Lower expectations for the next Bitcoin bull market.

Author: Alex Xu

BTC has been my largest overall asset position for most of the past few years (but not anymore now).

In this round of the BTC bull market cycle:

At 70k, I sold off the small leverage added during the deep bear period (about 1.1-1.2x, achieved through BTC collateralized loans);

Between 100,000 and 120k, I reduced my BTC holdings from full position to about 30%.

There were also some smaller operations, such as adding a little more when BTC retraced to over 50k in 2024, and adding slightly when BTC hit 60k in February this year. All these actions are based on a long-term bullish outlook on BTC.

According to usual cyclical logic, now is a good time to accumulate more BTC and wait quietly for the next bull cycle. However, during BTC’s recent rebound, I continued to reduce my already low 30% BTC position at the 78,000-79,000 level.

I must continuously track my assets, regularly conduct fundamental checks, and my reduction in BTC is also a result of ongoing assessment and deliberation. The conclusion is that I will lower my expectations for BTC’s market cap at the next bull cycle’s peak.

Here are the reasons summarized:

First, the potential energy driving BTC’s next cycle to continue rising significantly is not as strong as in previous cycles.

In previous cycles, there was an expectation of exponential growth in the investor community, from niche tech enthusiasts’ financial experiments to mainstream and institutional allocations. Each cycle’s narrative has gradually materialized.

For the 2023-2025 cycle, it entered mainstream financial institutions’ holdings through ETF compliant products, and received strong support from major financial firms like BlackRock and Trafi, plus a major national leader’s endorsement. To elevate this narrative further, BTC would need to enter the asset-liability sheets of major sovereign states, such as:

More sovereign funds (currently mainly Abu Dhabi)

Central bank reserves

Pure government fiscal reserves (e.g., U.S. state budgets) might be insufficient, as their purchasing power is relatively small compared to traditional financial institutions.

In my view, achieving this leap in the next 2-3 years is quite challenging. The current bull market was expected to see Bitcoin entering the U.S. Federal Reserve’s balance sheet, but that hope was largely disproven last year.

Currently, very few U.S. states have active Bitcoin reserve bills. At the peak in early 2025, over 20 states were pushing such bills, but only a handful have passed, and some are only “semi-formed” reserve bills requiring separate approval for budgets.

Major central banks still show no clear interest in BTC. The short history of consensus, high volatility, and competition from gold make it difficult for BTC to enter central bank balance sheets.

Second, my personal opportunity cost has increased.

Over the past half-year, I’ve discovered many good companies, which are now attractively priced and will be my main focus for portfolio adjustment (another part is increasing cash reserves).

Third, the overall crypto industry’s downturn negatively impacts demand and consensus for Bitcoin.

Currently, few viable business models exist in crypto. Most Web3 models (socialfi, gamefi, depin, distributed storage/computing, etc.) are gradually being discredited over time. Only DeFi truly generates positive cash flow and profits, but even DeFi’s development in this cycle’s latter half has been mediocre, mainly due to the shrinking of native high-quality assets, leading to contraction in lending and DEX trading.

The shrinking of the entire crypto ecosystem, along with declining industry participants and investors, will slow or even reverse BTC’s holder base growth.

Hypeliquid, as an on-chain exchange, is an outlier with growth against the trend. But its success largely comes from capturing CEX’s existing market share and incorporating non-crypto asset classes (commodities, US stocks, pre-IPO assets) for around-the-clock trading, which provides less value transfer to BTC. Relying on regulatory arbitrage and a unique position, Hypeliquid cannot offset the industry-wide decline (market prediction impacts are similar).

Fourth, BTC’s largest buyer, Strategy, continues to face rising financing costs.

It mainly raises funds through issuing perpetual preferred shares (STRC), with interest rates now at 11.5%, soon shifting from monthly to bi-weekly interest payments to stabilize STRC’s market price. This feels concerning, although Strategy’s financial health is still far from a collapse.

Additionally, most of the once-active BTC DAT concept stocks, besides Strategy, have essentially disappeared, leaving only it. Strategy doesn’t need a major default to suppress BTC prices; as the largest listed holder and net buyer, a slowdown in its buying pace and exhausted financing capacity will cause significant marginal selling pressure.

Fifth, Bitcoin’s main competitor in the non-sovereign asset space—gold—has narrowed the product gap in terms of value proposition: resistance to fiat inflation.

We previously said “digital gold” BTC is superior to gold because of better divisibility, portability, verifiability, and decentralization.

But this cycle has seen the emergence of “tokenized gold,” which in verifiability, portability, and divisibility is no different from BTC, and its scale is rapidly growing.

(Reference: rwa.xyz provides statistics on the scale of tokenized commodity assets, most of which are tokenized gold)

Of course, many say tokenized gold relies on centralized credit, but I believe reliance on centralized trust isn’t a necessary condition in crypto. One of the core infrastructures—stablecoins—is mostly based on fully centralized credit.

Sixth, as Bitcoin undergoes halving, the issue of insufficient security budget becomes more severe.

(Explorations of new fee sources like inscriptions, BTC L2, etc., have basically failed). This is a well-known issue, but still a concern. I believe quantum computing isn’t a major threat; the community already has solutions.

Summary and Self-Questioning

Of course, after reducing my position, I still remain bullish on BTC; otherwise, I would have sold everything. It remains one of my major holdings, and I hope it will continue to rise.

Other possible questions:

Why reduce now?

Because it rebounded quite a bit recently, so I took some profits.

What if it rises after I reduce?

If the reasons I cited for being cautious weaken due to changes in external and internal conditions, or if new positive factors emerge that I hadn’t considered before, and the price isn’t too high, I will buy back.

If the price is already too high to buy back profitably, then my understanding isn’t aligned with this asset, and I accept that outcome.

Just my personal opinion, for reference only.