Will Cryptocurrency Crash in 2025? How to Tell

Author: Michael Chmielewski Compiler: Plain Language Blockchain

This past week has been a historic one in the world of cryptocurrency. We have witnessed the worst liquidation event in the history of the field, with reported figures reaching a staggering $2.3 billion, and unconfirmed reports that the liquidation amount may be as high as $10 billion due to the heavy load on the trading platform's API. This violent crash was followed by a dramatic rebound, with Bitcoin and many altcoins rising by 20% to 30% in just a few hours. As the dust settles, investors and traders are left with a question: what happens next?

1. What caused the crash?

The crash was triggered by a series of macroeconomic and geopolitical events. The aggressive tariff policy reintroduced by the new Trump administration has made global markets uneasy. Specifically, the announcement of a 15% tariff on US coal and LNG products, along with a 10% tariff on US crude oil, shook risk assets like cryptocurrencies like a shockwave.

The news served as a catalyst for a massive chain reaction of liquidations, with leveraged positions being forcibly liquidated, further exacerbating downward pressure.

The speed of the decline was unprecedented, highlighting the fragility of a market that relies heavily on leverage.

2. Rebound: A Case of Extreme Volatility

Interestingly, the market that collapsed under the pressure of liquidations quickly rebounded after the news that the United States, Canada, and Mexico reached a temporary tariff suspension agreement. Bitcoin soared from $91,000 to $102,000, while altcoins saw even more dramatic fluctuations, with some even rising by more than 30%.

This volatility highlights the current market environment, which is driven more by news headlines than fundamentals. For traders, this is a gold mine; for long-term investors, it is a test of emotional resilience.

3. Future: Where do we go from here?

While the worst of the downside may be over, the market is unlikely to experience a rapid V-shaped rebound. Instead, we expect to enter a consolidation period, and price fluctuations may be more volatile as the market digests recent events and awaits new catalysts.

4. Key Observations

Altcoins are structurally weak: Many altcoins remain structurally weak and face continued selling pressure, especially from retail investors who are looking to reduce their positions after recent losses.

Retail sentiment: Retail traders generally tend to be risk-averse after experiencing significant losses, which further suppresses the demand for speculative assets.

Sensitivity to news: The market remains highly sensitive to geopolitical events, especially regarding US-China trade relations and possible monetary policy changes.

5. Which cryptocurrency categories may rise next?

Despite the current resistance, several areas have shown relative strength and may lead the next rally:

Real Asset (RWA) Tokens: These tokens have shown resilience amid recent volatility. Projects like ONDO and CHEX have shown strong price action, suggesting growing investor confidence in tokens backed by real assets.

AI-driven crypto projects: Artificial intelligence remains a hot topic, and projects like VIRTUL demonstrate strong fundamentals and growing user adoption. As AI technology continues to develop, these tokens may have significant upside.

Decentralized Finance (DeFi) Protocols: Decentralized finance projects with solid revenue models and strong community support may outperform. Focus on protocols that can consistently generate fees and innovate in areas such as lending, derivatives, and on-chain asset management.

Infrastructure Tokens: Tokens that provide critical infrastructure for the crypto ecosystem, such as SOL (Solana), HBAR (Hedera), and HYPE (Hyperliquid), have shown impressive resilience and may benefit from a rebound in risk appetite.

Selected meme coins: Although the meme coin craze has cooled, mature names like PEPE with strong community support may see a recovery during the bull market.

6. Actionable investment strategy

Given the current market environment, here is a four-step plan to optimize your cryptocurrency portfolio:

1) Cut underperforming assets: Evaluate your holdings and reduce those projects that you are no longer optimistic about, especially those that have failed to recover strongly in the recent rebound.

2) Focus on high-conviction projects: Focus on projects with strong fundamentals, clear application scenarios and proven resilience. Diversify investments in promising areas such as real assets (RWA), artificial intelligence (AI) and decentralized finance (DeFi).

3) Maintain adequate stablecoin reserves: Allocate 20% to 35% of your portfolio to stablecoins, which allows for flexibility in future market pullbacks or emerging opportunities.

4) Be patient and develop a strategy: Enter new positions only when a major liquidation event or trend reversal is confirmed. Avoid chasing highs and selling lows, and focus on high-risk/high-reward opportunities with clear technical and fundamental support.

7. Conclusion

The crypto market is inherently volatile, but it is this volatility that holds opportunities. While the past week has been brutal for many, it has also provided valuable lessons about risk management, high-conviction investing, and staying adaptable.

As we move forward, keep your eye on long-term trends, stay strategically disciplined, and be prepared for the unexpected at any time. The next big opportunity is often just around the corner; the key is being ready to grab it when it arrives.