The recent plunge in Bitcoin and a number of counterfeits has brought the entire market sentiment into a state of "extreme panic". In just one month, from expecting a violent bull market to having to accept that "maybe the bear market is really coming", investors' emotions fluctuated like a roller coaster, and their confidence was ruthlessly crushed by violent price fluctuations.

Is there any reason for cryptocurrencies to be bullish in 2025? Has this bull market cycle really ended? Michael Nadeau, founder of The DeFi Report, gave his analysis and opinions, and the following is the full text:

Before entering the on-chain data, I would like to share some qualitative analysis of how we think about cryptocurrency cycles.

1. Early bull market stage

This is about the period from January 2023 to October 2023. This is the period when the market bottomed out after the FTX event. The crypto market has become very quiet (low transaction volume, crypto Twitter is silent). Then we started to rise again.

BTC rose from about $16,500 to $33,000 during this period.

However, no one calls this a bull market. During the "early bull market", most market participants are still waiting and watching.

2. Wealth creation stage

This is about the period from November 2023 to March 2024.

This is a period when we see some big moves and significant wealth creation. Solana (SOL) rose from $20 to $200. Jito's airdrop (December 2023) creates additional wealth effects within Solana and reprices Solana's decentralized finance (DeFi) projects (Pyth, Marinade, Raydium, Orca, etc.). The venture capital market reached a fanatical peak during this period (which is typical).

Bitcoin rose from $33,000 to $72,000. Ethereum (ETH) rose from $1,500 to $3,600.

Bonk rose from $90 million to $2.4 billion (26 times). WIF rose from $60 million to $4.5 billion (75 times). The seeds of a larger "meme coin season" were sown during this period.

But this period is still quite "quiet". Your "ordinary friend" may not have started asking you questions about cryptocurrencies.

3. Wealth Distribution Phase

This is about the period from March 2024 to January 2025.

"Focus peak" period. We tend to see the "WAGMI" type of emotion, rapid rotation, new trends (quickly fading), and blind risk-taking behaviors pay off. Celebrities and other "temporary crypto-empty participants" usually enter the market at this stage. Crazy headlines such as "Tesla Buy Bitcoin" or "Bitcoin Strategic Reserves" tend to appear during the wealth distribution phase.

Why?

New investors enter the market because of these headlines. They don't know they're late to the party.

This is the second wave of the "meme coin season" that then evolved into the "AI agent season". During this period, the market ignored many obviously problematic behaviors. No one wanted to point out any problems. People are making money.

Now, this brings us to today.

4. Wealth Destruction Stage

We believe that we entered this stage shortly after Trump took office.

This is a period that follows the top of the market. The bullish catalyst is now a thing of the past. The seemingly positive news is accompanied by a bearish price action.

style="text-align: left;">In the current environment, administrative actions on “strategic Bitcoin reserves” have not been able to drive the market—a important signal. During this period, the rebound often encounters critical periods of resistance and fades (we saw this last week after Trump tweeted about crypto reserves).

Some of the additional signals we look for during the phase of wealth destruction include:

Removal and "panic" that will shock the market but still not completely awaken the market. We see this in the DeepSeek AI panic and tariff uncertainty.

Investors are "hopetic". We see a lot of discussion today about the dollar's decline and the rise in global M2 (more on this report later).

"scammer" type enters the market. More people send us "look at their projects" through private messages. Advertising capital flows in the market. Fragile spending of well-funded projects in conferences. More players compete/infight against players (PvP). The industry overall exudes a more "dirty" atmosphere. Bad actors start to be named during the "wealth destruction".

During this time, failed projects also start to surface—usually after liquidation. The previous cycle started with Terra Luna. This led to the collapse of Three Arrows Capital. Then there was the bankruptcy of BlockFi, Celsius, FTX, etc.. It eventually led to the collapse of Genesis and the sale of CoinDesk.

We haven't seen any explosive events yet. We have noticed that there should be fewer explosions in this cycle—just because of the reduction of centralized finance (CeFi) companies. Time will tell us. Fewer explosions can lead to higher lows when we officially bottom out.

Where may these explosions come from?

No one knows, but my guess is to focus on the usual suspects.

Exchange: left;">Stablecoins: We are focusing on Ethena/USDe—the stablecoins in circulation are worth nearly $5.5 billion. It maintains its peg through cash-to-arbitrage trading (holding spot assets, short futures) and obtains profits—a major source of leverage in the previous cycle (via Greyscale). Ethena’s reliance on centralized exchanges adds additional counterparty risk. In addition, MakerDAO will alsoSub-store investment in USDe creates additional cascading risks in DeFi.

Protocol: Focus on the increase in hacking attacks and potential liquidation cascades on platforms like Aave due to crypto collateral—Aave still has more than $11 billion in active loans (down from its peak of $15 billion).

Microstrategy: We think they do a good job of managing debts, as most of them are long-term unsecured debts or convertible bonds (BTC holdings have no margin calls). In addition, they were able to withstand a 75% decline in Bitcoin in the last cycle. Still, a sharp drop in Bitcoin’s price could put pressure on Saylor, forcing him to sell Bitcoin in large quantities at its worst.

The best time to re-enter the market is at the end of the Wealth Destruction Phase. We don't think this has come yet. Of course, we will notify you when we think we are back to the “buy zone”.

DEX trading volume

DEX trading volume on Solana has dropped by 80% since Trump launched the meme coin. Meanwhile, the number of unique traders has dropped by more than 50%. This shows to us that animal spirit is weakening.

Data source: The DeFi Report, Dune

Token issuance

Token issuance on Solana has dropped by 72% from its peak. Despite this, the chain still sees over 20,000 tokens being created every day.

Data source: The DeFi Report, Dune

MVRV ratio of long-term Bitcoin holders

Data source: Glassnode

MVRV for long-term holders (Bitcoin’s “smart money”) peaked at 4.4 in December. This is 35% of the 2021 cycle peak of 12.5, which is 35% of the 2021 cycle peak of 35% of the 2017 cycle peak.

Bitcoin rose about 80 times from valley to peak in the 2017 cycle. It rose about 20 times in the 2021 cycle. It rose about 6.6 times in the current cycle.

Bitcoin rose about 80 times in the 2017 cycle. left;">The realization price of Bitcoin (a proxy for the average cost basis of all circulating Bitcoin) reached a peak of $5,403 in the 2017 cycle, 15.1 times higher than the 2013 cycle peak. It reached $24,530 in the 2021 cycle, 4.5 times higher than the 2017 cycle peak. Today, the realization price is $43,240, 1.7 times higher than the 2021 cycle peak.

Key points:

With each of the above data points, we can observe that the reduction of peaks from one cycle to the next cycle is symmetrical. We think that this data clearly tells us that the law of diminishing returns is very true.

Bitcoin is a $1.7 trillion asset today. No matter how bullish the headlines are, investors should not expect to see a sustainable parabola that was like in the past. It takes too much capital to push this asset now. When Bitcoin loses momentum, the rest of the market will lose a lot.

The animal spirit on Solana is fading. We keep abreast of this because we are concerned that Solana's "recovery story" seems to be built on a "house of cards"—think that 61% of DEX transactions so far this year involve meme coins. In addition, less than 1% of Solana users contributed more than 95% of GAS fees in the past 30 days. This is worrying, as it highlights that a small percentage of Solana users ("big fish") are preying on everyone else ("little fish" that trades meme coins). So if the "little fish" get tired of losing money and resting (we think they are doing this), we may see a rapid decline in Solana fundamentals.

Source: The DeFi Report, Dune (Basic Fee + Priority Fee + Jito Tips on Solana)

Long-term Bitcoin holders have taken profits twice in the past year. Their realization price (the agent on the cost basis) is currently around $25,000. Meanwhile, short-term holders buying at the top are currently in a loss-making state (the average cost base is $92,000). We think this group may continue to sell at lower highs as they realize the reality that Bitcoin reaches its top at $109,000 has arrived.

Source of data: Glassnode

When you put it all out, it is undeniable that we think that the "typical" cycle has ended. Denying this is denying reality.

Of course, there is no "law" at work here.

In our opinion, the best way to process this information is to accept reality + set a probability for the top of the cycle. We think this probability is obviously higher than 50%.

After the basic work is completed, we will try to question our arguments and stress test our views.

I still see a lot of people refuting bearish views. The bullish will not let go of their weapons easily.

This begs the question: Is the bullish view more evidence that we have entered the "wealth destruction" phase, i.e. the "deny" phase? Or are we likely to be too bearish at local lows and the market will rise again afterwards?

In this section, we will discuss some of the main "bullish views" I have seen.

Global M2/Liquidity

Data source: Bitcoin Counter Flow

The green box on the right shows that Bitcoin is falling as global M2 begins to rise. Some point this out, mentioning the correlation between Bitcoin and M2, and that Bitcoin usually has a 2-3-month laganswer.

However, the green box on the left shows that the same dynamic occurred at the end of the previous cycle: M2 is rising and Bitcoin is falling. In fact, M2 didn’t peak until early April 2022 — five months after Bitcoin peaked.

Global M2 has risen 1.87% since mid-January, as central banks have shifted from tightening to easing.

This is positive for liquidity conditions.

However, we should also ask the following questions:

What drives the increase in M2? We believe this mainly comes from the decline of the US dollar (down 4% since February 28!) – when denominated in US dollars, foreign currencies increase. This is a driving factor in global M2. In addition, reverse repurchase facilities have been recently exhausted + are being easing to stimulate its economy.

will last? We think the dollar will continue to decline as investors move their funds overseas, but will not continue at the rate of the past few weeks. We believe that easing will continue to cope with the lower US dollar. However, we do not think the Fed will be easing in the near term, as they say reserves are still "adequate". We believe they are still worried about inflation.

How is this compared to last year's liquidity conditions? We believe that current liquidity conditions should be considered headwinds compared to last year. Remember, it's more about the rate of change than a nominal increase. We strongly believe that the Fed and the Treasury Department injected vitality into the market last year through "shadow liquidity" — or in the words of Cross Border Capital's Michael Howell, "QE that is not QE" and "yield curve control not yield curve control" —. The following figure shows the impact of Trump's new removal of these changes.

Source: Cross Border Capital

The "secret stimulus" in the above picture is estimated to inject $5.7 trillion into the U.S. market in the early 24 years. This is done by depleting reverse repurchase + early issuance of new debt notes.

Finally, we believe investors shouldPay close attention to what Finance Minister Becent said in a CNBC interview last week: "The market and the economy are already addicted. We are already addicted to this expenditure. There will be a detoxification period. There will be a detoxification period."

Business Cycle/ISM

We previously pointed out that the ISM data indicates that a new business cycle is beginning. We also recorded strong data on capital expenditure purchases and small business confidence. We think this is true, but obviously growth is slowing. The data we saw last month may be biased by some manufacturers “buy in advance” before expected tariffs. We have seen the service industry and new order data soften. The manufacturing PMI reading in February was 50.3, down from 50.9 in January.

Strategic Bitcoin Reserve

Until last Friday, cryptocurrency natives were still promising the discussions on strategic cryptocurrency/bitcoin reserves—even though the market repeatedly ignored the news over the past six weeks.

I think we can all agree now that this is an incident of "buying rumors and selling news". Are there any flaws in "cyclical thinking"?

We should also admit that this "cycle" is different from the past.

For example:

Bitcoin hits an all-time high for the first time before the halving.

This cycle is much shorter, with only two years of bull market.

The "altcoin season" performed quite differently, as Bitcoin's dominance has been gradually rising since the beginning of 2023.

Bitcoin is now fully integrated into the financial system and has been supported by the United States.

If "period thinking" is flawed, is it possible that we have not reached the top yet? Instead, we may be going through a pause/correction/consolidation phase, followed by the next round of gains, rather than a year-long bear market where prices fell 75-80% like in the past?

Summary our view:

We believe we are currently in the "Complacency" stage in the chart above.

All the bullish catalysts that could be identified a few years ago have already worked.

The economy may be heading for recession. We think Trump The news is already very clear. They are actually telling us that the economy needs to be detoxified. We should believe their words. This is very similar to Powell's coming out and said "pain is coming" before the rate hike in early 2022. We currently believe that cryptocurrencies are canaries in the coal mines. Traditional financial markets will follow slowly bleeding/swing.

In view of the extreme bearish sentiment, we may see the market rebound to the low of Bitcoin's $90,000 in the near term. However, we think that this will be actively sold – which may kill any hope of resuming the bull market structure.

As always, we are open to mistakes. Our analysis is based on information available today. We will update our perspectives as new information arrives.

left;">What do we need to be bullish again? We will look for the following:

Reversal of fiscal constraints/DOGE efforts.

The Fed's sharp rate cut/QE.

Major inflows of global liquidity driven by the Fed (not just ).

S&P 500/Nasdaq's significant correction/surrender.

left;">One ​​of our concerns is that bearish situations are beginning to become consensus. This makes us hesitate. But we still have to stick to all other factors at the moment - because the probability indicates that the top of the cycle has arrived and the bear market is coming.

Of course, there is a lot to be bullish in the long run.

Cryptocurrencies have truly entered their "turning point" period. Now it’s finally time to rebuild the financial system on the public blockchain.

Not to mention, we like bear markets. As the tide recedes, it is easier to separate the noise from the past cycle from the signal – which will prepare us for the next bull market.