Original article from The Defi Report
Compiled by Odaily Planet Daily Golem ( @web3_golem )
Editors note: On March 12, 2025, it was sunny and nothing happened in the crypto market. Old people who experienced the 312 cryptocurrency crash in 2020 would recall the days dominated by fear every March 12, and hope that this day could be spent peacefully. But calmness is not necessarily a good thing. Looking at the long-term trend, despite the frequent verbal calls from the Trump administration for the crypto industry, Bitcoin fell by 17.67% in February, reaching a low of $78,258. The situation has not improved in March, and Bitcoin is still hovering around $80,000.
So, the scary thing is, will January 2025 be the peak of this bull market? Will we be greeted with endless declines in the next year? Although there are still many positive comments in the market, researchers at The Defi Report say that the next 9-12 months will be a bear market . Odaily Planet Daily compiled the full text of its market analysis as follows. Sorry~
Looking back at the market: How did we get here?
Before understanding the current on-chain data, we will first conduct a qualitative analysis of the current cryptocurrency cycle.
Early bull market: January 2023 to October 2023
This is roughly the period from January 2023 to October 2023, which is the period after the market bottomed out after the FTX crash, and the market became very quiet (low trading volume, crypto Twitter was silent), but the market actually started to rise.
During this period, BTC rose from about $16,500 to $33,000. However, no one called it a bull run, and most people remained on the sidelines during the “early bull run.”
Wealth creation phase: November 2023 to March 2024
This is roughly the period from November 2023 to March 2024.
This is when we saw some big moves and some exaggerated wealth formation. SOL went from $20 to $200, Jito’s airdrop (Dec’23) created a massive wealth effect in Solana and repriced value in Solana DeFi (Pyth, Marinade, Raydium, Orca, etc.). The venture capital market peaked during this period (which is typical).
BTC rose from $33,000 to $72,000; ETH rose from $1,500 to $3,600; Bonks market value rose from $90 million to $2.4 billion (26 times); WIFs market value rose from $60 million to $4.5 billion (75 times). The seeds of a bigger Meme Season have been planted at this stage.
But the market is still pretty “quiet” during this period, and your friends outside the circle may not be asking you questions about cryptocurrencies yet.
Wealth Distribution Phase: March 2024 to January 2025
This is roughly the period from March 2024 to January 2025.
This is the peak period of crypto market attention, and we see WAGMI type sentiment, rapid rotation, new meta (which quickly disappears), and blind risk-taking to get rewarded. Celebrities and other crypto transients tend to enter during this period, and crazy headlines like Tesla buys BTC or Bitcoin strategic reserve tend to appear during the wealth distribution phase.
New investors entered the market driven by these headlines, but they didn’t know they were late. This was also the second wave of “Meme Season”, which then evolved into “AI Agent Season”. During this period, the market ignored a lot of obviously problematic behavior, and no one was willing to speak out because people were making money, which brought us to the current “hell”.
Wealth Destruction Phase: January 2025 to Present
We believe we entered this period after Trump took office. This is the period after a market top, when the bullish catalyst is now a thing of the past and seemingly positive news is met with bearish price action.
Executive actions regarding the “strategic bitcoin reserve” have not actually moved the market higher in the current regime — an important sign during which reversals tend to hit key resistance and fade away (as we saw last week following Trump’s tweet about cryptocurrency reserves).
Some other signs you can see during the wealth destruction phase:
Liquidations and “panics” disrupt markets but still do not fully sober them up. We saw this with the DeepSeek AI panic and tariff uncertainty.
Investors are “hopeful.” We’ve seen a lot of discussion today about a falling dollar and rising global M2 (more on this later).
More scammers entering the market . More people private messaging crypto folks asking to check out their project; more ad money circulating around, and well-funded projects at conferences being spent haphazardly; more PvP/competition/infighting, and a generally more dirty vibe coming from the industry; people starting blaming the bad guys during wealth destruction.
During this period, the dead bodies in the market also begin to surface - usually after liquidation. The last cycle started with Terra Luna, which led to the bankruptcy of Three Arrows Capital, triggered the bankruptcy of BlockFi, Celsius, FTX, etc., and ultimately led to the demise of Genesis and the sale of CoinDesk.
We haven’t seen any “bodies” yet, but this cycle should see fewer – simply because there are fewer CeFi companies. Time will tell, and the later the trigger comes, the higher the lows will be when we officially bottom.
Where might the trigger come from? No one knows, but common culprits include:
Exchanges . Keep an eye out for hidden leverage and/or potential scams on some of the “B and C grade” exchanges.
Stablecoins . Watch Ethena/USDe — with nearly $5.5 billion worth of stablecoins in circulation. Ethena maintains its peg and earns its gains from cash and carry trades (holding spot assets, shorting futures) — a major source of leverage in the last cycle (via Greyscale). Ethena’s reliance on centralized exchanges adds additional counterparty risk. Additionally, MakerDAO has invested part of its reserves in USDe, creating additional cascading risk for DeFi.
Beware of potential hacks and liquidation cascades due to crypto collateral, such as Aave, which still has over $11 billion in active loans (down from a peak of $15 billion) .
Strategy . They have done a good job of prudently managing their debt, as much of it is long-term unsecured or convertible debt (no margin calls on BTC holdings), and they were able to withstand a 75% drop in BTC last cycle. That being said, a significant drop in BTC prices could put pressure on Saylor, forcing him to sell a large amount of BTC at the worst time.
The best time to re-enter the market is at the end of the wealth destruction phase, which we believe is not here yet.
Some bearish data you can’t avoid
DEX Trading Volume
After Trump launched the meme coin, Solana DEX trading volume dropped 80% from its peak, and at the same time, the number of unique traders dropped by more than 50%. This signals to us that the market frenzy is beginning to wane.
Token issuance
Token issuance on Solana is down 72% from its peak. Despite this, the chain is still creating more than 20,000 tokens per day.
Bitcoin long-term holder MVRV ratio
Data: Glassnode
Long-term holder MVRV (“smart money” in Bitcoin) peaked at 4.4 in December. This is 35% of the 2021 cycle peak of 12.5 and 35% of the 2017 cycle peak. Bitcoin rose ~80x from trough to peak in the 2017 cycle and ~20x in the 2021 cycle. It is up ~6.6x in the current cycle.
The realized price of Bitcoin (a proxy for the average cost basis of all circulating Bitcoins) peaked at $5,403 in the 2017 cycle, 15.1 times higher than the peak of the 2013 cycle. It reached $24,530 in the 2021 cycle, which is 4.5 times higher than the peak of the 2017 cycle. Today, the realized price is $43,240, 1.7 times higher than the peak of the 2017 cycle.
Give up your illusions, this cycle is over
With each of the above data, we can observe the symmetry of the peaks falling between cycles. These data clearly tell us that the law of diminishing returns is real. Bitcoin is now a $1.7 trillion asset, and no matter how optimistic the headlines are, investors should not expect to see a sustainable parabolic move like in the past, when moving the curve requires too much capital to enter the market.
When BTC loses momentum, the rest of the market loses everything.
The frenzy on Solana is waning. We’re watching this because we’re concerned that Solana’s “comeback story” is built on a “house of cards” — considering 61% of DEX volume year to date involves meme coins. Additionally, less than 1% of Solana users are responsible for over 95% of gas fees in the last 30 days, which is concerning because it highlights that a small group of Solana users (the whales) are preying on everyone else (the “P-boys” trading meme coins). So if the “P-boys” get tired of losing money and take a break (which we think they will), we could see Solana’s fundamentals deteriorate quickly.
BTC long-term holders have profited twice in the past year. Their effective cost is currently around $25,000. Meanwhile, short-term holders who bought at the top are currently losing money (average cost basis is $92,000). We believe this group may continue to sell at lower highs as BTC tops out at $109,000.
Data: Glassnode
When presented with this data, it is undeniable that the “typical” cycle has ended, and to deny this is to deny reality. Of course, there is no “conclusion” here, and we believe that the best way to process this information is to accept reality + assign a probability to the cycle peaking, which we believe is clearly above 50%.
Does the bull market view still hold water?
The market still sees considerable resistance to the bear thesis, and the bulls are not quietly laying down their arms. In this section, we will cover the bull thesis that is untenable.
Global M2/Liquidity
Data: Bitcoin Counter Flow
The green box on the right shows BTC falling as global M2 begins to rise. Some see this as a bullish signal, citing the correlation of M2 with BTC and the general lag (2 to 3 months) in BTCs performance . That being said, the green box on the left shows the same dynamic at the end of the previous cycle: M2 rose as BTC fell. In fact, M2 did not peak until early April 2022 - 5 months after BTC peaked.
Since mid-January, global M2 has risen by 1.87% as central banks have largely shifted from tightening to easing, which is good for liquidity conditions. However, we should also ask the following questions:
What’s driving the growth in M2? We think it’s mainly from the falling USD (down 4% since Feb 28) – which means more foreign currency when denominated in USD. This is a boost to global M2, in addition to the recent exhaustion of the reverse repo facility + China easing policy to boost the economy.
Will M2 continue to rise? The dollar will continue to fall as investors move money overseas, but not as much as it has in the past few weeks. We think Chinese policy will continue to slow the dollars depreciation. However, the Fed may not adopt an easing policy in the short term as they say reserves remain ample.
How does this compare to last year’s liquidity conditions? Current liquidity conditions should be viewed as unfavorable compared to last year. Remember, this is more about the rate of change than nominal growth. We strongly believe that the Fed and Treasury “stimulated” the market last year to get Biden/Harris re-elected. This was accomplished through “shadow liquidity” – or in the words of Michael Howell of Cross Border Capital, “non-QE, QE” and “non-YCC, YCC”. The chart below shows the impact on the rate of change of removing these policies under the new Trump administration.
Data: Cross Border Capital
The aforementioned “secret stimulus” is estimated to have injected $5.7 trillion into the US market by early 2024. This was accomplished by draining reverse repo + issuing new bonds in advance. Finally, investors should pay close attention to what Minister Bessant said in an interview with CNBC last week: “The markets and the economy have become addicted, we have become addicted to this type of government spending, and there will be a detox period.”
Strategic Bitcoin Reserve
As of last Friday, crypto natives remain hopeful about discussions of strategic crypto/bitcoin reserves — even though the market has shrugged off this news multiple times over the past 6 weeks, so it has been a “buy the rumor, sell the news” event.
Is “cyclical” thinking flawed?
It must be admitted that this cycle is different from past cycles. For example:
BTC hits new all-time high ahead of its first halving.
The cycle is much shorter, only two years.
The alt season ended very differently, as BTC’s dominance has been gradually rising since the beginning of 2023.
With the support of the US government, Bitcoin is now fully integrated into the financial system.
If “cycle thinking” is flawed, then we may not have reached the top yet. Instead, perhaps we are entering a pause/correction/consolidation phase before the next leg up, rather than a year-long bear market where prices could drop 75-80% (as we have seen in the past)?
Although the cycle is evolving, we still expect the bear market to take 9-12 months to end.
Final Thoughts
Let me summarize the views of this article again:
We are currently in the “complacency” phase of the cycle shown in the chart above, and all of the bullish catalysts that one could have been talking about a few years ago have played out.
The economy may be heading for a recession. The message from the Trump administration is very clear, they are actually telling us that the economy needs to detox. This is very similar to what Powell said before the rate hike in early 2022 that pain is coming. We should listen.
Given the extremely bearish sentiment at the moment, we could foresee a rally towards $90,000 in the near term. However, we believe this would trigger a massive sell-off – which could kill any hopes of resuming the bull market structure.
We are not always bearish, but we may consider turning bullish again when the following factors occur :
Reversal of Austerity/DOGE efforts.
A big taper of the Fed/QE.
A massive influx of global liquidity, driven by the Federal Reserve (not just China).
Major correction/capitulation in the SP 500/Nasdaq.
But what we must insist on for now is that the cycle top has arrived and the bear market is coming. Of course, in the long run, this is a good thing. Cryptocurrency has entered a turning point period. Now is the time to calm down and rebuild the financial system on the public blockchain. I like bear markets. As the tide recedes, it will be easier for people to distinguish the noise from the signal of the past cycle, which will prepare us for the next bull market.
