It’s that time of the year again, I have published my thoughts and musings on the blockchain sector in the annual crypto market thesis for 2025.
Full document has been published here:
https://jamesbachini.com/resources/CryptoMarketThesis2025.pdf
Previous years: 2023, 2024
Summary below:
- Bullish:
- Institutional adoption (e.g., BlackRock’s Bitcoin ETF success).
- Positive regulatory outlook post-Trump’s election.
- Potential alt season, especially with emerging digital assets.
- Bearish:
- Market sentiment may shift from greed to fear as the cycle matures.
- Risk of a significant sell-off if Bitcoin fails to maintain momentum.
2024 Year in Review
- Bitcoin surpassed $100,000 for the first time, fueled by the halving event and institutional buying, notably by Microstrategy.
- Trump’s victory signals a potentially crypto-friendly administration, with a shift away from strict SEC enforcement.
- Speculation around sovereign wealth funds and a US Bitcoin treasury fund reflects increased global adoption.
Macro Trends
- Inflation and interest rates are expected to decline in 2025, benefiting risk assets like crypto.
- Shifts in trade and geopolitics under Trump’s nationalist policies could influence the industry.
Market Outlook for 2025
- Four-Year Cycle Perspective:
- Anticipated continuation of the bull run, possibly culminating in a “blow-off top.”
- Psychological shift expected towards later part of 2026 as the market transitions from greed to fear.
- Supercycle Thesis:
- Suggests a maturing asset class with reduced volatility over time.
- Contradicts the four-year cycle, creating uncertainty about long-term market trends.
Sector Insights
- Bitcoin and Ethereum:
- Bitcoin remains dominant but may face challenges in sustaining new highs.
- Ethereum, with the upcoming Pectra update, remains a strong bet for 2025, offering potential scalability and UX improvements.
- Long-term thesis favours Ethereum or similar platforms achieving higher market caps than Bitcoin.
- Smart Contract Platforms:
- Continued importance but side-lined in 2024 by Bitcoin’s performance.
- Potential for a breakout moment remains uncertain as the tech evolves.
- AI and Memecoins:
- AI tokens and memecoins captured significant attention in 2024, though long-term sustainability is doubtful.
- Opportunities exist for traders with strong risk management but not for foundational investments.
Emerging Trends to Monitor
- Sectors with potential breakout in 2025 include:
- GameFi, Metaverse, Real World Assets, Web3 Social Networks, DeSci, Payments & Payroll, and Fractionalized Ownership.
- Focus remains on identifying narratives and innovations that could dominate investor attention.
Portfolio Positioning (as of January 2025)
- Allocation:
- 71% Staked Ethereum (via liquid staking tokens like stETH).
- 21% Bitcoin.
- 4% Altcoins (momentum-based, short-term trades).
- 2% NFTs (mainly Gen0 CryptoKitties for long-term liquidity potential).
- 2% Early-stage investments.
- Strategy:
- Prioritize staked ETH and maintain a long-term view on Ethereum.
- Limit altcoin exposure to high momentum opportunities during potential alt seasons.
- Plan to rebalance to a semi-passive 60/40 crypto/stablecoin portfolio over time.
The crypto market in 2025 is poised for opportunities and risks. While the bull market momentum may persist, caution is warranted due to potential psychological shifts and market volatility. Emerging trends in GameFi, DeFi, and Web3 technologies are worth monitoring for speculative investments, alongside a long-term focus on Ethereum and staked assets.
