Investment plan for 2025: AI remains strong, DeFi continues to develop, and the market should remain flexible in the face of ever-changing

Author: 0xkyle

Compiled by: TechFlow

Good morning! Predicting the future has never been an easy task, but as traders and investors, we need a clear plan. Like all plans, this one will be adjusted as the market environment changes - after all, the market is a constantly evolving ecosystem. This memo is just based on my current perspective, some preliminary thoughts on 2025, for reference only, and does not constitute investment advice.

Before talking about 2025, let me first review the plan for 2024. If you're not interested, you can skip it.

To be honest, there were quite a few issues with my 2024 plan. Let's go through them one by one:

1. The impact of the Bitcoin halving was underestimated

At the time, many people debated whether the Bitcoin halving would be a "sell the news" event or would become a "bullish expectation" as in the past? It turned out that this halving did not cause much of a stir, but became the starting point of the bull market.

1. The misjudgment that rate cuts would be bearish

This judgment was obviously wrong. However, before the rate cuts, I had already publicly adjusted my view. The initial assumption was: "With inflation remaining high, rate cuts may only appear when economic data deteriorates significantly, becoming a passive response."

It turned out that the Fed's actions broke this assumption. For most of 2024, the right strategy was to believe the Fed's statements.

1. Failure to execute scenario planning

My core plan for 2024 was: "Reduce risk by partially reducing positions before rate cuts, then buy back in when prices fall, while keeping some positions unchanged."

But in reality, I didn't execute this plan at all, haha.

The market performance in 2024 was completely beyond expectations - from the initial sell-off after the ETF launch, to the rebound in the first quarter, then the weakness in the summer, and finally the positive impact of rate cuts on the stock market, but it plunged the crypto market into chaos. Bitcoin prices fluctuated between $50,000 and $60,000 until the election at the end of the year finally saw a real breakout.

Looking back, my biggest mistake was not realizing that 2024 was the year traditional financial institutions gradually accepted Bitcoin. This should have been the main theme of 2024 - traditional finance slowly but steadily entering the Bitcoin space.

1. Judgments on narratives:

• ETF beneficiaries: COIN (stock)/BTC/ETH

I mentioned some tokens like STX and TRAC, but they performed poorly. However, COIN performed very well, with the price around $120 when I wrote the article.

In addition, niche narratives like BRC-20 and LST did well in the first quarter of 2024, even though they didn't last too long.

• The success of SOL

SOL was $60 at the time! This may be one of my most successful trades. I wrote this article when the price was only $20 and predicted that "SOL will reach triple digits in the next cycle." This prediction turned out to be completely correct.

• Regulation and product-market fit

While I grasped the regulatory narrative, I chose the wrong tokens. The idea was to pick projects that had passed the DeFi regulatory hurdle but had not yet fully proven market demand. However, my choices of MMX and dYdX were clearly wrong.

• The failure of decentralized AI

I was very optimistic about decentralized AI, but in the first quarter of 2024 peak, I realized that the actual products developed were far from my expectations. Projects like Render and Akash lacked real-world use cases, more like "shitcoins".

• The success of GameFi v2

In the first quarter of 2024, GameFi-related assets performed very well, with BEAM price surging and many GameFi projects experiencing a wave of hype. However, only those who sold at the top were able to profit.

• Other potential narratives

  • DePIN / RWAs

  • DeSci

  • Meme (BONK / DOGE / PEPE / HPOS10INU)

  • RUNE / CACAO

  • GambleFi

  • Airdrops (LayerZero / Starknet / ZKSync)

Among these narratives, except for Meme, nothing seems to have stood out particularly - Meme performed very well in the first quarter of 2024, with Bonk's price basically doubling or tripling from when I mentioned it. DePIN also had its moment of glory, with projects like Geodenet and Helium; however, I didn't focus on it too much. A few months ago, decentralized science (deSci) started to emerge, with BIO tokens even listing on Binance. However, to be honest, I'm not particularly optimistic about this field.

1. Cycle top

At the end of the article, I wrote: "There's one thing I haven't talked about yet, and that's how I think this cycle will end - recently, I've been thinking more about GCR's point that 'the pico-top of the previous cycle was when funds entered, and the pico-top of the next cycle will be when countries start buying.'"

Looking back now, with the benefit of hindsight, I feel this view is very convincing, and I plan to incorporate it into my 2025 investment plan. This is definitely one of the "main signals of this cycle" on my list. The logic is very clear and reasonable.

2025 Plan

Now that the 2024 review is over, let's move on to the main topic. As usual, I'll start with macro and scenario planning, then explore specific investment narratives.

Scenario Planning

The 2024-?? cycle has already begun. I personally believe it started in late 2023, but that's just a detail. So far, the market has performed as follows: January 10th, Bitcoin ETF launched → Reached a new all-time high, triggering an Altcoin season, followed by a volatile period in Q2 and Q3 of 2024, with Bitcoin prices fluctuating between $50,000 and $60,000. By election day, Bitcoin broke through its previous high and reached $100,000, but was unable to break further, and is now fluctuating around $90,000.

Notably, Altcoin seasons or the so-called "good times" often accompany Bitcoin reaching new highs. The first time was when Bitcoin surged to $69,000, but failed to break through; the second time was when it reached $100,000.

The next Altcoin cycle may start after Bitcoin successfully breaks through $100,000. Although I hope it will happen in Q1 2025, it may repeat the volatile pattern of Q2/Q3 2024. This is something I need to be psychologically prepared for. Therefore, I have planned the following possible market scenarios:

Here are my views:

• Scenario 1: Bitcoin and Altcoins rise together. If 2025 becomes a unidirectional uptrend, with Bitcoin continuing to rise and Altcoins performing well, we may see a repeat of the across-the-board rally we've seen in the past two months.

  • Probability: 30%-40%

  • Action plan: Buy quality Altcoins on dips and seize the opportunity to position.

• Scenario 2: Bitcoin rises, Altcoins have limited gains. This is similar to the 2024 market, where the next few months may still be volatile, but more optimistic overall than 2024 (because Bitcoin continues to rise). Certain areas may perform well.

  • Probability: 50%-60%

    Here is the English translation with the specified terms:

  • Action Plan: Buy selected Altcoins at low prices, avoid overheated sectors, and look for the next potential direction.

• Scenario 3: Bitcoin rises, Altcoins fall. If this is the top for Altcoins, Bitcoin may continue to rise strongly, while Altcoins will perform weakly.

  • Probability: 20%-30%

  • Action Plan: Decisively clear out Altcoins, although there may be some drawdowns, if Altcoins have no upward momentum, it is still necessary to cut losses in time.

• Scenario 4: Both Bitcoin and Altcoins fall. If the market peaks, all assets will enter a downward cycle.

  • Probability: 10%-20%

I believe that the time for Bitcoin to break new highs will not be as long as in 2024, because the current macroeconomic environment has already provided favorable support for Bitcoin. During the "summer doldrums" of 2024, although ETFs had just been launched, traditional financial institutions were still trying to explain the value of Bitcoin to their clients. However, at that time, a global consensus on the importance of Bitcoin had not yet formed.

Now, with the election of Trump, discussions about a "Strategic Bitcoin Reserve (SBR)" are gradually heating up, and this narrative has undergone a significant change.

Although I will not speculate on the likelihood of the SBR being established, it is undeniable that this new political environment has brought more attention to the digital asset space. Especially when the president of the world's largest economy frequently talks about Bitcoin, people are more easily convinced to buy it.

Recognizing the importance of this change in power is extremely important. Therefore, I believe that BTC will continue to sail smoothly in 2025, but for Altcoins, it is a similar but different story.

Looking at the performance of the total market capitalization of Altcoins (Total3), it reached the historical high of 2021 in the first quarter of 2024 and set a new cycle high in the fourth quarter. The overall trend is similar to the historical cycle. To be frank, the difference between my Scenario 1 and Scenario 2 is not significant.

The key is how to grasp the position and timing. I am optimistic about 2025, but I cannot predict how long this will take. Although I believe that the upward trend will be faster than in 2024, Altcoins may still experience significant declines during periods lacking catalysts.

My strategy is: As long as the cycle has not yet peaked, maintain a net long position, whether in Bitcoin or other assets. I don't think 2025 will repeat the "summer doldrums" of 2024, but similar periods of volatility may occur - market sentiment is low, but prices can still remain relatively stable.

For on-chain assets, their volatility is greater, and they may experience declines of up to 70% during market adjustments. Therefore, my goal is to sell when the hype around on-chain assets is at its highest, switch back to large Altcoins (top 20 by market cap), and then gradually rebuild positions.

I don't think Altcoins have reached their peak here, because I can't imagine Bitcoin (BTC) continuing to rise while Altcoins are performing poorly. And I also don't think Bitcoin will peak at this stage.

Conclusion:

• Bitcoin will continue to rise, and its gains are expected to exceed the performance in 2024.

• For Altcoins - maintain an offensive stance, but know when to switch to defense. However, compared to 2024, the defensive intensity can be appropriately reduced.

Risks

1. Cycle Top

The cycle top is often a self-fulfilling phenomenon. Although I believe we are still far from the top, this needs to be reassessed weekly. The cycle top is not necessarily a specific "event", but rather a state that gradually approaches over time.

1. Risks of the Strategic Bitcoin Reserve (SBR)

After the new president takes office, everyone is focused on the direction of his policies. Although Bitcoin currently has tailwinds, if the president completely ignores Bitcoin, this will be a rather unfavorable signal.

I believe the risks are mainly reflected in two aspects: either the SBR plan is shelved, or the SBR is not implemented, but some alternative plan is launched. If the latter, although it may bring short-term negative news, as long as it is beneficial to Bitcoin, it will ultimately turn into a positive.

1. Supply Risk

In the summer of 2024, while global stock markets hit new highs, the crypto market faced huge selling pressure, mainly from the sell-offs of suppliers such as Mt. Gox, Germany, Grayscale GBTC, etc.

Supply risk always exists, and there will always be institutions or individuals holding large amounts of Bitcoin in the market, such as the UK government, Silk Road liquidation assets, FTX distributions, etc. Although these events may bring short-term pressure, if everything goes well, they may also become good opportunities to buy at low prices.

1. Macroeconomic Risks

I believe that even if the rate cut is relatively small, as long as interest rates continue to decline, market liquidity will improve, which is still a positive signal.

If the signal is negative (inflation rises again, the Fed has to raise interest rates), it may have a negative impact on digital assets.

Themes and Tokens

Now we come to the part that everyone is most looking forward to. But before we start the discussion, I want to emphasize again: "Be mainly offensive, but know when to switch to defense." In this cycle, active portfolio management will far outperform passive management.

The old "buy and hold" strategy is no longer applicable. For example, although Solana surged 10 times in 2023, its performance in 2024 was almost on par with Bitcoin. Similarly, top tokens like TAO did not benefit from the recent AI hype. And Meme has lost its former glory, such as "Dogecoin is no longer popular", "Calm Guy is no longer calm", "Pygmy Hippo seems to have lost its luster".

It can be foreseen that in this cycle, there will be almost no assets suitable for "buy and hold".

In addition, I like to think about: who are the marginal buyers in the market? Currently, there are three main types of marginal buyers in the market: institutional investors (traditional financial institutions), funds (liquidity funds/crypto-native funds), and speculators (perpetual contract traders, on-chain players, etc.).

A successful investment narrative must attract the attention of at least one of these buyer groups. Based on this, let's start the analysis:

1. AI Theme

AI is still an important investment theme. But as mentioned earlier, we have already experienced several rounds of hype. If you've read my views on AI tokens, you'll know that I believe the next wave is about to arrive.

• Macro Trend: From "hype" to "fundamentals" to "actual utility".

• Micro Trend: From "social buzz" to "fundamental driven" to "actual applications and virtual avatars".

However, "buy and hold" is not a good strategy. For example, Goat, which was the start of all this, has already fallen 60% from its high and may continue to underperform.

Recommended tokens: Application technology/clusters/games/consumer-facing AI

Such as ALCH (game development), Griffain (helps manage wallets with smart agents), Digimon, Ai16z (a leader in the AI field). Of course, there are many other potential tokens that may be overlooked, but these are my top picks.

1. DeFi

2. DeFi (decentralized finance) remains an important investment theme, but it is difficult to invest in. Only a few tokens can truly benefit from it, and even if these tokens have potential, their prices may not rise significantly (e.g., the performance of the LST-related field).

From the perspective of risk and return, DeFi is not my first choice, but I believe this field will continue to develop in 2025.

Recommended tokens: AAVE, ENA, Morpho, Euler, USUAL

Alternative tokens: stablecoins, payment-related tokens

1. Layer 1 blockchain (L1) trading

Although it may be controversial, I believe L1 trading will regain the market's focus in the future. The hype potential in the L1 field is obvious. For example, the rise of Sui from $1 to $4 shows that the market's interest in L1 is rebounding.

L1 trading is a currently underestimated but potentially huge field, just like Hype has already risen 10-fold.

Recommended tokens: SUI, Hype

Alternative tokens: Abstract

I am not very enthusiastic about Monad and Berachain, but I am very excited about Abstract - I think it may become a hit project.

1. NFT tokens and game tokens (new round)

I am also very optimistic about this field. Recently, I have invested in some game projects and believe that the NFT token field is worth watching. For example, the price of Pengu is gradually rebounding, Azuki has launched $ANIME, and Doodles also has its own characteristics. Although I don't think NFTs themselves will make a comeback, their related tokens may see new opportunities.

Game tokens are also worth watching. Off-The-Grid has proven that it is possible to develop an interesting game. Given that this field is currently underestimated, I think it is a good strategy to dig deeper into quality game projects that are about to issue tokens.

Recommended tokens: Pengu, Anime (Azuki), Spellborne, Treeverse

Alternative tokens: Prime, Off the Grid (if token issued), Overworld

1. Other narratives

Here are some narratives that I am following, although I am not particularly optimistic about them, but they still have some appeal:

• Data tokens: Kaito, Arkm

• Meme: The only one I'm interested in is PEPE, the rest are mostly outdated

• Decentralized Internet of Things (DePIN): PEAQ, HNT

• Ordinals

• Classic Altcoins (Dino Alts): XRP, etc.

• Old DeFi projects: CRV, CVX

2025 Predictions

Here are some of my bold predictions for 2025, which may sound a bit far-fetched, but are not entirely impossible:

1. DePIN (decentralized Internet of Things) is officially implemented by a large company through acquisitions or other means.

2. Binance's market share in the exchange market declines, but is surpassed by Bybit or OKX rather than Hyperliquid.

3. With the progress of VR technology, metaverse tokens regain vitality.

4. ICOs (initial coin offerings) become popular again.

5. The ETH chain's boom season fails to materialize.

6. The Sui price breaks into double digits (at least $10).

7. ETH staking rewards are approved through ETFs, leading to more staking tokens and yield aggregation products, similar to the situation in 2021.

8. A well-known artist uses NFTs and tokens to interact with and reward fans.

9. The price of Bitcoin reaches $200,000.

10. More L1 project CEOs or founders choose to leave, following the influence of Aptos.

11. Base is defeated in the on-chain competition and replaced by another L1 project, while Solana maintains its leading position.

Concluding Thoughts

Thank you for reading this far! This is my investment plan for 2025. I expect these plans may be adjusted as the market changes, just like my 2024 plans.

The most important advice here is: stay flexible, be like water and go with the flow. Enjoy the journey, as market changes are inevitable, but that's what makes investing so fascinating. As the famous saying goes:

"No man ever steps in the same river twice, for it's not the same river and he's not the same man."

Good luck and safe travels! If you've gained life-changing returns on this journey, don't forget to use those returns to truly change your life.