Crypto market forecast in 2025: cycle review, market outlook and hot narratives

Author: @arndxt_xo

Compiled by: Vernacular Blockchain

Historically, Bitcoin has typically had a strong performance in February in post-halving years

1. Cycle review and forecasting

1) Review of 2017 and 2021 cycles

2017: Bitcoin saw a correction in January but resumed its upward trend in February.

2021: Similarly, BTC resumed its uptrend in February after falling in January.

2) 2025 Forecast

If history repeats itself, February could see a similar rally.

3) Market rumors and potential driving factors

Recently, market speculation on Bitcoin-related executive orders has been heating up.

While not yet confirmed, historical experience suggests that such events often provide a significant boost to the market.

Next, we will conduct an in-depth analysis of the performance in each field👇🧵

2. Industry overview

1) Infrastructure & Interoperability

Reduce online tribalism and enable cross-chain connections

Development trends:

Superposition (Arbitrum L3) and Abstract (Hydra integrated with Stargate) are launching more efficient asset transfer and data sharing solutions.

LayerZero expands its influence, allowing applications on Superposition to obtain liquidity from more than 100 connected chains.

Arcana Network cooperates with Scroll to allow users to pay gas fees with stablecoins (USDC/USDT) on any chain, greatly simplifying the user's entry process.

Viewpoint:

These developments demonstrate that the push for cross-chain interoperability continues to gain momentum. From L1 to L2 to L3, seamless movement of assets and data is gradually becoming a basic requirement for the industry.

Projects that can integrate user-friendly interfaces, gas abstractions, and universal cross-chain bridges will hopefully reduce the barriers that have hindered the popularity of DeFi in the past due to "network tribalism."

Looking to the future, we may see the launch of customized L3 in more vertical fields, such as focusing on games, RWA (real world assets) and institutional-level DeFi.

2) Liquidity, borrowing and real-world assets

The Holy Grail of the Credit and Loan Ecosystem

Development trends:

Coinbase has launched BTC-collateralized loans for US users, giving a more mainstream audience the ability to leverage Bitcoin assets.

Tradable has partnered with ZKsync to bring $1.7 billion worth of Raised Credit (RWA) on-chain, demonstrating how institutional-grade products can further penetrate the DeFi space.

Plume Network attracted more than US$4.5 billion in asset commitments for asset tokenization, with TVL reaching US$64 million before going online, and also launched a RWAfi ecological fund worth US$25 million.

Viewpoint:

The boundaries between CeFi and DeFi are increasingly blurred, which is an important sign of the maturity of the industry.

Coinbase’s entry into the crypto-collateralized lending market demonstrates the willingness of centralized exchanges to offer products traditionally associated with DeFi platforms. This may divert DeFi users, but it also verifies the importance of on-chain lending as a key financial tool.

The integration of RWA is considered the “Holy Grail” connecting traditional finance and on-chain liquidity.

If this trend continues, DeFi may usher in stronger returns, deeper liquidity, and greater institutional trust, but this may also be accompanied by more regulatory scrutiny.

The development of these two fields is not only a technological and ecological progress, but also reflects the transformation path of the entire industry from "novel technologies" to mainstream financial instruments.

3) Liquid Staking & Synthetic Bitcoin

Pledge mechanism innovation

Development trends:

Babylon Labs has launched $YBTC, a liquid staking token backed 1:1 by BTC, integrated with pSTAKE.

BrahmaFi launched the Onchain+ plan, which combines multi-chain strategies and AI agents (ConsoleKit) to achieve automated DeFi operations.

Viewpoint:

Liquidity staking has proven to be a key means of unlocking additional benefits for stakers without sacrificing liquidity. By tokenizing pledged assets (such as BTC, ETH, etc.), DeFi participants can use them as collateral or trade freely.

This “dual benefit” model (earning staking rewards and potentially gaining DeFi benefits) will likely further accelerate development.

However, there are inherent risks: the more times an asset is "liquid-collateralized," the greater the complexity of the system. Protocols must be transparent and fully auditable to prevent hidden leverage from eroding system stability.

4) Ecological expansion and strategic cooperation

Large-scale user introduction and enterprise cooperation

Development trends:

Polygon Labs has partnered with Reliance Jio, India's largest telecom company with more than 450 million users, to integrate blockchain solutions into Jio's applications.

Ledger integrates Uniswap into Ledger Live Desktop to provide a smoother experience for hardware wallet users.

Abstract is preparing for the mainnet, suggesting that a wave of innovation in multi-chain products is coming.

Viewpoint:

Large-scale user introduction and enterprise cooperation are the keys to the blockchain industry becoming mainstream. This not only increases the exposure of blockchain technology, but also further verifies its value through actual application scenarios.

Especially in high-growth markets like India, Polygon's partnership with Reliance Jio could become an important example in driving blockchain adoption.

5) Airdrops, incentives and liquidity mining

Increased competition for users

Development trends:

Several projects, including Scroll, Quai Network, Fuel, and Bubblemaps, are launching airdrop events or extending bonus seasons, and their respective community participation standards are different.

Protocols such as Vertex (rewarding $2.1 million SEIToken) and Derive (rewarding $2 million DRV to liquidity providers) continue to provide user incentives. Nodepay and Solayer provide an early claim process or a direct distribution model during the TGE stage.

Viewpoint:

Airdrops have proven to be an effective way to launch an initial user base, but they are also becoming the “standard” in the competition for new protocols.

As more and more projects offer incentives, user fatigue may become an issue. The key to the project is to engage users through real usefulness rather than just "chasing incentives."

In the long term, protocols need to find a balance between incentive mechanisms and sustainable token economics. The best strategy is to design a reward system that attracts new users and retains them through real product value.

3. Narrative Overview

From liquidity staking and ecological cooperation to user incentives, the current industry focus is on improving user experience and engagement through innovation and strategy. These developments not only promote the improvement of infrastructure, but also mark that DeFi is gradually moving towards a more mature and efficient stage.

1) BTC price trend and macro impact

Market dynamics

On the first Monday of the new year, a significant "bull trap" appeared in the market. Bitcoin ($BTC) surged after the New York market opened, with Coinbase premium attracting investors believing a bull run is coming. However, this signal proved to be false. The next day, the price of Bitcoin quickly stalled and fell sharply, and the altcoin market subsequently weakened.

2) Uncertainty caused by key macro factors

Inflation concerns: Strong job market data (NFP report) released on January 10 showed potential inflationary pressures, which may lead to fewer interest rate cuts, becoming a bearish signal for the stock and crypto markets.

U.S. Dollar Index (DXY): Hits new highs at 110.

10-Year Treasury Bond Yield: Year to date increased from 4.6% to 4.8%.

S&P 500: Backtesting pre-election price levels.

3) AIToken correction and opportunity consolidation

$VIRTUAL: Down 57% from $5.2 billion market cap.

$AI16Z: Down 63% from $2.5 billion market cap.

$ZEREBRO: Down 73% from $820 million market cap.

$FAI: Down from $650 million to $500 million.

$AIXBT: Still close to all-time highs despite market weakness.

$GOAT: Down 55%, performance remains weak.

emerging winners

$ANON: Grows from $20 million to $240 million.

$AVA: Grows from $60 million to $300 million.

$PIPPIN: Grows from $15 million to $320 million.

4. Memecoins dynamics

1) FARTCOIN

Meme coins, loosely tied to the AI ​​narrative, rebounded 75% after falling 56%. The market generally speculates that its market value may exceed US$5 billion or even higher.

$$BUTTHOLE and $$LLM

$BUTTHOLE: Dropped 70% after reaching a high of $140 million.

$LLM: Related to AI narrative, down 75% after reaching $150 million.

2) Dino currency and USA currency (represented by $XRP)

$XRP: Up 6% YTD, outperforming the market.

Ripple's ties to the incoming U.S. administration and CEO Brad Garlinghouse's ties to key political figures have boosted market sentiment.

3) Other tokens with strong performance

$HBAR

$XLM

$ADA

5. Strong performance of other significant trends

$SPX: broke through $1 billion in market capitalization, reached a high of $1.6 billion, and is now down 30%.

$GIGA: Close to $1 billion but encounters resistance, down 30%.

$SUI: Reached all-time FDV high of $54 billion, down only 13%.

New project online

$BIO: As the first major DeSci protocol came online, the FDV was $3 billion, but is now down 55%.

$GRASS: Showing a strong rebound after weeks of sideways trading.

$USUAL: It fell 66% from its all-time high due to controversy over the change in USD0++ redemption rules.

Tokens that require caution

$FTM: Due to the delisting of the trading contract, it may have a second life, but there are significant migration issues.

$RUNE: Faces risks associated with ThorFi borrowing, compared to LUNA.

Animal-themed meme coins: $POPCAT, $WIF and $NEIRO performed the worst, with $POPCAT down 73% from its all-time high.

6. Looking forward to 2025

The market has opened a new chapter, but the macroeconomic environment and the diversity of the Token market remind us to remain cautious and look for potential opportunities.

We look forward to working with more market participants to welcome new highs in 2025!