2025 Investment Outlook: AI Remains Strong, DeFi Continues to Grow, Flexibility Is Key Amid Market Volatility
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2025 Investment Outlook: AI Remains Strong, DeFi Continues to Grow, Flexibility Is Key Amid Market Volatility
Stay flexible, go with the flow like water.
Navigating Web3 tides with focused insightsAuthor: 0xkyle
Translation: TechFlow
Good morning! Predicting the future has never been easy, but as traders and investors, we need a clear plan. Like any plan, this one will evolve with changing market conditions—after all, markets are dynamic ecosystems. This memo simply reflects my current early thoughts on 2025 and is for informational purposes only. It does not constitute investment advice.
Before discussing 2025, let me first review my 2024 plan. If you're not interested, feel free to skip ahead.
To be honest, several parts of my 2024 plan went off track. Let’s walk through them one by one:
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Underestimating the impact of Bitcoin's halving
There was much debate at the time: would Bitcoin's halving turn out to be "buy the rumor, sell the news," or follow historical patterns as a bullish catalyst? In the end, the halving itself didn’t cause a major stir—but it quietly marked the beginning of the bull market.
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Misjudging rate cuts as bearish
This assumption was clearly wrong. However, I had already publicly revised my stance before the rate cuts occurred. My initial hypothesis was: “With inflation persistently high, rate cuts might only come after significantly worsening economic data—a reactive, last-resort move.”
In reality, the Fed defied that expectation. For most of 2024, the right strategy was to trust the Fed’s forward guidance.
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Failure in executing scenario planning
My core 2024 strategy was: “Reduce exposure before rate cuts to lower risk, wait for price pullbacks to re-enter, while keeping some long positions intact.”
In practice, I completely failed to follow this plan—haha.
The 2024 market trajectory exceeded expectations—from early ETF-driven selling pressure, to a Q1 rebound, summer stagnation, and ultimately, rate cuts boosting equities but creating confusion in crypto. Bitcoin traded between $50K and $60K until the year-end election sparked a true breakout.
Looking back, my biggest mistake was failing to recognize that 2024 was the year traditional finance began embracing Bitcoin. That should have been the dominant narrative—the slow but steady entry of traditional finance into Bitcoin.
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Narrative analysis:
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Winners from ETFs: COIN (stock)/BTC/ETH
I mentioned tokens like STX and TRAC, which underperformed. COIN, however, performed exceptionally well. When I wrote about it, COIN was trading around $120.
Additionally, niche narratives like BRC-20 and LST had brief moments of strength in Q1 2024, though they didn’t last.
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SOL’s success
SOL was priced at $60 at the time! This may have been one of my most successful trades. I wrote this piece when SOL was just $20 and predicted “SOL will reach triple digits in the next cycle.” That prediction turned out to be spot-on.
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Regulation and product-market fit
I correctly identified regulation as a key narrative but picked the wrong tokens. My idea was to focus on projects that passed DeFi regulatory hurdles but hadn’t yet proven strong demand. Unfortunately, I chose MMX and dYdX—clearly poor picks.
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Mistake in decentralized AI
I was initially very bullish on decentralized AI, but by the Q1 2024 peak, I realized the actual products fell far short of expectations. Projects like Render and Akash lacked real-world utility and felt more like “aircoins.”
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Success in GameFi v2
In Q1 2024, GameFi-related assets performed strongly—BEAM surged, and many GameFi projects saw a resurgence. However, only those who sold at the top actually profited.
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Other potential narratives
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DePIN / RWAs
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DeSci
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Meme (BONK / DOGE / PEPE / HPOS10INU)
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RUNE / CACAO
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GambleFi
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Airdrops (LayerZero / Starknet / ZKSync)
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Among these, only Meme stood out—particularly in Q1 2024, where Bonk’s price rose 2–3x from when I first mentioned it. DePIN also had its moment, with projects like Geodnet and Helium gaining traction, though I didn’t pay them much attention. A few months ago, decentralized science (deSci) started emerging, with BIO even listing on Binance. Honestly, though, I’m not particularly optimistic about this space.
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Cycle top signals
At the end of my previous article, I wrote: “One thing I haven’t discussed is how I think this cycle will end—I’ve increasingly been reflecting on a GCR idea: ‘The pico-top of the last cycle was funds entering; the pico-top of the next cycle will be when nations start buying.’”
With hindsight, this view now seems highly compelling—and I plan to include it in my 2025 investment framework. It’s definitely going on my “key cycle signals” list. The logic is clear and sound.
2025 Plan
Now that the 2024 recap is complete, let’s dive straight in. As usual, I’ll begin with macro and scenario planning, then move to specific investment themes.
Scenario Planning
The 2024–?? cycle is already underway. Personally, I believe it started at the end of 2023, but that’s just a detail. So far, the market has followed this path: January 10, Bitcoin ETF launch → new all-time highs → altseason → a choppy Q2 and Q3 in 2024, with Bitcoin oscillating between $50K and $60K. On election day, Bitcoin broke past its previous highs, rising to $100K, though it failed to sustain further gains and now trades around $90K.
Notably, altseasons—or what some call “the good times”—often coincide with Bitcoin hitting new peaks. The first occurred during Bitcoin’s run toward $69K (which failed), and the second during its push toward $100K.
The next altseason may only begin once Bitcoin successfully breaks above $100K. While I hope this happens in Q1 2025, we could instead see a repeat of 2024’s prolonged consolidation. I need to mentally prepare for that possibility. Therefore, I’ve outlined the following potential market scenarios:
Here’s my conceptual breakdown:
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Scenario 1: Bitcoin and alts rise together. If 2025 becomes a broad, one-way rally—Bitcoin keeps climbing while alts perform well—we could see a repeat of the last two months’ widespread gains.
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Probability: 30%–40%
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Action plan: Buy quality alts on dips and position aggressively.
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Scenario 2: Bitcoin rises, alts gain modestly. Similar to 2024, the market may remain choppy over the coming months, but with a more positive overall bias (thanks to Bitcoin’s continued ascent). Certain sectors could still shine.
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Probability: 50%–60%
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Action plan: Buy select alts on dips, avoid overheated areas, and identify emerging opportunities.
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Scenario 3: Bitcoin rises, alts decline. If we’re at an altcoin top, Bitcoin may keep rallying while alts weaken.
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Probability: 20%–30%
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Action plan: Exit alt positions decisively. You might take drawdowns, but if alts lack upward momentum, cut losses early.
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Scenario 4: Both Bitcoin and alts fall. If the market tops, all assets enter a downtrend.
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Probability: 10%–20%
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I believe Bitcoin’s breakout to new highs won’t take as long as in 2024, thanks to a more favorable macro backdrop. During 2024’s “summer doldrums,” despite the ETF launch, traditional institutions were still figuring out how to pitch Bitcoin to clients. Back then, global consensus on Bitcoin’s importance was still forming.
Now, with Trump’s return, discussions around a “Strategic Bitcoin Reserve” (SBR) are gaining momentum—marking a significant shift in narrative.
I won’t speculate on whether SBR will materialize, but there’s no denying this new political environment brings heightened attention to digital assets. When the leader of the world’s largest economy speaks frequently about Bitcoin, it becomes easier to convince others to buy it.
Recognizing this regime change is crucial. I believe BTC will continue to benefit in 2025. For alts, the story is similar but different.
Looking at Total3 (total alt market cap), Q1 2024 reached the 2021 all-time high, and Q4 set a new cycle high. The overall pattern resembles past cycles. Frankly, the difference between my Scenario 1 and Scenario 2 isn’t huge.
The key lies in timing and positioning. I’m optimistic about 2025, but I can’t predict how long it will take. While I expect a one-way move to arrive faster than in 2024, alts could still suffer sharp corrections during catalyst-poor periods.
My strategy: Maintain a net long position—as long as the cycle hasn’t topped, stay invested, whether in Bitcoin or other assets. I don’t expect a full replay of 2024’s “summer doldrums,” but similar choppy phases may occur—bearish sentiment with relatively stable prices.
On-chain assets are more volatile and could drop up to 70% during corrections. Therefore, my goal is to sell on-chain assets at peak enthusiasm, rotate into large-cap alts (top 20 by market cap), and gradually redeploy.
I don’t believe alts have peaked yet—because I can’t imagine Bitcoin continuing to rise while alts remain flat. Nor do I think Bitcoin will top out at this stage.
Conclusion:
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Bitcoin will keep rising, likely outperforming its 2024 gains.
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For alts—stay offensive, but know when to switch to defense. Still, compared to 2024, defensive positioning can be lighter.
Risks
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Cycle top
A cycle top is often a self-fulfilling phenomenon. While I believe we’re far from topping out, this must be reassessed weekly. A top isn’t necessarily a single event—it’s more of a gradual approach over time.
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Risk around Strategic Bitcoin Reserve (SBR)
With a new president in office, everyone watches policy direction closely. While Bitcoin currently enjoys tailwinds, presidential indifference would be a notably negative signal.
The main risks are twofold: either the SBR initiative gets shelved, or it’s replaced by an alternative. In the latter case, it might be initially bearish, but if it ultimately benefits Bitcoin, it could become bullish over time.
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Supply risk
In summer 2024, global equities hit new highs, but crypto faced heavy selling pressure—mainly from Mt. Gox, Germany, and Grayscale GBTC.
Supply risks always exist. Large Bitcoin holders—like the UK government, Silk Road asset liquidations, or FTX distributions—can trigger volatility. While such events may cause short-term pain, if handled well, they could present buying opportunities.
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Macroeconomic risk
I believe even modest rate cuts, as long as rates keep trending down, improve liquidity and remain bullish.
If the signal turns bearish—e.g., inflation rebounds and the Fed hikes again—it could negatively impact digital assets.
Themes & Tokens
Now we arrive at the most anticipated section. But before diving in, let me reiterate: “Stay offensive, but know when to turn defensive.” Active portfolio management will vastly outperform passive strategies this cycle.
The old “buy and hold” approach no longer works. For example, while Solana gained 10x in 2023, it barely outperformed Bitcoin throughout 2024. Similarly, top-tier tokens like TAO didn’t benefit from the recent AI boom. Memes have also faded—“Dogecoin is no longer cool,” “Calm Pepe isn’t calm anymore,” and “Hippo NFTs seem past their prime.”
Clearly, few assets this cycle are suitable for “buy and hold.”
Also, I like asking: Who are the marginal buyers? Currently, three main groups drive marginal demand: institutional investors (traditional finance), funds (liquidity/crypto-native funds), and speculators (perpetual traders, on-chain players, etc.).
A successful investment narrative must capture the interest of at least one of these groups. With that in mind, let’s analyze:
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AI Theme
AI remains a major investment theme. But as previously noted, we’ve already seen multiple hype waves. If you’ve read my take on AI tokens, you’ll know I believe the next wave is coming.
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Macro trend: From “hype” to “fundamentals” to “real utility.”
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Micro trend: From “social buzz” to “fundamental drivers” to “practical applications and virtual agents.”
Still, “buy and hold” is not a winning strategy. Goat, for instance—the original AI narrative starter—is down 60% from its peak and may continue underperforming.
Recommended tokens: Application-focused AI / clusters / gaming / consumer-facing AI
Examples: ALCH (game development), Griffain (wallet management agent), Digimon, Ai16z (AI leader). There are many others I may have missed, but these are my top picks.
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DeFi
DeFi remains important, but it’s a challenging space to profit from. Very few tokens deliver meaningful returns, and even promising ones may not see big price moves (as seen with LST-related projects).
From a risk-reward standpoint, DeFi isn’t my top choice, but I believe the sector will continue evolving in 2025.
Recommended tokens: AAVE, ENA, Morpho, Euler, USUAL
Secondary picks: Stablecoins, payment-related tokens
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Layer 1 (L1) Trading
This may be controversial, but I believe L1 trading will regain center stage. The speculative potential in L1s is evident. Take Sui, for example—its jump from $1 to $4 shows renewed market interest.
L1 trading is currently undervalued but holds massive potential—just like Hype, which has already surged 10x.
Recommended tokens: SUI, Hype
Secondary pick: Abstract
I’m not excited about Monad or Berachain, but I’m highly optimistic about Abstract—I think it could become a breakout project.
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NFT Tokens and Gaming Tokens (Next Wave)
I’m very bullish here. Recently, I’ve invested in several gaming projects and believe NFT tokens deserve attention. Pengu’s price is recovering, Azuki launched $ANIME, and Doodles has its own appeal. While I don’t expect NFTs themselves to make a full comeback, their associated tokens may offer new opportunities.
Gaming tokens are also worth watching. Off-The-Grid proved that building engaging games is possible. Given the sector’s current undervaluation, digging into high-quality games nearing token launches seems like a solid strategy.
Recommended tokens: Pengu, Anime (Azuki), Spellborne, Treeverse
Secondary picks: Prime, Off the Grid (if launching a token), Overworld
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Other Narratives
These are themes I’m monitoring—not especially bullish, but still具有一定吸引力：
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Data tokens: Kaito, Arkm
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Meme: Only PEPE interests me now; most others are outdated
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DePIN (Decentralized IoT): PEAQ, HNT
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Ordinals
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Legacy alts (Dino Alts): XRP, etc.
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Old DeFi projects: CRV, CVX
2025 Predictions
Here are some bold predictions for 2025—these ideas may sound far-fetched, but they’re not impossible:
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DePIN (decentralized IoT) is officially adopted via acquisition or partnership by a major corporation.
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Binance loses market share, but is overtaken by Bybit or OKX—not Hyperliquid.
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Metaverse tokens revive due to advances in VR technology.
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ICOs (Initial Coin Offerings) regain popularity.
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No major revival of activity on the Ethereum chain.
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Sui’s price exceeds double digits (at least $10).
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ETF approval for ETH staking yields sparks growth in staking tokens and yield-aggregating products, similar to 2021.
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A well-known artist uses NFTs and tokens to interact with and reward fans.
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Bitcoin reaches $200,000.
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More L1 CEOs or founders step down under Aptos’ influence.
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Base loses its position in the L1 race, replaced by another L1, while Solana maintains its lead.
Final Thoughts
Thank you for reading this far! This concludes my investment outlook for 2025. I expect these plans to evolve with the market, just as my 2024 plan did.
The most important advice: Stay flexible—be like water, flowing with the market. Enjoy the journey. Change is inevitable, and that’s precisely what makes investing so fascinating. As the famous saying goes:
“No man ever steps in the same river twice, for it's not the same river and he's not the same man.”
Best of luck and smooth sailing! And if you achieve life-changing returns along the way, don’t forget to use them to truly transform your life.
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