Thoughts on 2025, Investment Themes, and Value Traps

Executive Summary

• The market is entering 2025 with sky-high expectations, fueled by narratives around AI agents, Bitcoin, and geopolitical factors like Trump. These elevated hopes leave no margin for anything less than perfection, risking disappointment even if outcomes are moderately positive. The year is likely to be decent but fall short of the current bullish sentiment, leading to exaggerated negativity.
• While macroeconomic factors like rate cuts and Fed policies influence traditional finance and have indirect impacts on crypto via ETFs, their role in crypto price movements is overstated. Crypto thrives on narratives and hype, which often overshadow macro considerations. A tempered outlook suggests 15–20% growth in the stock market, reflecting a slowdown from the previous two years’ rapid gains.
• Bitcoin’s 2025 forecasts remain overly bullish, reflecting the crypto industry’s preference for optimism over realism. While my bullish case for BTC is $170K, the base case is $150K, and the bearish case is $120K, doubling its market cap seems unlikely given its current $2 trillion size and tempered ETF inflows.
• Bitcoin spot ETFs saw $38 billion in inflows in their first year, with growth expected to slow to $45–50 billion in 2025. Ethereum, XRP, Solana, and mixed-asset ETFs could dilute Bitcoin’s appeal, signaling a shift in market dynamics as more players enter the ETF space.
• Ethereum is expected to continue underperforming Bitcoin in 2025, with a base case target of $4,300 and a best-case scenario of $4,900, compared to Bitcoin’s stronger potential gains. Despite long-term potential, Ethereum’s dominance over this cycle has notably declined.
• The proliferation of Ethereum L2s, with over 150 in existence, has led to an oversaturated market with little differentiation. This trend, coupled with declining transaction fees and MEV opportunities, has made L2 investments less appealing and challenging for sustained investor interest.
• AI agents are expected to dominate the narrative in 2025, potentially reaching $120B in valuation, though their actual utility and autonomy will fall short of the extreme hype. Stablecoin supply will grow moderately, likely peaking around $180B, while USDe and newer alternatives like USD0 are poised to challenge the dominance of USDT and USDC.
• The Layer 2 investment thesis may underdeliver financially, despite being vital for scalability, as oversaturation and lack of differentiation hinder meaningful returns.

Looking back, I shared predictions for 2024 around this time last year and reviewed them a month ago. The results? More wins than losses. Here’s to hoping 2025 proves even better.

01/ Macro

I believe 2025 will be a quieter, more subdued year than the market is currently anticipating. Having read countless 2025 predictions, it feels like everyone — and their mother — expects this to be the year for AI agents and Bitcoin fueled by the “orange man,” Donald Trump. While these narratives are compelling, the problem with such sky-high expectations is that they leave no room for anything less than perfection.

For 2025 to meet these expectations, everything would have to perform at an A+ standard. Anything short of that risks being perceived as failure. If results are moderate — good, but not earth-shattering — the market will likely overreact, branding the year a disappointment. On the flip side, if the bullish predictions fail to materialize entirely, the backlash will be swift and brutal, further amplifying negativity. My outlook? 2025 will likely be a decent year overall, but it will fall short of the lofty expectations being set today, leading many to prematurely label it a “bad year.”

I believe the Fed will cut rates more than twice this year, despite their recent messaging suggesting otherwise. But honestly, does it really matter whether it’s 2, 3, or 4 cuts? The difference is negligible in the grand scheme. Macro’s impact on crypto is often overstated — are we to believe that Fartcoin’s +10% gain is because of Fed policy? Or that Zerebro’s -75% plunge from its peak was driven by rate cuts? Not at all. Crypto thrives on short-lived narratives and hype, often moving faster than the time between FOMC meetings. I don’t base investment or trading decisions on macro trends, but it’s useful to stay aware of the broader environment. With a pro-crypto president like Trump or the launch of BTC and ETH ETFs, macro might become more relevant — but even then, its influence depends on the market cycle. Macro matters more during bear markets and much less during bull runs.

In traditional finance, macro is undeniably crucial, and its growing intersection with crypto through ETFs means it has some downstream impact. Rate cuts and Fed policies influence the S&P 500 and NASDAQ, and given Bitcoin’s correlation to these indices via ETFs, there’s a knock-on effect for crypto. But this connection is indirect and diluted — macro matters, but not enough to stress over daily or weekly changes. As for the stock market, I expect solid performance in 2025, though not as strong as the last two years. The S&P 500 gained 25% in both 2023 and 2024, and it’s unlikely we’ll see another 25% jump. A more tempered increase of 15–20% feels realistic. The current market excitement feels a bit overextended, and it’s hard to see this rally sustaining the same momentum.

02/ Bitcoin

Every year brings outrageous price targets for Bitcoin, and 2025 is no different. It’s not surprising anymore — being overly bullish carries no real downside. If you called for $150K and Bitcoin “only” hit $100K, you still win in the court of public opinion. But if you predict $30K or $50K, you’ll be dragged as either not bullish enough or outright bearish. In crypto, being bearish is practically forbidden. You can hold bearish sentiments privately, but voicing them publicly is a recipe for backlash. Even if your bearish prediction is accurate, no one will celebrate because everyone’s bags are down, and no one likes being reminded of that.

What this means is that Bitcoin price predictions are a poor barometer for market sentiment. Industry figures like Cathie Wood and Michael Saylor are perpetually bullish, regardless of market conditions. Wood was calling for sky-high prices during the 2015, 2018, and 2022 bear markets, and Saylor remained a staunch bull as Bitcoin fell from $69K to $16K. If 2025 turns out to be a bear year, you won’t know it from the forecasts of crypto’s loudest voices. This contrasts sharply with traditional finance, where bearish calls are socially acceptable, even respected, because the space is inherently risk-averse. In crypto, however, risk-taking is the norm, and over-optimism often gets a free pass.

After reading countless 2025 Bitcoin predictions, it’s hard not to feel skeptical. It seems like many of these forecasts are crafted to match what people want to hear or what the media will amplify, rather than grounded in realistic expectations. With that in mind, I expect a more modest outcome for Bitcoin in 2025. BTC more than doubled in both 2023 and 2024, but the likelihood of another doubling seems slim. Doubling a $2 trillion asset is no small feat, even with ETF inflows supporting demand. My bullish case for 2025 is $170K, the base case is $150K, and the bearish case is $120K. If I had to pick a target to sell everything, it would be $150K — a figure I’m most confident in, representing a 45% increase from the current $103K. Of course, that’s not how I invest, but it highlights the level of my expectations.

Bitcoin spot ETFs saw $38 billion in net inflows within a year of their launch. While inflows will likely grow, I don’t see that number doubling in 2025. Instead, I estimate around $45–50 billion in net inflows. The previous year’s rush was driven by TradFi FOMO and a booming stock market, but with markets likely taking a breather this year, Bitcoin ETF flows should follow suit. Additionally, the launch of Ethereum ETFs — and potentially Solana and XRP ETFs — could dilute Bitcoin’s appeal as investors diversify. While BTC will remain a cornerstone, the dynamics of ETF-driven demand may evolve in ways that temper overexuberant price predictions.

Bitcoin enthusiasts often portray BTC as uniquely special, but much of the rhetoric — whether it’s Larry Fink on CNBC or others hyping up Bitcoin’s narrative — boils down to wanting their bags to appreciate. The idea that TradFi institutions are buying Bitcoin ETFs because of sovereign property rights or its “digital gold” status feels overly idealistic. These ETFs are cash-settled; they don’t hold or custody actual Bitcoin, and investors ultimately cash out in dollars. If a TradFi investor truly cared about owning Bitcoin, they’d likely just use Coinbase or a similar platform. Bitcoin’s real advantages lie in its longevity (Lindy effect) and mindshare. But the narrative that BTC is singularly special doesn’t hold up as Ethereum crosses the same chasm. To the surprise of ETH skeptics, ETH ETFs have been approved, setting the stage for more ETFs in 2025. XRP and Solana are frontrunners for approval, with others potentially following.

This year, we could also see innovative ETF products, such as mixed-asset ETFs incorporating various cryptocurrencies. Regardless of how they’re packaged, 2025 will be the year of more ETF launches. As Bitcoin’s perceived uniqueness diminishes, these newcomers will inevitably eat into its market share. While they might not reach Bitcoin or Ethereum’s level of success, they won’t flop either. Their performance will likely mirror their relative success within the crypto market. An XRP or Solana ETF — or another unexpected contender — will likely be approved, but the market response may underwhelm, revealing a lack of appetite for diversification beyond BTC and ETH. However, at least one ETF launch will likely exceed expectations, catching most people off guard and driving new narratives for the year.

03/ Ethereum

A viral tweet recently joked about ETH being a “stablecoin,” humorously pointing out its $3,150 rangebound trading over the past four years. While meant in jest, it highlights Ethereum’s noticeable underperformance this cycle, which has surprised many. Expectations were high for ETH to outperform, but it hasn’t delivered. If BTC outperforms ETH in 2025, it would mark the first full cycle — spanning four years — where Bitcoin outperformed Ethereum. BTC reached new all-time highs in March 2024, while ETH remains below its 2021 peak. The saying “winners keep winning and losers keep losing” often rings true, but markets eventually shift. However, for Ethereum, 2025 isn’t likely to be that turning point. BTC is expected to continue outpacing ETH. Assuming my BTC base case of a 45% increase, this would place ETH at $4,800, representing a more modest performance relative to BTC.

If BTC gains 45%, ETH may only see a 30% increase, putting it at $4,300. While this might sound bearish, consider the precedent: ETH gained just 43% in a year where BTC surged 110%. Assuming the gap between ETH and BTC narrows slightly in 2025, ETH’s upside could align more closely with BTC’s best-case scenario. Should BTC reach my $170k bullish target (+65%), ETH could gain between 45% and 50%, reaching $4,900 at best. However, my base case for ETH remains $4,300, with a flat-year scenario leaving ETH around $3,300. While Ethereum’s long-term potential remains compelling, 2025 is unlikely to see it reclaim the dominance it’s lost to Bitcoin this cycle.

ETH ETFs have already attracted $12 billion in net inflows, despite being less than a year old. I anticipate that figure doubling in 2025, pushing total assets under management (AUM) to ~$40 billion by year-end. Of this, I project $25 billion in net inflows for ETH spot ETFs alone. Why? Because $12 billion is simply too low considering ETH’s standing, and as I’ve pointed out before, there’s nothing inherently unique about BTC that ETH can’t achieve at least 50–75% of. When you factor in narratives like real-world assets (RWA), tokenized treasuries, and stablecoins, ETH’s most bullish potential lies in these use cases becoming widely understood — and I think that moment arrives this year.

On the other hand, Layer 2s (L2s) continue to underperform the broader market. The sector’s outlook is grim. My advice? Exit on every pump. I used to strongly believe in the L2 investment thesis, but my perspective is shifting. Modular blockchains don’t seem as revolutionary as we once thought. The sheer number of ETH L2s — over 150 at this point — adds to the problem. They offer little differentiation, and even some of the top market cap projects lack genuine innovation. Many are just alt-L1s or EVM clones.

Tools like Conduit have simplified rollup launches to the point where creating an L2 is as easy as placing an order online. This ease of deployment will lead to even more rollups flooding the market, further diluting attention and spreading capital thin. The result? L2s may struggle to carve out meaningful niches or sustain investor interest. It’s a sector that feels increasingly oversaturated and underwhelming.

While Layer 2s might improve Ethereum’s scalability in terms of UoPS and TPS, they are less appealing from an investment perspective and don’t significantly benefit Ethereum financially. By offloading execution to L2s, Ethereum has essentially ceded MEV opportunities, and transaction fees are nearing zero. This has negatively impacted Ethereum’s financials — its revenue, fees, and MEV earnings. The hope was that these losses would be offset by increased transaction volume, but that hasn’t materialized, and I doubt it will.

Ethereum as an asset is facing challenges due to a lack of diverse narratives to drive value. If ETH struggles, its L2 counterparts will fare even worse. L2 tokens, in particular, will find it hard to sustain investor interest, given the sector’s saturation and limited differentiation.

On the flip side, we’re likely to see more institutions follow the example of Deutsche Bank or Sony, launching their own L2s or even L3s. It’s starting to feel like an Oprah moment: “You get an L2, you get an L2, everybody gets an L2!” Expect a flood of new L2s entering the space — but this abundance will dilute value rather than enhance it.

04/ Supercycles

There’s no such thing as a memecoin supercycle. While we may see occasional rotations into memes, that doesn’t make it a true supercycle. Each rotation will favor a different meme, so holding onto any of Murad’s picks might not be the best strategy. With only a year left in this cycle, it’s unlikely that any new memecoin will surpass Doge, Shib, or Pepe. I used to think otherwise, but my outlook for the year has changed.

On the other hand, AI agents will dominate the meta this year, potentially reaching memecoin-like valuations of over $120B by the end of the year. Not because they live up to the hype, though. In reality, most of these are just chatbot wrappers — useful, yes, but not groundbreaking. It’s crucial to adjust expectations and recognize what we’re dealing with.

Some are calling for AI agents to hit $250B (or even $500B in extreme cases), likening it to DeFi Summer in 2020. I think they’re getting ahead of themselves. People will soon realize these tools aren’t genuinely autonomous or agentic. They will always require human oversight — though that’s not necessarily a bad thing. The challenge lies in balancing expectations with reality.

By the end of the year, the winners in crypto might look very different from what they are today. This pattern is classic in the space. Remember this time last year? AI infrastructure projects were the golden child of the crypto x AI narrative. Now, the spotlight is on AI agents. By the time I revisit this review, it could be something else entirely. Regardless of who the individual winners are, the ecosystem will continue to evolve and grow.

05/ Wildcards

The alt L1 trade will resurface yet again, as if it never left. This time, however, it likely won’t center on Solana. Instead, projects like Sui and Hyperliquid seem poised to take the spotlight as the most promising contenders. We might finally see Berachain launch and join the race as well. Other alt VM chains, like Aptos and Sei, remain in the mix, but they feel more like beta plays — or perhaps theta plays — relative to Ethereum.

On the stablecoin front, supply will increase but likely won’t hit the $200B mark that many are forecasting. I expect a more muted year for markets overall, with the Fed cutting rates and reducing yields, which will dampen demand for stablecoins. That said, stablecoin supply should exceed $150B by year-end, potentially peaking around $180B.

USDe will continue gaining traction, steadily eating into the market share of giants like USDT and USDC. Additionally, we’ll likely see the rise of alternatives like USD0. For what it’s worth, I believe the combined market dominance of USDT and USDC has already peaked — especially USDT’s. The era of unquestioned dominance for these two stablecoins may be behind us.

DeFi’s total value locked (TVL) is likely to hit $150B, with a potential peak around $170B. While we’ll continue to see hype cycles driven by new or evolving DeFi products, the sector as a whole is set to grow steadily. The rise of multi-functional DeFi protocols will define this year, with projects like Fluid, Morpho, and Drift leading the way. The era of single-function DeFi protocols is over — future protocols will likely combine lending/borrowing markets, spot and perpetual DEXs, and stablecoin issuance into unified platforms.

As for NFTs, they won’t return to their 2021 glory days. After this year, the sector will likely settle into a cycle of underperformance, finally earning the “dead” label — and this time, it might stick. While NFTs will still perform well in some pockets, the overall growth will remain unimpressive.

The market will increasingly split into two distinct verticals:

1. Crypto-native: The degen, Web3, and Wild West spirit persists.
2. TradFi-aligned: Investors drawn to ETFs, traditional financial models, and fundamentals.

Sectors like DeFi, DePIN, and RWA risk being sidelined by tradfi-focused players unless they somehow manage to tap into the degen culture and narrative. This cautious outlook on DeFi stems from the challenge of bridging these two investor verticals and remaining relevant across both.

06/ Value Traps

The key value trap this year is overestimating. Lower expectations on any prediction by about 30% as a safeguard. Another notable trap is the Layer 2 investment thesis. While L2s remain essential for scaling, they may not deliver the financial returns many are hoping for.

I also expect the market to peak later in the year — likely in Q4, with August as my base case. With that in mind, Godspeed!