Title: What's Happening in the Crypto Market and What's to Come (February 2025)
Author: 0xTodd, Partner at Nothing Research (@0x_Todd)
In the past week, many friends have called me to inquire about the market situation, and I feel it's necessary to publicly share my thoughts and views on the current market conditions.
"What has changed?"
"What's the future outlook?"
Those who have been following me for a long time know that I am a long-term investor. So, since 2019, I have had an annual strategy update, and this is the one for 2024-2025, which I'd like to share and discuss with my family.
I. DeepSeek Burst the Bubble
Whether DeepSeek really spent $5 million to train this AI or not, the narrative is that "algorithmic advancement" has at least temporarily defeated "computational power advancement".
You don't need to dwell on whether it's true or not - since the market has accepted the $5 million fact, you should treat it as true.
By the end of 2024, our crypto industry, apart from memes, had only one remaining narrative that I'm reluctant to admit but objectively true: the AI Agent, which was the last hope for the entire industry.
However, no one expected that the AI Agent would be ruthlessly crushed by DeepSeek, the true AI track next door.
The DS team is full of real IQ200, fresh graduates from Tsinghua and Peking University, and medal winners in the International Mathematical Olympiad.
In contrast, the figures we idolize in our industry are mostly second-tier programmers who stay at home, AI engineers who were fired from big companies or running side businesses, so we are sometimes forced to have an IQ of 50.
So...
On January 27th, I tearfully took profit on all my AI token positions. I didn't sell at the peak, and the drawdown was painful, but it's the truth.
But the colder fact is that this has turned our entire AI Agent track into a joke, and this is likely irreversible.
The reason why "narrative" comes before "event" is that this "event" has not yet materialized, and can only be supported by "narrative". Once the story can no longer be told, the decline of the track is truly irreversible.
II. The Motley Crew of Presidents and Presidents
I don't know how everyone felt during the Chinese New Year, but my physical experience was that many relatives and friends were asking how to register on BN or OKX, because they wanted to buy Trump Coins.
The last time they were this crazy was during the National Day, when they wanted to open accounts and rush into the A-shares.
If I'm not mistaken, those brave warriors who entered the A-shares on October 8th are still hanging on that mountain top. After taking profit on AI, to be honest, I'm getting more and more worried, and then I saw this post.
In short: the president seems to be in trouble, but for two possible reasons:
1. He doesn't make money through the channels you can see;
2. He's an idiot;
But I know the answer is definitely not 2.
Yes! Meme has now become what the president is playing with, and he can even make money through channels unknown to us. Honestly, can our meme games compare to Trump sitting at the same table?
A Thai hippo, an American squirrel, a longevity drug that extends the life of flies, can they really sit at the same table as Trump, who sits firmly in the Oval Office?
It's Chinese New Year, the adults at one table, the kids at another.
The adults drink fine wine, the kids can only drink Sprite.
So on that day, I basically cashed out all my meme positions. My meme position had once made huge profits, but due to actively lowering my IQ to 50, I failed to complete the great retreat, but kept joining the great revolution.
It feels like a dream.
III. A Top Signal: A High School Kid Makes Millions
I believe that all the families playing memes, and even those not playing memes, have heard about this legendary story recently.
A high school kid, by joining and sitting still for a month, suddenly hit the jackpot on Jelly, making millions at a super low cost.
Of course, the story gets more and more exaggerated as it spreads, and there are more and more rumors, I'm not 100% sure it's true, but I know the taste is right.
Looking back at the 1-3 days before the 69K historical top in 2021, I was reflecting:
An intern, easily outperforming fund managers;
An ENS community contributor, getting an airdrop worth millions;
At that time, it was just like, this time right now.
I liked this post, where a TIME editor (or possibly a hacker) could immediately harvest countless SOL with a fake tweet. I ask you, what does this mean?
It's not that making money is wrong - the masters can always make money, even at the bottom of a bear market. But if the subject becomes ordinary people: the intern made a lot of money, the ENS contributor made a lot of money, the high school kid made a lot of money, the editor made a lot of money.
It means: 【At this moment, everyone's hands are particularly loose】 Experienced gamblers all know that it's only when the floating profit is extremely high that they become loose-handed.
This represents the greed index reaching a true peak.
This is a super top signal.
So on the 30th, I cleared out almost all my Altcoins, only keeping BTC and a small portion of mainstream coins ETH/SOL/DOGE/exchange tokens. Although there were still losses, at least I left some victory fruits. I admire the brilliant operation of the high school kid, and I also revere the iron law of this alternative investment market.
IV. Doubts about BN and BN's Response
Honestly, I don't want to talk about this topic.
As a former CEX practitioner, I've seen this consultant-listing-dumping routine too many times, from the initial anger to the gradual numbness, it's already a familiar sight.
But in the past, this thing was kept under the table, it was "small greed and small corruption are the lubricants of development";
It was "when the water is clear, there are no fish", a bit of murkiness under the water surface is part of the game rules.
After all, we're not living in a utopia, not in a vacuum homeland.
But the thing that this is most afraid of is being taken from under the table to the tabletop.
I don't intend to criticize BN or the sister, because this exists in almost every CEX.
If this were in the traditional world, to exaggerate, it would be a huge scandal that could lay off hundreds of people and send dozens to jail.
Maybe the sister would have been better off not responding, learning from the celebrities' cold treatment, still leaving some hope for the retail investors.
But our industry is already dominated by skeptics, and a huge scandal is a heavy blow, ruthlessly pounding on the hearts of every holder.
It has shattered the faith of many people.
Our industry really needs "gods", because it is sustained by consensus.
But when everyone discovers that the public servants under the "God" are also trying to make some quick money, the faith is suddenly extinguished, and it is quickly projected onto the God-related - all the Altcoins on the BN, which are now facing a huge skepticism and attention from the retail investors. If AI and HOOK are like this, will the other coins really be better?
V. The Future Script
If we follow the "clinging to the sword in the boat" view, this drop is very similar to 5.19, and I suggest that everyone review the trend after 5.19 themselves.
The trend after 5.19 in 21, source: Bitfinex
If following the 5.19 script, the next will be a repeated and sustained two-month volatility drama, until the most loyal people are also washed out, then a new $Bitcoin ATH will come.
Of course, some people suspect this is the 12.4 script, AKA the beginning of the bear market.
From the inner tendency, I hope this is 5.19. After all, the matter of Bitcoin as the US national strategic reserve is moving towards clarity, and we should never underestimate the huge impact of this. Even if Bitcoin reaches 85K-88K, I am still willing to add some more positions.
VI. My Position Distribution
My current positions:
40% BTC;
20% mainstream coins (ETH, SOL, Doge, BNB/MNT);
40% stablecoin finance;
Bitcoin is my eternal faith, I think I will never sell BTC again, and I will not do any wave trading.
The reason for keeping ETH: To be honest, my faith in ETH is weakening.
However, objectively speaking, the President's DeFi project is buying ETH.
I don't know how many of you are trading US stocks, many people regret not following [Nancy Pelosi, the Goddess of Stocks on Capitol Hill].
Source: CommonWealth Magazine
Pelosi's heyday was the Speaker of the House, which is only the third-ranking position in American politics.
And now Trump is the legitimate President, this Crypto President is holding a large position in ETH (although he has deposited it into an untraceable Coinbase custody), this weight is not to be underestimated.
Secondly, ETH has fallen to its current position, I feel it has reached the extreme of FUD, and there may be a rebound. I can't buy when no one cares, at least don't sell when no one cares.
The reason for keeping SOL:
There is a small probability of an ETF;
But the cooling of the AI narrative and the short-term decline of MEME are two small clouds.
The reason for keeping Doge:
Grayscale has launched a Dogecoin trust, Doge also has a small probability of an ETF;
In addition, Musk is working hard in the D.O.G.E department;
Riding with the world's richest man and the "US Reform Commission Chairman", I think I can sleep well.
The reason for keeping exchange tokens:
To be blunt, exchanges have no chance of reaching a bigger stage.
Coinbase will not list BNB, and Binance will not list MNT.
But exchanges are the only institutions in our industry that can make money and give back;
If the bear market really comes, exchange tokens will be relatively more resistant to declines, and the occasional IEO can also recover some blood, relying on this to get through the bear market.
VII. Cruel View: The Good Days of the Old Timers Are Over
Except for the above, I will most likely not hold any Altcoins in large positions in the short term - the reason is also very simple, inflation is too fast.
The speed of new users and new capital entering the market is simply no match for the speed of these coin minting maniacs.
Source: Decrypt
The other day there was a statistic, the best account on pump fun issued 17,000 coins in 3 months.
Not 170, not 1700, but 17,000! His contribution may exceed the total issuance of tokens in the entire 2017 bull market.
Why did the investment strategy of the old timers fail?
Too many choices!
Too many angles!
Even the same angle has N CAs, how can the old timers' Altcoins compete?
The old timers' favorite strategy: buy a mid-cap Altcoin at $100M, $200M.
Hold it for 2-3 months, bet it will outperform Bitcoin.
But now, it may not even be able to outperform ETH.
And General P's favorite strategy: buy a 10K valuation project on the internal market.
Run away in 30 minutes.
Real men never look back at the explosion.
Obviously, in the era of token hyperinflation, General P is far superior to the old timers.
I don't urge everyone to become a P warrior, I just hope that at least you won't be an old timer.
VIII. Best Position: 50% BTC + 50% Stablecoin Finance
Also, I sincerely advise everyone to hold a certain amount of USDC to get through the coming period.
You have to accept the fact that no one can really sell at the super top.
The mountain top is once every 4 years, in the 1,000 days you have to find a day to sell, 1/1000 probability, those who can do it are very few, all are super lucky.
At this stage, a half position is the best choice.
50% of your principal invested in finance, we don't talk about mining or arbitrage.
We just do the simplest Ethena USDE, now Pendle can still offer an 18% interest rate.
If you're too lazy to mess with Pendle, just throw it into AAVE or the mainstream CEX finance, there's still 10%.
The other 50% is mainly in Bitcoin, quietly waiting for the day when the US Bitcoin strategic reserve arrives.
With interest cash flow and dreams and faith, you must be comfortable and packed.
Of course, you can also allocate 5% to the Altcoin you truly believe in, whether it's ETH, SOL, Doge or any other faith coin.
Allocate another 5% of the funds to go PVP a few times, win and be cool, lose and treat it as consumption, keep your hand in, isn't it great?
Finally, form this Yin-Yang distribution.
PS: This is also the look I want to gradually turn my portfolio into Source: 0x Todd
IX. Finally
I am quite satisfied with my current positions, after all, this is my 8th year in the crypto industry, with so much experience. The only thing I regret a bit is that I was playing in Osaka over the Chinese New Year and was a bit lazy, not organizing these thoughts and releasing them in a timely manner.
The same strategy, if I had said it a few days ago, it might have helped a lot of people, but a few days later it becomes a post-mortem. But it's not too late to mend the pen.
I hope that every family member can get their own big results in the crypto market.
Of course, if you can't get the big results, then keep some small results, earn more spiritual wealth and social wealth, it's not in vain.
Finally, wish all family members - Happy Year of the Snake, the golden snake dancing wildly.
Todd
February 5, 2025
