Lower the expectations for the next bull market of BTC

Core Viewpoint

Reasons summarized:

First, the potential energy driving the next round of BTC's price surge is not as sufficient as in previous cycles.

In previous cycles, there were expectations for an exponential expansion of investor groups in BTC, from niche geeks' financial experiments to mainstream and institutional asset allocations. In each past cycle, this narrative has gradually been fulfilled.

In this cycle from 2023 to 2025, it has entered mainstream financial institutions' holdings through the listing of compliant ETF products and has received strong support from financial institutions like BlackRock, as well as endorsements from the president of the world's largest country. If we want to elevate the narrative to another dimension, it at least needs to enter the balance sheets of leading sovereign nations, such as:

More sovereign funds (currently mainly from Abu Dhabi)
Central bank reserves

Simply relying on government fiscal reserves (such as those from various U.S. states) may not be enough, as the purchasing power they can provide is relatively small, far less than that of traditional financial institutions.

However, in my view, achieving this leap in the next 2-3 years is still quite challenging. Originally, there were expectations that Bitcoin would enter the U.S. Federal Reserve during this bull market, but that hope was largely debunked last year.

Currently, there are very few U.S. states even considering Bitcoin reserve bills. At the peak in early 2025, there were over 20 states in the U.S. advancing Bitcoin reserve bills, but now only a small number have been passed, and some of those bills are "half-baked" reserve bills that require separate proposals for budget approval.

Currently, central banks in mainstream countries still show no obvious interest in BTC. The short history of consensus, excessive volatility, and the existence of gold as a competing product make it very difficult for BTC to enter central bank balance sheets.

Second, my personal opportunity cost has increased.

In the past six months, I have gradually discovered many good companies, and their current prices are quite attractive, which will be the main direction for adjusting my portfolio (another part is to increase some cash reserves).

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

Currently, there are very few viable business models in the crypto industry. Most Web3 models (socialfi, gamefi, depin, distributed storage/computing…) have gradually been debunked over time. In reality, the only one that can generate positive cash flow and create profits is DeFi. However, DeFi has also developed relatively poorly in the latter half of this cycle, one of the main reasons being the shrinkage of high-quality native assets in the industry, leading to a decline in DeFi business (still mainly focused on lending and Dex trading).

The overall shrinkage of the crypto industry's fundamentals, along with the reduction of practitioners and investors, will also slow down or even lead to a loss of the growth of BTC holders.

Hypeliquid, as an on-chain exchange, is a counter-cyclical growth anomaly. However, much of its success still comes from capturing the existing market share of Cex + incorporating asset classes outside of crypto (commodities, U.S. stocks, pre-IPO assets) for all-weather trading, which provides little value transfer to BTC. Relying on regulatory arbitrage, the standout Hypeliquid is unlikely to hedge against the industry-wide trend of shrinkage (the impact of prediction markets is similar).

Fourth, the financing costs for BTC's largest buyer, Strategy, continue to rise.

Its main financing method is through issuing perpetual preferred shares (STRC), and the financing rate has risen to 11.5%. Moreover, it is about to change from monthly interest payments to bi-weekly payments; otherwise, it won't be able to maintain the market price of STRC. This gives me a rather negative feeling, although Strategy's current financial situation is still far from a so-called crisis.

Additionally, we can see that many previously very active BTC DAT concept stocks, apart from Strategy, have basically disappeared, leaving only it alone. Strategy does not need to actually face a crisis to exert pressure on BTC prices; as the largest publicly listed holder and net buyer of BTC, its slowing buying speed and exhausted financing ability will trigger significant marginal selling pressure.

Fifth, Bitcoin's main competitor in the non-sovereign asset space (value proposition: anti-fiat currency inflation) — gold — has narrowed the product gap with Bitcoin.

We previously said that Bitcoin, as "digital gold," is superior to gold because it has better divisibility, portability, and verifiability + decentralization.

However, this cycle has seen the emergence of "tokenized gold," a product that is indistinguishable from Bitcoin in terms of verifiability, portability, and divisibility, and its scale is rapidly growing.

(Reference: rwa.xyz for statistics on the scale of tokenized commodity assets, most of which are tokenized gold)

Of course, many people will say that tokenized gold relies on centralized credit, but in my view, whether it relies on centralized credit is not a necessary condition in the crypto industry, as one of the core infrastructures of the entire crypto industry — stablecoins — is mostly based on complete centralized credit.

Sixth, with the Bitcoin halving, the issue of insufficient security budget is becoming increasingly severe.

(The exploration of new fee sources like inscriptions and BTC L2 has largely failed). This is a somewhat old topic, but it remains an issue. I believe quantum computing is not too significant a threat; the community already has solutions.

Summary and Q&A

Of course, even after reducing my holdings, I still have a positive outlook on BTC; otherwise, I should have liquidated my position. It remains one of my larger asset holdings, and I hope it can still rise.