Is Bitcoin a tulip bubble? What risks will the market face in 2025?

Source: Talking Li and Talking Outside

Although we have written quite a bit about market trends and Bitcoin in recent days, we still see some interesting comments in the background. Here, I will select two representative types:

• Following the public account to read your articles is giving you face, but the article actually sets up WeChat beans?

• I often see news reports that many people have gone bankrupt because of Bitcoin. Bitcoin is just a virtual currency, it's just a tulip bubble. Are all the people in your circle just gamblers?

Since these two types of questions seem quite interesting, I will briefly respond publicly:

First, regarding the WeChat beans issue.

I can only say that, as for face, I don’t know you, is your face really that important? To be honest, if you are not strong enough, then no one in this world will care about your so-called face.

Moreover, Talking Li and Talking Outside has published 519 articles through the public account, all of which are open and free. Additionally, we have a WeChat bean section, which currently has only 5 articles, and based on some special considerations, we have only symbolically set a redemption threshold of 2.1 yuan (21 WeChat beans). As shown in the picture below. If after successfully benefiting from 519 articles, you feel dissatisfied because of 5 articles and think your face is at stake, then please take care of your face and perhaps unfollowing us would be a good thing for you.

Secondly, regarding Bitcoin.

In fact, there are gamblers in every field, it's just a matter of more or less. Of course, you can think that everyone except yourself is a gambler; that is your freedom. Regarding Bitcoin, if you think Bitcoin is just a virtual currency, perhaps in your eyes it is just an expensive "WeChat bean," then I will not oppose your viewpoint, because everyone has the right to maintain their own views and opinions. You can certainly think that Bitcoin is just a tulip bubble, and we will not refute you.

For those who still hold such thoughts or views, our advice is:

• It’s fine to have your own views; you can freely share your opinions within the legal limits, but don’t casually try to challenge others with your views.

• Block all news or messages related to Bitcoin, and try to keep your eyes away from it.

Many times, people often feel dissatisfied with certain things, but ultimately, it may be more about their own missed opportunities or not becoming vested interests. For example, if you had spent $1,000 to buy 100 Bitcoins in 2012 and successfully held onto them until now, you would probably look at your account with $10 million and wouldn’t say anything about Bitcoin being a tulip scam.

Having discussed these two interesting questions, let’s continue to talk about Bitcoin.

If we extend the time dimension, we can clearly see that since January 2023, Bitcoin has been in an overall upward trend. As shown in the picture below.

Or to put it bluntly, if you had bought Bitcoin with your eyes closed at any time between January 2023 and October 2024, ignoring the fluctuations in between and successfully holding it until November 2024, from an overall return perspective, you would not have lost money.

But the reality is that over the past two years, we have always seen people giving various reasons for whether to buy or sell, and many people still hope to always buy at the lowest point and sell at the highest point, hoping to accumulate wealth in a short period of time. Ultimately, after all the back and forth, they find that not only did they not make money, but some even lost some principal.

In fact, since Bitcoin passed the spot ETF earlier this year, although Bitcoin still experiences considerable price volatility, compared to previous bull market cycles, this cycle has begun to appear relatively lower in terms of risk. We can also consider that from this cycle onward, Bitcoin will officially enter a "low-risk" asset cycle.

Additionally, if we simply compare it with the historical development of gold, we might even say: BTC ETF is the most successful financial product in history.

As for those who still believe that Bitcoin is a tulip bubble or a Ponzi scheme, we can only say that you might as well directly say that the U.S. government is a scam, because the approval of the ETF requires government approval. Since the BTC ETF can be approved by the U.S. government, doesn’t that mean the U.S. government has allowed a kind of tulip bubble or Ponzi scheme?

Clearly, so far, this viewpoint seems untenable, and more of it is just a "retaliatory" psychological statement from those who have missed opportunities. Or to put it in simpler terms, have you ever seen a tulip bubble that can last for 15 years (the Bitcoin white paper was published on October 31, 2008, and Satoshi Nakamoto mined the first block of Bitcoin on January 3, 2009)?

Let me share an interesting piece of data: according to statistics from 99bitcoins, Bitcoin has been declared dead 477 times in the past decade. As shown in the picture below.

But this so-called "death report" and the tulip bubble rhetoric have not stopped Bitcoin's price from rising over 1.52 million times. As shown in the picture below.

Also, don’t forget that it has been less than a year since the BTC ETF was officially approved, and with further adoption by institutions in the future (and some countries/regions may include BTC in their strategic reserves), Bitcoin's entry into a "new stage" of development has just begun. Once you disregarded 1 Bitcoin, today you feel you can’t afford 1 Bitcoin, then in the future, you can only look up to it.

Of course, the future seems bright, but the process is often tortuous. Moreover, from a longer time dimension, we may continue to experience one round after another of new cycles (bull markets, bear markets).

Let’s not talk too far ahead, let’s talk about next year:

Many people seem to be full of expectations for the upcoming 2025, hoping that Bitcoin can reach new highs in 2025, hoping for a comprehensive outbreak of altcoin season in 2025… In the previous articles on market topics in Talking Li and Talking Outside, we discussed more about some macro factors that may be favorable for the market next year. Next, let’s continue to talk about possible macroeconomic risks next year, as opportunities and risks coexist.

1. The pace of Fed rate cuts may slow down

Regarding the expectations for Fed rate cuts next year, we have actually sorted out some points in previous articles. In the interest rate meeting that concluded last week (December 19, Beijing time), the Fed announced a 25 basis point reduction in the target range for the federal funds rate to between 4.25% and 4.50%, and it is expected that the rate cut in 2025 may narrow to 50 basis points.

This news directly led to a rapid decline in the market (including the U.S. stock market and the crypto market). Currently, more and more people have regarded the Fed's rate cut expectations as one of the important measuring factors for market trends, and the Fed slowing down the pace of rate cuts is certainly not good news for the market.

2. Trump may continue to face a tariff war upon taking office

Recently, we have seen some signs through media reports, such as the possibility that the U.S. may impose a 100% tariff on BRICS countries next year. If the trade war restarts, it will definitely have some impact on GDP, thereby hindering economic development to some extent. As shown in the picture below.

3. NVDA's earnings may be below expectations

As an important representative of U.S. technology stocks, NVDA contributed a return rate of 20% to the S&P 500 index last year. After they announced their third-quarter earnings data last month (November 20), although the data still exceeded expectations (third-quarter revenue was $35.1 billion, higher than the market analysts' general expectation of $33.2 billion; net profit was $19.31 billion, higher than the market expectation of $17.45 billion), the market's reaction seems not very strong.

Based on this trend, the market seems to have higher expectations for NVDA, which undoubtedly increases the volatility factors in the market next year.

4. Inflation in the U.S. remains a major issue

According to the current development situation, after Trump officially takes office next year, the U.S. should further increase or stimulate economic development, such as the recovery growth of manufacturing, boosting the development of the oil and gas industry, etc. According to some economists' predictions, U.S. GDP growth will remain around 3.0% and may accelerate in 2025.

However, this growth rate theoretically occurs when inflation begins to rebound and monetary policy is relaxed. In other words, the inflation issue remains a major problem that the U.S. (and globally) will face next year, and this problem seems to become increasingly apparent. At the same time, the inflation issue further impacts the Fed's interest rate hike/cut policy mentioned above.

5. U.S. 10-year Treasury yield continues to rise

By the way, let’s mention domestic financial products. I wonder if you have noticed that some domestic financial products (low-risk) seem to have started to yield higher recently. Many products that previously had around 2% annualized returns have risen to 3% or even higher. A long-term financial product I bought in a certain bank has recently even soared to over 4%. I haven't seen a "low-risk" financial product starting with 4 for a long time. As shown in the picture below.

This is mainly because the rise in government bonds has driven up low-risk financial products, as many low-risk financial products primarily invest in various debt assets. As for the reasons for the rise in government bonds, there are roughly two: first, there are indications that policy rates are expected to be lowered by 40-50 basis points next year; second, given the current situation in our A-shares, it is estimated that a lot of funds will return to the bond market for safety, and under the dual influence, it has directly driven up the bond market. From the current situation, as long as A-shares do not experience a major bull market like a few months ago (in September), it will naturally be favorable for the bond market. As shown in the picture below.

As for the relationship between government bond yields and the rise and fall of financial products, we actually wrote a special article about it earlier (in 2022), and interested friends can search for historical articles to review. However, the performance of government bonds is just one aspect; our main issue next year is still a potential deflation problem, but the topic in China is quite sensitive, so we won’t discuss it further. Let’s continue to talk about the U.S.

Since the Fed's policy shift this month, the U.S. 10-year Treasury yield has continued to rise. Based on the current trend, it may reach 5% by the second quarter of next year, which is bearish for the market. As shown in the picture below.

Of course, the five aspects we listed above are more macro-level influencing factors. When combined with various other factors and news, we can only say that 2025 is a year full of opportunities, but it also comes with greater market volatility risks. Always remember the saying from our previous articles: managing your positions strictly is more important than living short-term; investing is a long-term and comprehensive practice.