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 (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);

• At 100,000-120k, I reduced my BTC holdings from full position to about 30%.

There have also been some smaller moves, 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. 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 BTC’s recent rebound, I further reduced my already low 30% BTC position at the 78,000-79,000 level.

It’s essential to continuously track my holdings, regularly perform 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.

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 the investor base, 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 institutional holdings through ETF compliant products, received strong support from major financial institutions like BlackRock, and was heavily promoted by global leaders, including the president of the world’s largest country. To elevate this narrative further, BTC would need to enter the asset-liability sheets of top sovereign nations, such as:

2. More sovereign funds (currently mainly Abu Dhabi)

3. Central bank reserves

Pure government fiscal reserves (like U.S. state treasuries) may be insufficient; their purchasing power is limited, far less than traditional financial institutions.

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

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

Major central banks of mainstream countries 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 adjustments (another part is increasing cash reserves).

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

Currently, very few business models in crypto can sustain themselves. Most Web3 models (socialfi, gamefi, depin, distributed storage/computing, etc.) have been gradually discredited over time. In fact, only DeFi can generate positive cash flow and profits. But 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 reduce the holder base of BTC.

Hypeliquid, as an on-chain exchange, is an outlier with counter-cyclical growth. However, its success largely comes from capturing CEX market share and later expanding into non-crypto asset classes (commodities, US stocks, pre-IPO assets) through all-weather trading, which contributes little to BTC’s value. Relying on regulatory arbitrage, Hypeliquid’s isolated success cannot offset the industry-wide decline (similar effects are seen in prediction markets).

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%. Soon, it will switch from monthly interest payments to bi-weekly payments, to maintain the market price of STRC. This situation feels unfavorable to me, although Strategy’s financial health is still far from a collapse.

Additionally, the once-active BTC DAT concept stocks have mostly disappeared, except for Strategy. Strategy doesn’t need a major failure to suppress BTC’s price; as the largest listed holder and net buyer, a slowdown in its buying pace and exhausted financing capacity will create 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:

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

But now, “tokenized gold” products have emerged, which are comparable to BTC in verifiability, portability, and divisibility, and their scale is rapidly growing.

( Reference: rwa.xyz’s statistics on tokenized commodity assets, mostly tokenized gold )

Of course, many argue that tokenized gold relies on centralized trust, but I believe that dependence on centralized trust isn’t a necessary condition in crypto, since one of the core infrastructures—stablecoins—are mostly based on fully centralized trust.

Sixth, as Bitcoin’s halving approaches, the security budget issue is becoming more severe.

(Explorations of new fee sources like inscriptions and BTC Layer 2 solutions have largely failed). This is a well-known issue, but still a concern. I believe quantum computing isn’t a major threat, as the community already has solutions.

Summary and self-Q&A

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

Other possible questions:

• Why reduce now?

  Because of the recent rebound, I decided to trim some.

• What if it rises after I reduce?

  If the reasons I cited for being cautious weaken or become invalid due to external and internal changes, or if new positive factors emerge and the price at that time isn’t too high, I will buy back.

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

Just my personal opinion, for reference only.