Lower the expectations for the next bull market of BTC

Author: Alex Xu

BTC has been my largest total asset position for most of the past few years (it is no longer the case now).

In this round of the BTC bull market cycle:

• At 70,000, I reduced the small leverage I added during the deep bear period (around 1.1-1.2 times, completed through BTC collateral lending);
• At 100,000-120,000, I lowered my BTC position from fully invested to about 30%.

There were also some small operations during this period, such as slightly increasing my position when BTC pulled back to 50,000+ in 2024, and slightly increasing my position when BTC spiked to 60,000 in February this year. These actions were based on my long-term optimism for BTC.

According to the usual cyclical logic, now is a good time to accumulate more BTC and then wait for the next bull market cycle to arrive. However, during the recent rebound of BTC, I continued to reduce my already low BTC position to about 30% at the 78,000-79,000 level.

It is essential to continuously track the assets I hold and conduct regular fundamental check-ups. The reduction of my BTC position is also an action taken after continuous check-ups and considerations, and the conclusion is that I will lower my expectations for the market value at the peak of the next BTC bull market.

Reasons summarized:

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

In previous cycles, there were expectations for an exponential expansion of the investor base for BTC, from niche geek financial experiments to mainstream and institutional asset allocations. This narrative has gradually been realized in each round.

In this round from 2023 to 2025, it has entered the holdings of mainstream financial institutions 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:

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

Simply relying on government fiscal reserves (like those of 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 has basically been debunked last year.

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

Currently, central banks of mainstream countries still show no obvious interest in BTC. The short consensus history, significant 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 reallocation (another part is to increase some cash reserves).

Third, the overall downturn in the crypto industry has a negative impact on the demand and consensus for Bitcoin.

Currently, there are very few business models in the crypto industry that can operate effectively. Most Web3 models (socialfi, gamefi, depin, distributed storage/computing...) have gradually been debunked over time. In fact, 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 decrease in practitioners and investors, will also slow down or even lead to a loss in the growth of BTC holders.

Hypeliquid, as an on-chain exchange, is a counter-cyclical growth anomaly. However, a significant part of its success still comes from dividing the existing cake of Cex + incorporating asset classes outside of crypto (commodities, U.S. stocks, pre-IPO assets) for all-weather trading, which contributes little to the value delivery of BTC. Relying on regulatory arbitrage, Hypeliquid, which stands out alone, is unlikely to hedge against the trend of industry-wide 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 will not stabilize the market price of STRC. This gives me a rather bad feeling, although Strategy's current financial situation is still far from a so-called explosion.

Additionally, we can see that many previously very active BTC DAT concept stocks, except for Strategy, have basically disappeared, leaving only it alone. Strategy does not need to actually explode 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 field (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 round has seen the emergence of "tokenized gold," a product that has no difference 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, as Bitcoin approaches halving, the issue of insufficient security budget is becoming increasingly severe.

(The exploration of new fee sources like inscriptions and BTC L2 has basically failed). This is a rather old topic, but it remains a problem. Conversely, I believe quantum computing is not too significant a threat, as the community already has solutions.

Summary and Q&A

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

Other questions may include:

• Why reduce now?

  Because there has been a significant rebound recently, so I decided to reduce my position.

• What if it rises after I reduce my position?

  If the reasons I mentioned above become less valid or are disproven due to more external and internal environmental changes, or if more favorable factors that I hadn't previously considered emerge, and the price at that time is not considered expensive, I will buy back.

  If the price at that time has already risen to a level that is not suitable for buying back, then it means my understanding does not match this asset, and I will accept the outcome.

This is just one person's opinion and is for reference only.