What has happened in the recent cryptocurrency market and what will happen?

Author: 0xTodd, Partner at Nothing Research

In the past week, many friends have called me to inquire about the market. I feel it's necessary to publicly share my thoughts and disclose my views on the current market situation------【What has really changed】【Future developments】

Long-time followers among my family know that I am a long-term investor. Therefore, since 2019, I have had an annual strategy that I update every year. This article roughly outlines my strategy for 2024-2025, for discussion with family.

1. DeepSeek Burst the Bubble

Once DeepSeek emerged, it didn't matter whether it truly used $5 million to train such an AI; the narrative is clear: 【Algorithmic improvement】 has at least temporarily triumphed over 【Computational power improvement】.

Don't get hung up on whether this is true------since the market unanimously recognizes the $5 million claim, you should treat it as true. By the end of 2024, aside from memes, I reluctantly admit that there is objectively only one narrative left: AI Agent, which can be seen as the hope of the entire village. However, no one anticipated that the AI Agent narrative would be ruthlessly shattered by DeepSeek from the adjacent true AI track. The team at DS consists of genuine IQ 200 individuals, fresh graduates from Tsinghua and Peking University, and numerous Olympiad medalists.

In contrast, our industry tends to idolize second-tier programmers who are either laid off from big companies or secretly working side gigs as AI engineers, which sometimes forces us to operate at an IQ of 50. So…

On January 27, I tearfully took profits on all my AI token positions. I didn't sell at the peak and ended up selling after a significant pullback, so it would be a lie to say I wasn't heartbroken. But the harsher reality is that this has turned our entire AI Agent track into a joke, and that might be true. The reason the "narrative" is "narrated" before the "event" is that the "event" hasn't materialized yet and can only rely on "narration." Once the story can no longer be told, the decline of the track becomes truly irreversible.

2. The President and the President's Mob

I don't know how everyone felt during the New Year, but my physical experience is that many friends and family were asking how to register on BN or OKX, simply because they wanted to buy Trump coins. The last time they were this crazy was during the National Day holiday when they wanted to open accounts to dive into A-shares.

Shanghai Composite Index Trend Source: Tencent Securities

If I remember correctly, those brave souls who entered the A-shares on October 8 are still stuck at that peak. After taking profits on AI, to be honest, the more I think about it, the more scared I get, and then I saw this post.

In summary: The president seems to be losing a lot, but there are two possible reasons:

1. He is not making money in the way you can see;
2. He is an idiot;

Anyway, I know the answer can never be 2. Yes! Memes are now something the president is playing with, and he can also make money through channels unknown to us. To be fair, can our meme play be compared to sitting at the same table as Trump? A Thai hippopotamus, an American squirrel, a bottle of longevity medicine that extends the life of flies—can they really sit at the same table as Trump, who is firmly in the Oval Office?

During the New Year, adults sit at one table, and children at another. Adults drink fine liquor, while children only get Sprite. So, that day, I basically sold off all my meme positions. My meme holdings once had huge unrealized gains, but due to actively lowering my IQ to 50, I didn't manage to execute a great retreat and instead kept joining the great revolution. It feels like a dream.

3. A Top Signal: The High School Kid Made Millions

I believe everyone who plays memes, even those who don't, has heard about this legendary story recently. A high school kid sat idle for a month and suddenly hit the jackpot with Jelly, making millions at a super low cost.

Of course, as the story spread, it became more and more outrageous, and there are many rumors. I can't guarantee this is 100% true, but I know the vibe is right.

Looking back at the historical peak of 69K in 2021, just 1-3 days before, I was reflecting:

• Interns easily outperformed fund managers;
• Grassroots community contributors of ENS made millions from airdrops;

At that moment, it was just like this moment.

I liked this post, and a small editor from TIME (who could also be a hacker) could instantly harvest countless SOL with a fake tweet. I ask you, what does this mean?

It's not that making money is wrong------experts can always make money, even at the bottom of a bear market. But if the subject changes to ordinary people: the intern makes big money, the ENS contributor makes big money, the high school kid makes big money, the editor makes big money.

It means: 【At this moment, everyone's hands are particularly loose】 Friends who often play cards know that only when there are extremely high unrealized gains do people become loose with their hands.

This represents that the greed index has truly reached its peak. This is a super top signal.

So, on the 30th, I cleared out almost all my altcoins, keeping only BTC and a small portion of mainstream coins like ETH/SOL/DOGE/exchange tokens. Although I still incurred losses, at least I left with a few small victories. I admire the high school kid's brilliant operation, and I also respect the market's iron law regarding this alternative investment.

4. Questions About BN and BN's Response

Honestly, I don't want to discuss this topic.

As a former CEX practitioner, I've seen this advisor-listing-dumping routine too many times, from initial anger to gradual numbness; I've long since become desensitized.

However, in the past, this kind of thing was kept under the table, belonging to "small greed and small corruption as a lubricant for development";

It belonged to "the clearer the water, the fewer the fish," where a bit of murkiness beneath the surface was considered part of the game rules.

After all, we don't live in a utopia, nor in a vacuum. But the most taboo thing about this is bringing what should be kept under the table to the surface. I have no intention of criticizing BN or the sister, because this exists in almost every CEX.

If this were in the traditional world, to exaggerate, it would be a huge scandal that could lead to hundreds of layoffs and dozens of arrests. Perhaps the sister would have been better off not responding, learning from celebrities to handle it coldly, giving retail investors a bit of hope. However, our industry is predominantly filled with skeptics, and a huge scandal is a heavy blow, striking hard at the hearts of every holder.

It has shattered the faith of many. Our industry truly needs "gods," as it is maintained by consensus.

But when everyone discovers that the "servants" beneath the "gods" also want to make a quick buck, faith suddenly evaporates, and it quickly projects onto the "gods"------all the altcoins on BN are now facing immense doubt and scrutiny from retail investors. If AI and HOOK are like this, can other coins really be any better?

5. Future Scenarios

If we follow the perspective of "carving a boat to seek a sword," this recent decline is very similar to May 19, and I suggest everyone review the trends after May 19.

Trend after May 19, 2021, Source: Bitfinex

If we follow the May 19 script, the following would be a repeated two-month oscillation until even the most loyal are shaken out, leading to a new $Bitcoin ATH.

Of course, some suspect this is the script of December 4, AKA the start of the bear market.

From an inner inclination, I hope this is May 19. After all, the U.S. national strategic reserve for Bitcoin is becoming clearer, and never underestimate the immense impact of this. In fact, if Bitcoin reaches $85K-$88K, I would be willing to add some positions.

6. My Position Distribution

My current positions are:

40% BTC; 20% mainstream coins (ETH, SOL, DOGE, BNB/MNT); 40% stablecoin investments;

Bitcoin is my eternal faith; I think I will never sell BTC again, nor will I trade it. The reason for holding ETH: To be honest, my faith in ETH is weakening.

However, objectively speaking, the president's DeFi project is buying ETH.

I don't know how many family members are trading U.S. stocks, but many regret not following 【Nancy, the stock goddess of Capitol Hill, Pelosi】.

Image Source: 天下杂志

Pelosi's highlight moment was as the Speaker of the House, which is the third highest position in American politics.

And now Trump is the real president, this crypto president is holding a significant position in ETH (even though it has now been deposited into untraceable Coinbase custody), which cannot be underestimated.

Secondly, ETH has already dropped to its current position, and I feel it has reached the peak of FUD, which might lead to a counter-reaction. I can't buy when no one cares; at least I won't sell when no one cares.

The reason for holding SOL: There is a small probability of an ETF; however, the cooling of the AI narrative and the short-term slump of MEME are two small clouds.

The reason for holding DOGE: Grayscale has launched a Dogecoin trust, and Doge also has a small probability of an ETF;

Additionally, Musk is working hard in the D.O.G.E department; being in the same car as the world's richest man and "Director of the U.S. Development and Reform Commission," I think I can sleep well.

The reason for holding exchange tokens: To be blunt, exchanges have no possibility of stepping onto a bigger stage. Coinbase will not list BNB, and Binance will not list MNT. However, exchanges are the only institutions in our industry that can make money and provide benefits; if a bear market truly arrives, exchange tokens are relatively more resilient, and occasionally an IEO can help recover losses; during a bear market, we can only rely on this.

7. Harsh Perspective: The Good Days for Old Investors Are Over

Aside from the above, I will most likely not hold any altcoins in large positions in the short term------the reason is simple: inflation is too fast.

The speed at which new users and new funds enter the market simply cannot keep up with the speed at which these token printing maniacs are printing.

Source: Decrypt

A few days ago, there was a statistic that the most powerful account on Pump Fun issued 17,000 tokens in three months. Not 170, not 1,700, but 17,000! His contribution alone may exceed the total number of tokens issued during the entire bull market of 2017. Why have the investment strategies of old investors failed?

There are too many choices! Too many angles!

Even within the same angle, there are N different CA; how can old investors' altcoins compete?

The strategy old investors love most: buy a mid-tier altcoin at a valuation of $100M or $200M. Hold it for 2-3 months, betting it will outperform Bitcoin. However, now it seems they might not even outperform ETH.

And the strategy that Marshal P loves most: buy a project with a $10K valuation in the internal market. Run away 30 minutes later. Real men never look back at explosions. Clearly, in today's environment of massive token inflation, Marshal P far outshines old investors. I don't urge everyone to become a P junior; I just hope everyone at least doesn't become an old investor.

8. Best Position: 50% Bitcoin + 50% Stablecoin Investments

Additionally, I sincerely suggest everyone hold a certain amount of USDT to get through the upcoming time. You have to accept a fact: no one can truly sell at the super peak.

The peak occurs once every four years, and finding a day to sell in over a thousand days gives you a 1/1000 chance; naturally, only a few can achieve it, all of whom are super lucky. At this stage, half a position is the best choice. You invest 50% of your principal in financial products; we won't talk about mining or arbitrage.

Let's just do the simplest Ethena USDE, which currently offers an 18% interest rate through Pendle. If Pendle is too lazy to deal with it, just throw it into AAVE or mainstream CEX financial products, which still offer around 10%. The other 50% should focus on Bitcoin, quietly waiting for the day the U.S. Bitcoin strategic reserve arrives.

With both interest cash flow and dreams and faith, you will definitely feel comfortable.

Of course, you can also allocate 5% to a few altcoins you genuinely believe in, whether it's ETH, SOL, DOGE, or any coin you believe in. Additionally, you can set aside 5% of your funds to play a couple of PVP games; if you win, enjoy it; if you lose, consider it consumption, keeping your hand in shape—how wonderful is that?

Finally, this forms a distribution resembling a Tai Chi diagram.

PS: This is also the distribution I aim to gradually adjust my holdings to. Source: 0xTodd

9. Conclusion

I am relatively satisfied with my current positions, as this is my eighth year in the crypto industry, and after such a long time, I have gained some experience. The only regret I have is that I was playing in Osaka during the New Year and got lazy, not organizing these thoughts and sharing them in a timely manner.

The same strategy, if mentioned a few days ago, could have helped many people, but saying it a few days later turns it into a post-event review. However, it's never too late to mend the fold.

I hope every family member can achieve their own great results in the crypto market. Of course, if you can't achieve great results, then retaining some small results and earning some spiritual and social wealth is also worthwhile. Finally, I wish everyone------in the Year of the Snake, may the golden snake dance wildly.

Todd

February 5, 2025