26x); WIF's market cap went from $60 million to $4.5 billion (75x). The seeds of an even bigger "Meme Season" have been sown in this phase.
But during this period, the market was still relatively "quiet", and your non-crypto friends might not have asked you about crypto yet.
Wealth Distribution Phase: March 2024 to January 2025
This is roughly the period from March 2024 to January 2025.
This is the peak of crypto market attention, where we see "WAGMI"-type sentiment, rapid rotation, new meme coins (that quickly disappear) and blind risk-taking to get returns. Celebrities and other "crypto transients" often enter during this period, and crazy headline news like "Tesla buys BTC" or "Bitcoin strategic reserve" often appear in the wealth distribution phase.
New investors are drawn into the market by these headlines, but they don't know they're late to the party. This is also the second wave of the "Meme Season", which then evolves into the "AI Agent Season". During this period, the market ignored many obvious problematic behaviors, and no one was willing to speak up loudly, because people were making money, and this has also brought us to the current "hell".
Wealth Destruction Phase: January 2025 to Present
We believe we entered this period just after Trump took office. This is the period after the market has peaked, where the bullish catalysts have now become the past, and seemingly positive news is met with bearish price action.
Under the current system, administrative actions related to "strategic Bitcoin reserves" have not actually driven the market up - this is an important signal. During this period, market reversals often encounter key resistance and gradually fade (we saw this after Trump tweeted about crypto reserves last week).
Other signals that can be seen during the wealth destruction phase:
Liquidations and "panic" will disrupt the market, but will not fully wake it up. We saw this in the DeepSeek AI panic and tariff uncertainty.
Investors are "hopeful". We see a lot of discussion today about the US dollar falling and global M2 rising (more on this later).
More "scammers" are entering the market. More and more people are DMing crypto people asking them to "check out their project"; more advertising capital is circulating everywhere, with well-funded projects being carelessly spent at conferences; more PvP/competition/infighting, and a generally "dirtier" atmosphere from the industry; during the "wealth destruction" period, people start to blame the bad guys.
During this period, the "corpses" in the market also start to surface - usually after liquidation. The last cycle started with Terra Luna, which led to the bankruptcy of Three Arrows Capital, triggering the bankruptcies of BlockFi, Celsius, FTX, and ultimately the demise of Genesis and the sale of CoinDesk.
We haven't seen any "bodies" yet, but this cycle should be fewer - simply because there are fewer CeFi companies. Time will tell, and the later the trigger comes, the higher the bottom we'll hit when we officially hit bottom.
Where might the trigger come from? No one knows, but the usual suspects are:
Exchanges. Keep a close eye on some "B and C-tier" exchanges for hidden leverage and/or potential fraud.
Stablecoins. Keep an eye on Ethena/USDe - its circulating stablecoin value is close to $5.5 billion. Ethena maintains its peg and earns income from cash and arbitrage trades (holding spot assets, shorting futures) - this was a major source of leverage in the last cycle (through Greyscale). Ethena's increased reliance on centralized exchanges adds additional counterparty risk. Additionally, MakerDAO has also invested a portion of its reserves in USDe, bringing additional cascade risk to DeFi.
Protocols. Watch out for potential hacks and liquidation cascades due to crypto collateral, such as Aave, which still has over $11 billion in active loans (down from a peak of $15 billion).
Strategy. They've done a good job managing their debt, as most of it is long-term unsecured debt or convertible debt (no margin calls on their BTC holdings), and they were able to withstand a 75% drop in BTC prices in the last cycle. That said, a significant drop in BTC prices could put pressure on Saylor, forcing him to sell large amounts of BTC at the worst time.
The best time to re-enter the market is at the end of the wealth destruction phase, which we believe has not yet arrived.
Some Bearish Data You Can't Ignore
DEX Trading Volume
After Trump launched the Meme coins, Solana DEX trading volume has dropped 80% from its peak, and the number of unique traders has dropped by more than 50%. This signals that the market frenzy is starting to wane.
Token Issuance
The token issuance on Solana has declined 72% from its peak. However, the chain is still creating over 20,000 tokens per day.
Long-Term Holder MVRV Ratio of BTC
Data: Glassnode
The long-term holder MVRV (the "smart money" of BTC) reached a peak of 4.4 in December. This is 35% of the 2021 cycle peak of 12.5, and also 35% of the 2017 cycle peak. BTC rallied about 80x from the bottom to the peak in the 2017 cycle, and about 20x in the 2021 cycle. In the current cycle, it has rallied about 6.6x.
The realized price (the average cost basis of all circulating BTC) reached a peak of $5,403 in the 2017 cycle, 15.1x higher than the 2013 cycle peak. It reached $24,530 in the 2021 cycle, 4.5x higher than the 2017 cycle peak. Today, the realized price is $43,240, 1.7x the 2017 cycle peak.
Abandon the Illusion, This Cycle Has Ended
From the data above, we can observe the symmetry in the decline of the peaks across cycles. These data clearly tell us that the law of diminishing returns is real. BTC is now a $17 trillion asset, and regardless of how optimistic the headlines are, investors should not expect to see a sustainable parabolic trajectory like in the past, as it would take too much capital inflow to move the curve.
When BTC loses momentum, the rest of the market will lose everything.
The frenzy on Solana is waning. This is concerning because we fear the "Solana comeback story" is built on a "house of cards" - given that 61% of DEX trading volume this year has involved Meme coins. Additionally, less than 1% of Solana users have contributed over 95% of the gas fees in the past 30 days, which is worrying as it highlights a small group of Solana users (whales) are preying on everyone else (the "P-soldiers" trading Meme coins). So if the "P-soldiers" get tired of losing and take a break (which we think they will), we may see Solana's fundamentals deteriorate rapidly.
Long-term BTC holders have now profited twice in the past year. Their realized cost basis is currently around $25,000. Meanwhile, the short-term holders who bought at the peak are currently in a loss (with an average cost basis of $92,000). We believe, as BTC reaches a peak of $109,000, this group may continue to sell at lower highs.
Data: Glassnode
When presenting these data, it is undeniable that the "typical" cycle has ended, and to deny this would be to deny reality. Of course, there is no "definitive conclusion" here, we believe the best way to handle this information is to accept the reality + assign a probability for the cycle reaching a peak, which we think is clearly above 50%.
Can the Bull Case Still Stand?
There is still considerable resistance to the bear case in the market, and the bulls have not quietly put down their weapons. In this section, we will present the "bull case" that cannot stand.
Global M2 / Liquidity
Data: Bitcoin Counter Flow
The green box on the right shows that as global M2 starts to rise, BTC is declining. Some see this as a bullish signal, citing the correlation between M2 and BTC and the general lag in BTC's performance (2 to 3 months). That said, the green box on the left shows the same dynamics at the end of the last cycle: M2 rose as BTC declined. In fact, M2 did not peak until early April 2022 - 5 months after BTC peaked.
Global M2 has risen 1.87% since mid-January, as central banks have largely shifted from tightening to easing, which is favorable for liquidity conditions. But we should also ask the following questions:
What is driving the growth in M2? We believe this is mainly due to the weakening of the dollar (down 4% since February 28) - in dollar terms, this means more foreign currency. This is a boost to global M2, and the recent depletion of reverse repo tools + China's easing policies to boost the economy are also factors.
Will M2 continue to rise? As investors shift funds overseas, the dollar will continue to weaken, but not as dramatically as in the past few weeks. We believe China's policies will slow the dollar's depreciation. However, the Fed is unlikely to adopt an easing policy in the near term, as they have stated that reserves are still "ample".
How does the current liquidity condition compare to last year? Compared to last year, the current liquidity condition should be seen as unfavorable. Remember, this is more about the rate of change, not nominal growth. We strongly believe that the Fed and the Treasury "stimulated" the market last year to get Biden/Harris re-elected. This was done through "shadow liquidity" - or as Cross Border Capital's Michael Howell puts it, "non-QE, QE" and "non-yield curve control, yield curve control". The chart below shows the impact on the rate of change when these policies were reversed under the new Trump administration.
Data: Cross Border Capital
It is estimated that the above "secret stimulus" injected $5.7 trillion into the US market in early 2024. This was achieved by depleting reverse repos + pre-issuing new bonds. Finally, investors should closely monitor the comments made by Secretary Yellen in her recent CNBC interview: "The markets and the economy have become addicted, we've become addicted to this government spending, and there will be a detox period."
Strategic BTC Reserves
As of last Friday, the discussion around crypto-native entities' strategic crypto/BTC reserves remained hopeful - even though the market has shrugged off the impact of this news multiple times in the past 6 weeks, making it a "buy the rumor, sell the news" event.
Is the "Cycle" Thinking Flawed?
It must be acknowledged that this "cycle" is different from past cycles. For example:
BTC set a new all-time high before its first halving.
The cycle is much shorter, only two years.
The altcoin season's ending is markedly different, as BTC's dominance has been gradually rising since early 2023.
Bitcoin is now fully integrated into the financial system, with the support of the US government.
If the "cycle thinking" is flawed, then we may not have reached the peak yet. Instead, perhaps we are in a pause/correction/consolidation phase before the next leg up, rather than a bear market that could last a year or more with a 75-80% price decline (as we've seen in the past)?
While the cycles are evolving, we still expect the bear market to last 9-12 months.
Final Thoughts
To summarize the key points of this article:
We are currently in the "complacency" stage of the cycle shown in the chart above, where all the bullish catalysts that people were talking about a few years ago have already played out.
The economy may be heading towards a recession. The message being conveyed by the Trump administration is very clear, they are essentially telling us that the economy needs to detox. This is very similar to Powell's statement in early 2022 that "pain is coming". We should heed the warning.
Given the current extremely bearish market sentiment, we can foresee BTC rebounding to the $90,000 level in the short term. However, we believe this will trigger a massive sell-off - this could potentially kill any hope of a recovery in the bull market structure.
But we are not permanently bearish either, and we can consider turning bullish again when the following factors occur:
Reversal of fiscal tightening/efforts by the US Department of Energy (DOGE).
Significant reduction in Federal Reserve/quantitative easing.
Massive influx of global liquidity, driven by the Federal Reserve (not just China).
Major correction/capitulation in the S&P 500/Nasdaq.
But for now, we must persist that the cycle top has arrived, and a bear market is imminent.Of course, in the long run, this is a good thing,as the crypto industry enters a "pivotal" period, it is now time to take a step back and rebuild the financial system on public blockchains.I like bear markets, as the receding tide allows people to more easily distinguish the noise from the signal of the previous cycle, which will prepare us for the next bull market.
