Lower expectations for the next Bitcoin bull run.

Author: Alex Xu Source: X, @xuxiaopengmint

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

During this Bitcoin bull cycle, I sold off the small leverage added during the deep bear period (about 1.1-1.2x, achieved through BTC collateralized loans) at around 70k, and at 100,000-120k, I reduced my BTC holdings from full position to about 30%.

There were also some small operations, such as slightly increasing positions when BTC retraced to over 50k in 2024, and adding a bit when BTC hit 60k in February this year. These actions are all based on a long-term bullish outlook on BTC.

According to usual cyclical logic, now is a good time to accumulate more BTC and then wait quietly for the next bull cycle.

However, during the recent rebound of BTC, I further reduced my already low 30% BTC position at the 78,000-79,000 level.

It’s essential to continuously monitor the assets I hold, 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 cycle’s peak.

Let’s analyze the reasons:

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

In earlier cycles, there was an expectation of exponential growth in investor groups, from niche tech enthusiasts’ financial experiments to mainstream and institutional allocations. Each cycle has gradually fulfilled this narrative.

For the 2023-2025 cycle, it entered mainstream financial institutions’ holdings through ETF-compliant products, received strong support from major financial firms like BlackRock and Trafi, and was endorsed by the president of the world’s largest country. To elevate this narrative further, BTC would need to enter the balance sheets of leading sovereign nations, such as:

1. More sovereign funds (currently mainly Abu Dhabi)

2. Central bank reserves

*Pure government fiscal reserves (like U.S. state treasuries) might not be enough; their purchasing power is relatively small, far less than traditional financial institutions.

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

Currently, very few U.S. states have active Bitcoin reserve bills. At the peak 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, and their prices are quite attractive now, which will be my main focus for rebalancing (another part is increasing cash reserves).

Third, the overall depression in the crypto industry negatively impacts Bitcoin’s demand and consensus.

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

The shrinking of the entire crypto ecosystem, along with fewer practitioners and investors, will slow down or even cause a decline in BTC holder base.

*Hypeliquid, as an on-chain exchange, is an outlier with counter-cyclical growth. But its success largely comes from capturing CEX’s existing market share and later expanding into non-crypto asset classes (commodities, US stocks, pre-IPO assets) for around-the-clock trading, which contributes little to BTC’s value. Relying on regulatory arbitrage and being a standout, Hypeliquid cannot offset the industry-wide trend of contraction (market prediction impacts are similar).

Fourth, BTC’s largest buyer, Strategy, is still facing rising financing costs.

It mainly raises funds by issuing perpetual preferred shares (STRC), with interest rates now at 11.5%, and soon it will switch from monthly to bi-weekly interest payments, or else the STRC market price will become unstable. This feels concerning to me, although Strategy’s current financial situation is still far from a default.

Additionally, we see that most of the once-active BTC DAT concept stocks, except Strategy, have basically disappeared, leaving only it.

Strategy doesn’t need a major default to suppress BTC’s price; as the largest listed holder and net buyer, a slowdown in its buying pace and exhaustion of 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 with BTC 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 Bitcoin, and its scale is rapidly growing.

rwa.xyz’s statistics on tokenized commodity assets, mostly tokenized gold

Of course, many say tokenized gold relies on centralized credit, but in my view, dependence on centralized credit isn’t a necessary condition in crypto, because one of the core infrastructures—stablecoins—is mostly based on fully centralized credit.

Sixth, as Bitcoin approaches halving, the issue of insufficient security budget becomes more severe (exploring new fee sources like inscriptions, BTC L2, etc. has largely failed). This is a common topic, but it remains a real concern.

On the other hand, quantum computing isn’t considered a major threat; the community already has solutions.

Of course, I still believe in BTC’s prospects, otherwise I would have sold out. It remains one of my major holdings, and I hope it can still rise.

Other possible reasons include:

Why reduce now?

Because it has rebounded quite a bit recently, so I want to trim some.

What if it rises after I reduce?

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

If the price is already too high to buy back profitably, then it means my understanding doesn’t match this asset, and I accept that outcome.

Just my personal opinion, for reference only.