Say goodbye to the 4-year cycle. How to continue to make profits in the new crypto landscape in 2025?

Author: Miles Deutscher Compiler: TechFlow

The 4-year cycle is over. We are entering a new paradigm in cryptocurrency - survival of the fittest, elimination of the unfit.

Here is my strategy for how to deal with market changes in 2025 so that I can continue to accumulate wealth in unknown territory.

Before sharing my strategy, let's explore why the 4-year cycle is a thing of the past.

There are two reasons why I think the 4-year cycle is no longer applicable.

1. The halving effect is weakening

First, from the supply side, the halving effect of Bitcoin ($BTC) is gradually weakening.

With each halving, the reduction in the issuance of new Bitcoins is also shrinking.

For example, the halvings in 2012 and 2016 reduced the issuance by 50% and 25% respectively, so the impact on market prices was very significant.

But by 2024, the reduction in issuance by halving was only 6.25%. This means that the driving effect of halving on prices is no longer as great as before.

2. ETFs have changed the rules of the market

Secondly, from the demand side, the launch of Bitcoin ETFs is a major variable that has permanently changed the rules of the market.

Bitcoin ETFs are financial instruments that allow investors in traditional financial markets to invest in Bitcoin indirectly.

Since their launch, they have become the most successful ETF products in history, with demand far exceeding expectations.

This influx of demand has not only changed the overall landscape of the crypto market, but also broken many old market rules (such as the 4-year cycle).

The biggest impact of ETFs is actually reflected in the altcoin market. Let me explain in detail.

In the past, you may often see a chart showing the price rotation relationship between Bitcoin and altcoins. This is indeed true in 2021.

But now, this relationship is no longer valid.

The original image comes from Miles Deutscher, compiled by Deep Tide TechFlow

Bitcoin's wealth effect disappears

In 2017 and 2021, when Bitcoin prices rose, many wealthy Bitcoin whales would transfer profits to altcoins on centralized exchanges (CEX), driving the prosperity of the altcoin market.

However, most of the new capital flows now enter the market through Bitcoin ETFs, and these funds have not flowed into the altcoin market.

In other words, the way money flows has fundamentally changed, and altcoins no longer benefit from Bitcoin's wealth effect.

Retail investors skipped Phase 2 (ETH) and Phase 3 (mainstream coins)

Retail investors flocked directly to high-risk speculative projects on the chain, the so-called "on-chain casino games" (Pump Fun).

Compared to 2021, the number of retail investors in this cycle has decreased significantly. This is mainly due to the pressure of the macroeconomic environment and the fact that many people were hit hard by events such as LUNA, FTX, BlockFi and Voyager in the previous cycle.

However, those retail players who remain in the market have directly skipped mainstream coins and chose to look for opportunities on the chain.

You can read my detailed analysis of how this phenomenon affects the market here.

If my judgment is correct, that is, the cycle theory is no longer applicable, what changes will this bring to the future market?

I have bad news and good news to share.

The bad news is: it has become more difficult to "lie flat and make money". This is a natural signal that the industry is gradually maturing.

In fact, there are more trading opportunities in the market now, but if you still use the strategy of 2021 - such as holding a bunch of altcoins and quietly waiting for the arrival of "altcoin season" - then you may be disappointed or even underperform.

The good news is that since there is no so-called four-year cycle, it also means that multi-year bear markets caused by crypto-specific factors will no longer occur. Of course, from a macroeconomic perspective, long-term bear markets are still possible, because cryptocurrencies do not operate in isolation and are more closely related to the macro economy now than ever before.

The market's "risk-on" and "risk-off" periods are more likely to be driven by changes in macroeconomic conditions. These changes usually trigger short-term mini echo bubbles rather than one-sided rallies that last for months. The so-called echo bubble refers to a short-term market rebound caused by changes in the macro environment. Although it is smaller in scale, it has similarities with the large bubbles in the past.

In these bubbles, there are a ton of opportunities to make money.

For example, in 2024, we saw a rotation of different hot spots: November was the meme craze, December was AI concepts, and January was AI agents. There will undoubtedly be new trends to come.

These are all great opportunities to make money if you are sharp, but they require a slightly different strategy than past cycles.

This brings me to what I want to discuss next: my strategy.

I had dinner with @gametheorizing the other day, and he made a very insightful point.

Many people are chasing an ultimate goal: whether it is to 5x, 10x, or 20x their portfolio.

But in fact, a better strategy is to focus on multiple small bets instead of going all in. By continuously accumulating a series of small wins, this approach may bring greater returns in the long run.

So instead of betting everything and hoping that the alt season will quickly double your assets, it is better to try to accumulate wealth continuously through the compounding effect of time.

Specifically, you can adopt a strategy like this:

Small bets > Take profits, bet again > Take profits again, and repeat.

This is why many of the top traders and thinkers in the crypto field (such as Jordi) used to be professional poker players. They learned from poker how to think about each trade with probabilistic thinking and evaluate possible outcomes instead of blindly betting.

My portfolio is currently allocated like this:

50% invested in high-conviction assets that I am optimistic about in the long term, and 50% for stablecoins and active trading. I will use this part of the funds to find short-term opportunities in the market and enter and exit flexibly.

In addition, I use stablecoins as a measure of the success or failure of my transactions. Every time I exit a transaction, I transfer the profit back to stablecoins, so that I can clearly see my gains.

If your cryptocurrency portfolio is too diversified and you don’t know how to deal with the current market changes, last week I shared a guide that explains in detail how to optimize your portfolio according to market changes.

In this article, I emphasized a key point: the importance of setting an "invalidation" standard for each transaction. This is just like when you decide to buy a certain cryptocurrency, you need a clear reason to validate your choice. The so-called "invalidation" refers to the criteria for timely exiting a transaction when market conditions no longer meet your expectations.

I have noticed that many people lack basic risk management awareness when entering a transaction and do not set clear exit criteria. This practice often leads to unnecessary losses.

If you want to take a suggestion now that can significantly improve future profitability, it is: set clear technical or fundamental "invalidation" criteria for each transaction. This will not only help you better manage risks, but also improve the overall efficiency of trading.

Of course, your level of confidence in a transaction and the expected holding time may affect how you set the "invalidation" criteria or trigger conditions. But in any case, this does not change the fact that you need to plan ahead. Having a clear exit plan is one of the keys to successful trading.

Although the current market may not fully follow the previous cycle rules, I am still confident in the future. As long as you maintain the right mentality and strategy, 2025 is still expected to usher in huge growth space.

Currently, we are in a bear market, but the market trend will eventually change and bring many new opportunities. Until then, your first goal is to survive.

The rewards in the cryptocurrency market often belong to those who can persist in the fierce fluctuations. No matter how the market fluctuates, patience and tenacity are the key to winning in the end.