Hello readers,

Historically, Bitcoin has delivered its best performance in the years following the halving:

2013 performance: 5,437%
2017 performance: 1,295%
2021 performance: 130%

Therefore, it’s a given that BTC/crypto broadly will have another banner year in 2025, right?

And Bitcoin is going to rip again “as soon as Trump gets into office.”

Right?

If you’ve been following our research, you know that we are in the bull camp for ‘25. But we’re also observing some bearish signals in the market. Even a few “toppy-looking charts.”

Not to mention, sentiment has flipped bearish. Some market participants seem to be rebalancing to cash. Others are calling for the cycle to be over.

We disagree. But as Charlie Munger (RIP) used to say: “I never disagree with someone unless I understand their side better than I do mine.”

That’s why we’re covering the bear case this week.

Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment, legal, tax, business, or any other advice.

Let’s go.

A Note on Risk Management

A quick note on risk management before we hop into the bear case.

Given that both professional and less experienced retail investors read The DeFi Report, we think it’s prudent to clarify a few important topics at this stage of the cycle:

We are not short-term traders. Rather, we like to play the cycles — which means our hold time is typically 1-5+ years.
We think it’s a fool’s game to try to precisely catch the cycle tops and bottoms. Rather, our goal is to scale in/out of our favorite assets as close to cycle lows and highs as possible. The bottom line is you don’t have to be perfect to make money in crypto. Bitcoin is up 6x off the cycle lows. If you captured 50% of that, you’re doing just fine.
If it’s your first crypto cycle and you are sitting on significant gains, we think it’s prudent to take some risk off at these levels. We’ve rebalanced to 25% cash over the last 6 weeks.
If it’s your first cycle and you arrived late, we recommend investing small amounts that you can comfortably lose — with the goal of learning as much as you can. Understand that it takes time to make money in crypto. Multiple years if not multiple cycles for most.

I share this simply to drive home the point that we all have different circumstances. Different risk tolerance. Different obligations. Different goals.

And so my hope is that you can use our research in a way that fits your unique situation.

Now, onto the bear case….

Sentiment/Vibe Shift

If the market has already peaked, below are the signals that were right in our faces.

1. Market Participants are Tired

Crypto Twitter is tired. And for good reason. Anyone who works in the space knows the deal. The long hours. The highly competitive environment. The start-up grind.

Not to mention everything that comes with the “newness” of crypto. Learning new technology. New use cases. New people. International business.

You’re building from scratch. And it’s exhausting.

Of course, the liquid nature of the assets takes an emotional toll on people in ways that we do not see in other industries. For example, if you’re at a SaaS start-up, you might know what your valuation was at your company’s last raise. But that’s it. You’re not thinking about the value of your company every single day. Or having to deal with people like me writing about it.

And then there’s the social media aspect. The envy. The fear. The greed. The FOMO.

You add it all up and you realize that the industry is a factory for burnout.

At some point, people just kind of throw in the towel. I’m seeing some early signs of this today.

2. Howard Marks “On Bubble Watch” Memo

Everyone knows that the S&P 500 has produced returns of 26% and 25% in the last two years. And don’t forget that Warren Buffett/Berkshire sold 67% of its Apple shares and bolstered its cash position to nearly 30% of total assets — all the way back in Q3 of last year.

And now we have Howard Marks publishing his latest memo, On Bubble Watch — noting several warning signals, including:

Persistent optimism in markets since late 2022
Elevated valuations in the stock market (S&P 500 CAPE Ratio nearing Tech Bubble levels)
Enthusiasm being applied to the “new thing” (AI)
The implicit presumption that the top 7 stocks will continue to be successful
Bitcoin’s performance over the last two years

3. The Trump Bump is already baked in

The S&P 500 increased 6% in the month following the election. Bitcoin rose 42%.

The S&P 500 has now given back most of its gains. BTC is holding on. But what’s the catalyst for the next move in stocks and risk assets/crypto?

Is the Strategic Bitcoin Reserve going to be a big letdown/sell the news event?

Hasn’t the market already priced in the rest of Trump’s policies?

4. Additional Factors

Retail is on the scene. This was clear to me after seeing friends and family members over the holidays.
Michael Saylor is everywhere. Isn’t this what the top of the market looks like?
XRP is up 477% over the last year
Pump dot fun created a new launchpad for memecoins — and we’ve seen some really weird, “toppy-like” stuff on there
AI coins and AI Agents have become the new “meta” — yet have no discernable business model
Crypto natives are fighting with each other on X — something you see toward the end of cycles as envy takes over for market participants who have not achieved their goals.
PTSD from last cycle — when everyone thought BTC would get to $100k. We believe some market participants are exiting early this cycle as a result.
The Coinbase App already made its way into the top 10 apps in the App Store (and #1 in the finance category).
Phantom Wallet became the #1 utility app in the app store.
Key Opinion Leaders on X have grown their followers exponentially over the last year.
Crypto advertising markets have re-priced as crypto start-ups seek to capture new users entering the space.
It feels like the entire market is hinging on Nvidia's earnings each quarter.

Toppy Looking Charts

Long Term Holders

Long-term holders are passing their coins to short-term holders — a dynamic we’ve repeatedly seen near cycle peaks. In the chart below, the red line indicates the 30-day change in Long-Term Holders. As we can see, we’ve already reached levels that marked cycle peaks in the past.

Data: Glassnode

Market Value to Realized Value

Shifting to MVRV we can see that we’ve already had two extreme deviations this cycle:

Data: Glassnode

Note the diminishing returns of the extreme deviations with each passing cycle:

In the ‘13 cycle the MVRV peaked at 6.0
In the ‘17 cycle the MVRV peaked at 4.8
In the ‘21 cycle the MVRV peaked at 3.9

We hit a local high of 2.72 on 11/22/24. And we got as high as 2.78 back in March. Given the diminishing returns, we may have already peaked.

Note: A reading above 3.2 is considered an “extreme level” — which has been achieved for just 6% of BTC’s lifetime. We have not reached this level yet this cycle. If we did, the price would be $132k.

Data: Glassnode

We’ll leave you with this piece of artwork we found on X:

Final Thoughts

To be abundantly clear: it is not our view that the cycle has peaked. To the contrary, we think the setup is still bullish — which we’ve shared in recent reports that go deep on the macro setup and some areas where we think the market is offside (e.g. inflation expectations, rate cuts).

With that said, there is plenty of froth in the market. Most of the move for this cycle has already played out. After all, Bitcoin is up nearly 5x over the last two years.

Now. That doesn’t mean there isn’t room to run. Remember. On average, if you miss the top 10 trading days of the year for BTC, you miss out on all of the year’s gains.

Could we get one more 100% fold, making it 10x from the cycle lows? It’s possible. It’s also possible we’ve peaked.

And that’s why we wanted to share the bear case with you.

Thanks for reading.

P.S. The DeFi Report has started to build out its own data infrastructure. This means we’ll have unique, proprietary data that is unavailable elsewhere in the market.

Stay tuned as we’re sharing a data-driven deep dive of the top memecoins on Friday — many of which are currently 40-60% off their local highs.

P.P.S. One of my biggest fears working in crypto is becoming the victim of a SIM Swap. If you’re not aware, a SIM Swap is when a hacker calls up your phone company and convinces the service rep to port your SIM card to a new phone. This is done remotely with the victim finding out when their phone no longer works.

It’s happened to a lot of people in crypto and it’s a nightmare to deal with.

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Take a Report.

And Stay Curious.

Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.

Did the cycle already peak?

The bear case for crypto in 2025

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