2025 Encryption Market Outlook: Will Base Lose the L1 Battle? Are ICOs making a comeback?

Author: Kyle Source: @0xKyle's Research Translation: Shan Oppa, Golden Finance

While it is difficult to predict the future, as traders and investors we need to have a plan. This plan, like all plans, adjusts as market fundamentals change—the market is an ever-evolving creature. This memo is just my vision of where the market will be in 2025, based on where we are today. This is an entry point into my thinking about 2025 and should not be taken as financial advice.

Let’s first review my 2024 plans.

2024 Plan Review

Man, I made a lot of mistakes in my 2024 planning; let’s look at the predictions piece by piece:

1. The Bitcoin halving is an inconsequential event

I remember many people were discussing this issue - is the halving a "good thing to cash in and all the bad things to go"? Although historically "buy news," the end result is just a run-of-the-mill event that marks the beginning of a bull market.

2. Interest rate cuts are negative

This is obviously wrong, but in my defence—I had publicly reversed my stance before the rate cut. The initial assumption was that "inflation is stubborn and the rate cut will occur after economic data has deteriorated significantly and is therefore a reactive rather than a preventive measure."

But it turns out that the Fed shattered that assumption. The correct attitude in 2024 is: act directly in accordance with the Fed's statements.

3. Scenario planning

The core of my 2024 plan is: "Control a certain percentage of risk in the portfolio before interest rates are cut, and then buy back when prices are lower, while retaining the remaining position."

I have no idea what I'm talking about because I didn't do any of this.

Ultimately, the market in 2024 is a completely different monster - the market experienced an initial sell-off after the ETF launch, then a rise in the first quarter, followed by a lull in the summer, and interest rate cuts had a stimulating effect on stocks, but The crypto market is still hovering in the $50,000-60,000 range until the final election becomes the real breaking point.

My biggest mistake was not emphasizing that 2024 is the year when Bitcoin gradually penetrates into traditional institutions. What am I thinking? This may be the most important thing in 2024 - Bitcoin is gradually and steadily accepted by the traditional financial field.

4. The market narrative I mentioned:

• ETF Beneficiaries: COIN (Stocks)/BTC/ETH

I also mentioned coins like STX and TRAC, but they didn't perform well. But COIN is a great option. At the time of writing, it was probably around $120.

The short-term narrative of BRC-20 and LST did not last long, but it does represent a good trading opportunity in the first quarter of 2024.

• SOL

At the time of writing, the SOL price is $60! Man, this is one of the trades I'm most proud of - I originally wrote this prediction at $20. The title is even a little funny: "SOL will reach triple digits in the next cycle." The results completely came true.

But the TIA/Aptos/Layer 2 related narrative underperformed for much of 2024.

• Regulatory and product market fit

The direction of the narrative is right, but the choice of tokens is completely wrong. My thinking at the time was: "DeFi projects that can pass regulatory tests, but products that have not yet demonstrated clear market fit."

What am I thinking? I chose MMX and dYdX.

I also mentioned HYPERLIQUID. I really wish I had followed my own advice and participated in mining more. Although I was one of the early users of HYPERLIQUID, I didn't realize its importance until it was too late.

• Decentralized AI

This is really complicated. I was once very bullish on this track, but turned extremely bearish at the market top in the first quarter of 2024, because I found that the actual product was completely different from what I imagined. Projects like Render and Akash have few real use cases and look more like air projects. Although I am very interested in AI narrative now, it did feel empty at the time.

TAO was $300 when I wrote the article, but it’s probably doubled now? Forget about OLAS, I don’t want to mention it more.

• GameFi 2.0

This direction is good. This is a money-making trade I made in 2024. There is a small window in the first quarter of 2024. BEAM prices have risen sharply, and many GameFi-related assets have performed well (such as Pirate NFT). Prime is also a good choice.

Of course, you must sell at the top, otherwise you will have lost a lot now. I didn't sell much, but overall the trade was profitable.

Popular choices: Overworld / Treeverse / Prime / L3E7 - Overworld tokens increased from 5ETH to 15ETH, Treeverse plots increased from 0.2ETH to 1ETH, L3E7 increased from 3ETH to 14ETH (but I lost money back later).

BLUR-related narrative performance is mediocre.

• Other potential narratives:

• dePIN/RWAs

• deSci

• Meme Coins (BONK/DOGE/PEPE/HPOS10INU)

• RUNE / CACAO

• GambleFi

• Airdrops (LayerZero/Starknet/ZKSync)

There aren’t many bright spots here, except for memecoins – which really exploded in the first quarter of 2024. Bonk has increased two to three times since I wrote the article. dePIN (such as Geodenet/Helium) also ushered in a brief highlight, but I didn't pay too much attention. DeSci became popular a few months ago, especially after BIO was listed on Binance... but to be honest, I don't like this track.

5. Cycle top

I wrote at the end of the article: "One thing I haven't talked about yet is how I think this cycle will end - recently, I have increasingly agreed with GCR's view: 'The top of the last cycle was fund entry, The top of the next cycle is when countries start buying.'"

Looking back now, with the benefit of hindsight – oh my god, I feel like I’m going to put this point directly into my 2025 plan. This is definitely an important part of my list of “Top Signals of the Cycle” and it does make a lot of sense.

2025 plan

Now that the 2024 review is complete, let’s get straight to the point. As usual, I will talk about macro and scenario planning first, and then talk about thematic narrative.

scenario planning

The 2024-?? cycle has begun. I think the cycle starts at the end of 2023, but it's just a matter of details. The cycle so far is:

• January 10 – Bitcoin ETF launched

• Bitcoin then hits new all-time highs, triggering altcoin season (altszn)

• The market will be volatile in the second and third quarters of 2024, with Bitcoin fluctuating between $50,000 and $60,000

• On the day of the election, it broke through a record high, soaring all the way to $100,000, but failed to break through, and then fluctuated around $90,000.

It’s important to note that altcoin seasons or “good times” all begin with Bitcoin’s rise, the first phase when Bitcoin rises to $69,000 but fails to break out, and the second phase when it rushes towards $100,000.

The next altcoin cycle may begin when Bitcoin solidly breaks through $100,000. I don’t have a crystal ball, and while I hope this is what happens in the first quarter of 2025, the reality is that the next few months may be a repeat of the shock period of the second and third quarters of 2024 – and I have to be prepared. Therefore, I have listed the following scenarios:

Scenario 1: Bitcoin and altcoins both rise

Continuing to rise in 2025, we are ushering in another altcoin season. Bitcoin continues to rise, all tokens are performing well, and the market has reproduced the "10,000 coins rising" phenomenon of the past two months.

Probability: 30-40%

Strategy: Buy the dip (BTFD), focusing on strong altcoins.

Scenario 2: Bitcoin rises, altcoins gain less

The market will repeat itself in 2024. In the next few months, altcoins will rise and fall with greater volatility; however, the overall market is more optimistic than in 2024 (because Bitcoin continues to rise), and some areas have performed well.

Probability: 50-60%

Coping strategy: Buy selected altcoins at dips, avoid areas of excessive concern, and look for the next hot spots in the market.

Scenario 3: Bitcoin rises, altcoins fall

Bitcoin continues to strengthen, but altcoins generally fall, and the market reaches an altcoin top.

Probability: 20-30%

Strategy: Sell all altcoins. If altcoins stop rising, it may be necessary to liquidate them all, even if it means taking some losses.

Scenario 4: Bitcoin and altcoins both decline

The market as a whole peaks and everything falls.

Probability: 10-20%

I believe that Bitcoin’s breakthrough to new all-time highs in 2025 will not be as slow as in 2024, because the macro background is already in place. The Bitcoin ETF has just been launched in the summer of 2024, and traditional financial institutions (TradFi) are still promoting Bitcoin to customers. More importantly, the world had not fully recognized the importance of Bitcoin at that time.

But things are different now. With Trump back in power and even news of establishing a Strategic Bitcoin Reserve (SBR), the market narrative has shifted. I won't speculate on the actual probabilities of SBR - I have no experience where politics and finance intersect.

My focus is on narrative. The fact is that the current new administration is pushing the digital asset space to gain more attention, and now that the President of the United States talks about Bitcoin frequently, it is easier to get people to buy Bitcoin than in the past.

This regime change is an extremely important market signal. Therefore, I believe Bitcoin will continue to benefit from macro tailwinds in 2025. When it comes to altcoins, the situation is similar but slightly different.

In the first quarter of 2024, the total market capitalization (Total3) hit the historical high in 2021, and reached the cycle high again in the fourth quarter of 2024. The markets generally follow similar patterns, so I don 't think the difference between Scenario 1 and Scenario 2 is huge .

The key is position management and timing . I am optimistic about 2025, but not sure when the increase will occur. I think the market’s “all up, no down” phase will arrive sooner than 2024, but altcoins could still fall without a catalyst.

As long as the cycle does not peak, I will remain net long, whether in Bitcoin or other assets. I don’t think 2025 will be a repeat of the summer of 2024, but the market could still experience a similar downturn where prices remain stable but the market lacks a clear catalyst.

On-chain assets (on-chain) are different from the mainstream market. On- chain assets tend to fall by 70% when the market ebbs. Therefore, the goal is always to sell when on-chain attention is highest, return to the mainstream altcoins (top 20), and then gradually reinvest .

I don’t think altcoins will peak right now because I can’t imagine Bitcoin continuing to rise while altcoins plummet. Bitcoin is also unlikely to peak at this time.

Summarize

• Bitcoin continues to rise, with gains set to exceed 2024

• Altcoins – stay on the offensive and know when to switch to defense, but less defensively than in 2024

risk

1. Risks at the top of the cycle

The top of a cycle is often a self-fulfilling prophecy. While I don't think we are near the top of the cycle right now, this requires continued evaluation on a weekly basis. The top of a cycle is not necessarily a definite “event” but more of a process that gradually approaches it over time.

2. Strategic Bitcoin Reserve (SBR) Risks

As the new president takes office, everyone will be watching his movements. Despite the positive factors facing Bitcoin, it would be a negative sign if the president completely ignores Bitcoin. For me personally, the biggest risk is that SBR may be forgotten, or more likely, SBR may not be implemented at all and other measures may be pursued instead.

If the latter happens (that is, a different policy replaces SBR), it may be negative in the short term, but as long as the new policy is friendly to Bitcoin, it will still be positive in the end.

in short:

• Positive Signal = Cycle continues

• Bearish signal = plan needs to be revised , cycle may continue, but less likely.

3. Supply risk

In the summer of 2024, we experienced an extreme macro environment, with the stock market hitting new highs. However, we did not enjoy a similar rally in the crypto market, instead bearing the weight of massive sell-offs from the likes of Mt. Gox, the German government, and Grayscale GBTC .

Supply risks cannot be avoided. There are always institutions or governments that hold large amounts of Bitcoin – the UK government, Silk Road, FTX Debt Distribution, etc. These events require continued monitoring, but if all goes well for the market, they are often good bargain-hunting opportunities.

4. Macro risks

Although the rate cut is smaller, a rate cut is still a rate cut. Although the stimulus is low , liquidity will improve as long as interest rates continue to fall.

• Positive Signal = Cycle continues

• As long as interest rates are not raised or interest rates are stopped, the macro environment will be positive for digital assets.

The real bearish signal is that inflation is back and the Fed is forced to raise interest rates to curb inflation.

Topics and Tokens

Now come to the part that everyone is most interested in. But before I get into that, let me say it again - " Stay on the offensive, but know when to switch to defense." In this cycle, actively managed portfolios will perform far better than passive holdings.

The old days of “buy and hold forever” are over.

In 2024, Solana performed at the same level as Bitcoin throughout the year , despite a 10-fold surge in 2023. Popular tokens such as TAO have not enjoyed the dividends of the recent AI wave. The meme coin craze is also fading - Dogecoin (DOGE) has lost its hat, the little chill guy is no longer calm, and Hippo (PEPE) looks like it has reached its limit.

Chances are, none of the tokens on this list will make you “buy and hold.”

It’s important to consider who the potential buyers are. There are three main types of marginal buyers in the crypto market:

1. Institutional Investors (TradFi)

2. Funds (crypto native or liquid funds)

3. Speculators (perpetual contract traders, on-chain players, etc.)

For a narrative to become a hot topic in the market, it must attract at least one type of buyer.

1. Artificial Intelligence (AI)

Yes, this track is still there. But as the tweet shows, we’ve already experienced several AI booms. If you read my analysis on AI tokens, I believe a new wave of craze is coming .

• Macro path : Hype → Infrastructure → Practical application

• Micro-level path : retail investors follow suit → basic layer (infra) → applications and virtual people

Nothing good will come from holding on. Goat, the leading AI token, has retraced 60% from its highs and is likely to continue to underperform the market.

Recommended tokens:

• Application layer technology/swarm intelligence/games/consumer-oriented AI projects

• ALCH (game development), Griffin (smart wallet agent), Digimon , and Ai16z are all projects that I am optimistic about. There are many more coins worth paying attention to, but these few are the highlights.

2. DeFi

This goes without saying. DeFi is still a good track, but investment is extremely difficult and there are very few tokens that can really benefit. Even if they can benefit, they may not rise (look at the LST track).

The risk-reward ratio is not high , but I think the DeFi track will continue to grow in 2025.

Recommended tokens : AAVE/ENA/Morpho/Euler/USUAL

Secondary line : Stablecoins/payment tokens

3. Layer 1 public chain track

I know this may be controversial, but I believe L1 public chain transactions will come back again in a big way. Sui went from $1 to $2 and now to $4, despite the market being very negative towards it. But this is what the market ignores, and it often contains huge opportunities (Hype has already increased 10 times).

Recommended Token : SUI/Hype

Subline : Abstract

I'm not too interested in Monad and Berachain, but I'm very excited about Abstract, which may be a hit.

4. NFT tokens & game currency (second round)

I absolutely love this track. I recently bought some gaming projects, and I think the NFT token track is worth paying attention to. Pengu is back on the rise, Azuki has launched the $ANIME token, and Doodles is up to something. I don’t think NFTs themselves will come back, but NFT tokens will.

Game tokens are also fun, and Off-The-Grid proves that it's possible to develop a fun game. With the market’s negative attitude toward gaming currencies, this is a good time to dig deeper and find truly interesting gaming projects and their tokens.

Recommended coins : Pengu/ANIME (Azuki)/Spellborne/Treeverse

Sideline : Prime/Off-The-Grid (if the token is launched)/Overworld

5. Other narratives

These tracks are on my watch list, not favorites but interesting:

• Data Token : Kaito/Arkm

• Meme Coin : I am only optimistic about PEPE, and everything else is cold.

• DePIN : PEAQ/HNT

• Ordinals

• Old leading brands : XRP, etc.

• Old DeFi : CRV/CVX

2025 Forecast

This section is purely for fun and is filled with ideas that sound a bit outrageous but not completely impossible.

• DePIN (Decentralized Physical Infrastructure Network) is officially implemented by a serious large company, possibly even through an acquisition.

• Binance lost its leading position among exchanges , not because it was surpassed by Hyperliquid, but because Bybit or OKX took over.

• Metaverse tokens are given a new lease of life due to breakthroughs in VR technology.

• ICO is back and popular again.

• ETH On-Chain Szn will not happen.

• Sui breaks double digits (at least $10).

• Ethereum staking returns are approved for inclusion in ETFs, triggering more staking return products for other tokens, and return aggregators will become popular again, just like they have in 2021.

• A top artist uses NFTs and tokens to interact with fans, track and reward their fan base.

• Bitcoin rises to $200,000.

• The CEOs/founders of multiple L1 public chain projects have resigned one after another , similar to the Aptos phenomenon.

• Base lost its on-chain competitive advantage and was replaced by another L1 public chain, while Solana continued to maintain its lead.

Conclusion

This article roughly summarizes my market layout for 2025. As planned for 2024, I expect that many of these views and strategies may change significantly.

The most important advice here is: stay flexible, be like water, and enjoy the market journey. The market will continue to change, and that’s part of the game. As the famous saying goes:

"A person can never step into the same river twice, because the river is no longer the river of yesterday, and the person is no longer the same person."

I wish you all good luck and safe travels. Hope to see you in the next cycle. If you make a life-changing profit along the way, remember – let it truly change your life.