Article reprinted from: Mario Sees Web3
Author: @Web3_Mario
Summary: Thank you all for your support throughout the year. I apologize that the author's year-end summary comes a bit late; handling matters has delayed the time. Of course, I have also thought for a long time about which angles to use to sort out my insights from this year. In the end, I feel that sharing from the perspective of an ordinary Web3 entrepreneur who is still striving on the front line will be more genuine. Overall, looking back at 2024 and looking forward to 2025, I believe it is quite appropriate to summarize with four phrases: from grassroots to universal, from chaos to order, from recession to bubble, from conservatism to reform. Next, the author will share some representative events that I believe reflect my thoughts and outlook.
From grassroots to universal: The approval of the BTC spot ETF has opened the curtain for the universal path of crypto assets.
Looking back at 2024, the author believes that the most unusual transformation experienced by the crypto world is the upgrade from a product of past niche subcultural groups to an asset class with universal value. This journey can be traced back to two landmark events: the first is on January 10, 2024, when the BTC spot ETF approval event, which had been contested for three months, was officially passed with the SEC's approval. The second is on November 6, 2024, during this round of the U.S. election cycle, when crypto-friendly Trump successfully became the 47th President of the United States. Both can be seen in the two relatively obvious price movements of BTC this year. The former raised the BTC price from the $30,000 range to $60,000, while the latter contributed significantly to the rise of BTC from $60,000 to $100,000.
The most direct impact of this transformation is on capital liquidity. More abundant liquidity naturally favors the price trends of risk assets, but the process and motivation of attracting liquidity differ from those in the 2021 bull market. Looking back at the crypto asset bull market in 2021, the main driving force came from the deregulated nature of crypto assets, which yielded higher capital efficiency, allowing the crypto sector to capture the excess liquidity generated by the Biden administration’s (1.9 trillion dollar economic relief plan) more effectively, thus achieving extremely high speculative returns.
However, in this current bull market that began in 2024, it can be seen that the entire transmission process has undergone a transformation. Leveraging the 'influential capital' attracted during the 2021 bull market and the newly emerging vested interests, a new interest group is actively releasing greater political influence, not limited to many crypto policy lobbying groups and massive political donations. Regarding this, the author has provided a more in-depth analysis in the previous article (In-depth Analysis of the Value of World Liberty Financial: A New Choice Amid Trump's Campaign Fund Disadvantages).
The most direct impact brought about by this is that through political means, the efficient promotion of the universal value of cryptocurrencies has become possible. Therefore, in this round of cycles, you will see that discussions about the value of crypto assets are undergoing iterations, and more traditional elite classes and mainstream media are labeling themselves as 'crypto-friendly'. This shift from 'grassroots' to 'universal' has profoundly influenced the motives for attracting liquidity. Whether or not the viewpoints are backed by sufficient evidence (which has been discussed in previous articles, such as in-depth analysis of the underlying reasons for the current turbulence in the crypto market: anxiety about BTC's value growth after breaking new highs), the purchasing motivation for BTC in this round, besides speculation, indeed includes more terms like 'store of value' and 'anti-inflation', which will lower the cyclicality and volatility brought by speculative attributes in crypto assets, making value support more robust. Currently, it seems that only a few blue-chip assets, including BTC, can attain this positive change. However, with the transmission effects brought by the multiplier effect, the entire crypto asset market will benefit to some extent. Using an illustration to explain this transformation may be more intuitive.
In addition to the impact on the top-tier class, this evolution has also brought about a significant positive mindset shift for many practitioners, including the author. The most straightforward example is that when friends and relatives from outside the circle ask you about your industry, you no longer have to explain anxiously that you are not a criminal or a nouveau riche, but can confidently introduce your profession or career. This mindset change will also make the inflow of talent more positive; whether in seeking partners for entrepreneurship, recruiting talent, or collaborating with traditional industries, the friction costs in these processes will be greatly reduced. Therefore, in this regard, the author is very confident about the future development of the industry.
Finally, it is also worth mentioning some prospects for this narrative path. By mid-2025, discussions about the value of crypto assets represented by BTC will be more positive. In previous articles, it has been analyzed that BTC's store of value may take over AI, becoming the core of growth in the U.S. stock market. Therefore, it is essential to remain sensitive to related information, which may include several aspects:
l Progress on legislation related to Bitcoin reserves at the national, regional, organizational, and corporate levels;
l Relevant statements or viewpoints expressed by key political figures with political influence;
l The allocation of BTC in the balance sheets of U.S. listed companies;
From chaos to order: The regulatory framework for the crypto industry by global sovereign nations will be further improved, and the Web3 business scenarios will be substantiated.
The author's second observation path is 'from chaos to order'. We know that for a long time, a core narrative in the cryptocurrency industry has been its resistance to censorship due to decentralization and anonymity. You can find similar discussions in most Web3 applications during the previous cycle, which naturally contributed significantly to finding value support for the Web3 industry in its early stages. However, it also brought considerable harm to the industry, such as fraud and money laundering.
However, the author believes that the industry will iterate in this direction; it is not about completely abandoning Web3 fundamentalism. Rather, from a pragmatic perspective, the current crypto industry will undergo a transformation from chaos to order, and this transformation will be accompanied by the further improvement of the regulatory framework for the crypto industry by global sovereign countries. We know that in 2024, among many 'crypto gaming hotspots', the changeover of SEC Chairman Gary Gensler has attracted significant attention. Under this crypto-unfriendly chairman, the SEC has prosecuted a large number of U.S. crypto companies, such as Ripple and Consensys, causing these giants' business operations and expansions to face bottlenecks. In the previous article (Buy the rumor series: What kind of cryptocurrency benefits directly from the improvement of the regulatory environment?), Lido was taken as an example to analyze progress in this direction clearly.
However, with Trump's assumption of office, his deregulatory policy preference, combined with the change of Gary Gensler, a more relaxed and inclusive, crypto-friendly regulatory framework is to be expected. From the recent progress of related case judgments, such as Ripple and Tornado Cash, the introduction of this framework is not far off.
The most direct benefit of this change is that it makes breaking out of the Web3 business scenario more substantiated and does not have to bear many potential legal risks. In the coming year of 2025, the author will particularly observe the progress of such events. Everyone also needs to remain sensitive to similar information, including the outcomes of other lawsuits, the introduction and advancement of related legislation, changes in SEC personnel appointments, and statements and viewpoints of key decision-makers. Regarding potential breakout businesses, the author is particularly interested in two aspects:
l Ce-DeFi scenarios: Connecting traditional financial tools with crypto assets and other on-chain tools to solve issues of capital efficiency and reduce transaction friction costs. From the direction of capital flow, it can be divided into two categories: the first is the flow from the traditional financial world to on-chain crypto assets, such as MicroStrategy's financial innovations. The second is the flow from on-chain crypto assets to the traditional financial world, specifically regarding bond-based RWA, similar to Usual Money's on-chain financing channels, and stablecoins in the TradeFi sector.
l DAO in the management of off-chain entity business: This direction seems a bit improvised. Due to Trump’s policies easing regulations on cryptocurrencies and the 'America First' approach boosting domestic demand, will more organizations or companies inclined towards traditional businesses choose to operate through the DAO model for internal governance to obtain cheaper financial services? For example, if someone wants to open a Chinese restaurant, they can choose to operate through a DAO and connect to a stablecoin-based payment system, making all cash flows transparent. If regulatory policies are further relaxed, the company’s financing and dividend processes could also be managed through the DAO.
From recession to bubble: Traditional Web3 business development focuses on three main axes: more innovative grand narratives, more robust business revenues, and a more balanced interest gaming model.
The author's third observation path is 'from recession to bubble'. We know that in 2024, traditional Web3 business hotspots have undergone a significant transformation. In the first half of the year, represented by the LRT market driven by EigenLayer, the main characteristics reflect the industry’s recession period. Due to the lack of a general profit-making effect and against the background of stock market gaming, capital groups warm together, choosing to concentrate on the few potential market segments with large scale but where actual business implementation is still far off in the Infra sector, trading time for space, raising valuations, and using 'points strategies' to avoid dilution of shares, thus exploiting users. This was analyzed in the author's previous piece (Web3 oligarchs are exploiting users: From Tokenomics to Pointomics).
However, with the improvement of the market environment in the middle of the year and the unsatisfactory performance of the LRT sector token prices, the hotspots gradually transitioned to the application layer represented by TON Mini App. Compared to the Infra sector, the application layer benefits from more target options, lower development costs, shorter implementation cycles, and more easily controllable favorable iterations, making it highly regarded by capital. At this point, the market quickly emerges from the shadows of the recession.
As we enter the second half of the year, with the Federal Reserve entering a rate-cutting cycle and with the FUD issues surrounding VC coins, traditional capital exit paths have been disrupted, and the market has quickly entered a bubble phase. Capital is chasing after virtual assets, and Meme coins, which have shorter exit cycles, are being pursued for higher capital turnover rates. Besides Meme coins themselves, launch platforms represented by Pumpfun, as well as new tools featuring narratives like AI Agents, are also being pursued by the market.
Regarding the outlook for the coming year, the author believes that traditional Web3 businesses will develop according to the bubble cycle:
l A more innovative grand narrative: We know that capital likes to chase high-growth sectors, primarily due to their enormous imaginative potential and the tolerance for current delivery, which allows valuation bubbles to grow larger. It also more easily attracts market traders and new capital to enter, making it easier for investors to exit through the secondary market at the right time. Therefore, whether or not to recognize the long-term value of a particular sector, as long as it makes sense, it can become a target for capital speculation during the bull market bubble. Thus, from the perspective of chasing capital gains, we should remain sensitive.
l More robust business revenue: For some sectors that have undergone an iteration, the valuation model will return to a reasonable range. At that time, the pursuit of real income will become the main theme of the industry iteration, which raises higher demands for refining commercialization potential. However, if a particular scenario can truly be explored, the market potential will be infinite. Here, I specifically refer to the DeFi sector or Ce-DeFi sector. Personally, I am quite interested in the interest rate trading market, and those with similar thoughts are welcome to discuss with me.
l A more balanced interest gaming model: We know that the current traditional VC coins are facing FUD, and the more significant issue lies in the current traditional financing model creating a prisoner's dilemma among project parties, primary market VCs, and secondary market investors. Each prisoner thinks the other may betray, thus choosing to betray (to ensure their own release or reduce their punishment). Therefore, in the new environment, whether it is possible to find a better model is also worth attention. For example, the author believes that HyperLiquid may have discovered some of these secrets, which will also be a focus of the author's future research.
From conservatism to reform: The significant uncertainty brings rare opportunities for risk assets to escape peril.
The author's fourth observation path is 'from conservatism to reform'. It is necessary to explain that 'conservatism' and 'reform' here are neutral terms. Conservatism means compliance with existing rules, while reform implies breaking them. The main theme of 2025 will certainly be the significant changes in the economic and cultural fields triggered by political reform, and the entire process is filled with the uncertainty brought about by the collapse of the old order. Examples include uncertainties surrounding the U.S.-China government debt crisis, uncertainties in various countries' monetary policies, uncertainties in the evolution of mainstream societal values, and uncertainties in international relations.
The uncertainty brought about by these factors results in enormous volatility in the risk market. Of course, if sector rotation places the industry in a state of active promotion, this volatility can be a good thing, and vice versa. A news flash from the other day piqued the author's interest in this direction, which is that the FTX restructuring plan will take effect on January 3 and will allow users to start receiving repayments.
We know that during the previous cycle, the mainstream political spectrum in the tech industry was relatively Democratic. Therefore, it is understandable that many big players who entered the market during the last bull run may not fare well after Trump's return. Thus, it is reasonable that before his formal inauguration, they would try to inflate related prices as much as possible, to hedge their risk assets, resulting in an escape from peril. Here, a slight conspiracy theory arises: some Deep State capital has suffered enormous losses due to the FTX bankruptcy and the collapse of the crypto industry. Therefore, after Trump's victory, they were willing to use numerous political means to artificially inflate cryptocurrency prices to an exaggerated level, allowing some already beleaguered balance sheets to be revived and thereby avoiding their losses.
From the FTX case, the author also gained some inspiration. Therefore, in 2025, the author is quite interested in the development of the NFT sector. There seem to be some similarities between the two, and combined with new speculative narratives like AI Agents, it is not impossible for the NFT market to experience a second spring.
