The last mega cycle of BTC: the value and price theory of BTC

Original author: Long Ye

1. As of the time of writing this article, 2024 Q4, this is the beginning of a new bull market in the cryptocurrency industry.
2. The value of BTC in the macro field is analogous to bonds and stocks in financial history, and is the “fuel” for the new round of development of human technology; in the meso field, it is the currency and index of the digital world that humanity will inevitably enter in the future; in the micro field, it is the landing of a new round of legal regulation, the compliance of currency issuance, and the suction of investment demand from all over the world.
3. This may be the last “reckless” cycle in the crypto industry, and the last mega cycle in which BTC has a huge beta gain. This means that after this cycle, the beta of BTC will be greatly reduced, but it does not mean that there will be no 100-fold alpha opportunities in the generalized token issuance market.
4. The top of this bull market for BTC will appear in Q4 2025, with a high point of 160,000-220,000 US dollars. Before that, apart from the already occurred ‘first wave,’ there are still two significant mid-term trends in the bull market.
5. It is the year 1999 of the Internet era, which means that in the next 12-18 months, after the bull market reaches its peak, the crypto industry will experience a long winter, just like the bursting of the dot-com bubble in 2000-2001. Of course, this is also an opportunity for industry reshuffling. I am looking forward to it.

When I feel the bull market is coming, it’s the time of the highest output of articles.

About 4 years ago, at the beginning of the previous bull market cycle, I wrote “How should we invest in digital currency in 2021?”. When we talk about the entire digital currency industry, it is inevitable to first mention the value and price of BTC.

If you already believe in the value of Bitcoin, you might as well skip to Part V for the expected future price trend of Bitcoin.

First, in terms of the value of BTC from an industrial perspective, I would like to divide it into three levels: macro, meso, and micro, and then discuss it further.

In a macro perspective, BTC represents the entire financial market’s expectation for safe-haven, as well as the third capitalizable ‘financial medium’ in human history following bonds and stocks; from a meso perspective, BTC is the ‘index’ of the best value in the ‘digital age’ that humanity is inevitably entering, also known as the web3 world; from a micro perspective, BTC is gradually becoming sound in terms of regulatory compliance and will attract a large amount of ‘traditional old money’ in mainstream countries such as the United States. In third world countries, it siphons off domestic investment demand that cannot be met.

On a macro level, we see Bitcoin as a groundbreaking asset in the history of human finance. The most important thing is to understand the changes in financial history. In “How should we invest in digital currency in 2021?”, the first in a four-part series, it repositions the status of digital currency from the perspective of technological history. Behind every technological revolution, important financial infrastructure and new financial “mediums” are created.

Behind finance, there is a change in the current situation. Standing at the present moment, it may be the most turbulent time in global political and economic situation in the past thirty years, and also the most fragile and likely moment for a major reshuffle of the traditional financial order. Now I cannot trace whether there was a financial market similar to the London Stock Exchange and the New York Stock Exchange at the time of famous financial bubbles like the ‘Dutch tulip’ hundreds of years ago, or whether Dutch peddlers were accustomed to offline trading, but speculation did not establish rules and order, leading to the eventual collapse of the bubble. However, in the long river of history, every technological innovation remembered by humanity is accompanied by a change in the financial paradigm, and the change in the financial paradigm is the inevitable result of the current situation. These are mutually causal, yet mutually reinforcing, and eventually wrote a colorful stroke in human history. I cannot imagine if the dramatic changes in the social structure of the United States brought about by the Civil War did not reshape the social class and thus encouraged technological innovation to enter industry, whether the Second Industrial Revolution would still have started in England but ultimately flourished in the United States, becoming a milestone.

At the same time, I have a more radical view: When everyone is talking about economic depression and how to find viable business models, why does business itself need a business model? Has the term ‘business model’ already lost its meaning?

Here are more of my thoughts, which are a little complicated, and I won’t go into them here. They will be further elaborated as the most important part in another article of mine, “The Philosophy of Business and Investment in the Extra of the Quadrilogy of Crypto Capital Theory,” in the future. (Related reading: “The First of the Quadrilogy of Crypto Capital Theory: Token Issuance, a New Paradigm of Financing”)

[Excerpt: The context behind the discussion of business models in the contemporary business environment and financial environment refers to the general path developed by commercial entities with the “company system” as the mainstream in the past 100 years: a whole system of stock pricing in the form of profit *PE by expanding the market size, increasing the number of employees, and finally going public.】 This path may not be established in the future.

In today’s “social capital” (or expressed as “private economy”), equity enterprises may account for 95% of the value possessed, while listed companies that use stocks as value anchors account for a large proportion of capital value. However, in the future, these values may exist more in “business” (why not limited partnerships) and “tokens” (foundations).

2. Spend more time talking about the mid-range views of the BTC industry

At the end of my book published in 2021, the first of the eight predictions mentioned that BTC is unbeatable. Refer to the e-book version of my book ‘Unlocking the New Code - From Blockchain to Digital Currency’ Afterword 4 -

From the perspective of the technology industry, web3 is an inevitable trend in the future, and Bitcoin is the core asset of the entire web3 world, or in economic terms, it should be called ‘currency’. In the ancient barter system, gold was the most common ‘currency’, and in the modern national and financial system development, national currency is the most common ‘currency’. In the future, with the advent of the digital age, in the virtual space of the metaverse, all life in the digital world will require a new ‘currency’.

So, it is meaningless for some people to cling to the question of ‘why are you investing in a token?’. Blockchain and crypto need the ‘+’ sign, just like when someone asks you what field you are investing in, and you say ‘I want to invest in equity companies’ or ‘I want to invest in an internet company’. As a special industry, Web3, and as a new market tool and financial medium, crypto has gradually integrated with other industries - blockchain + AI = DeAI, blockchain + finance = Defi, blockchain + entertainment/art = NFT+metaverse, blockchain + scientific research = Desci, blockchain + physical infrastructure = Depin…

The trend is very clear, but what does it have to do with us? Or, how can we increase wealth after seeing the trend clearly?

Now let’s turn our attention to AI.

In recent years, the main theme of the business society has been divided into two parts: one is visible and the other is hidden. AI is undoubtedly the hot spot that capital has been pursuing and can be put on the table. Crypto is surging in the dark, where all kinds of legends and myths of getting rich gather, but it is also limited, making it inaccessible to many people.

The potential of the AI market is widely believed to be in the trillions, especially in the areas of generative AI, AI chips, and related infrastructure. However, for investors, while they believe that AI is a sunrise industry and are willing to invest their money, the question is what to invest in. Can AI ETF index funds, which comprehensively cover the AI ecosystem, effectively track industry growth?

No. In 2024, Nvidia’s stock price nearly tripled, while the performance of most AI-themed ETFs during the same period appeared mediocre. Looking further ahead, Nvidia’s stock performance does not necessarily correlate with the overall growth of the AI industry. As a chip company, it is impossible for Nvidia to be the only one forever.

Comparison of mainstream AI ETF and NVIDIA stock performance in 2024

AI is the main theme, but is there a product that can anchor the future market value development of the AI industry and the value of the ETF will increase as the overall output value of the AI industry rises? Just like the Dow Jones Index/S&P 500 ETF represents the development of Web 0 (equity companies), the Nasdaq ETF represents the investment opportunities of Web 1, and the investment opportunities of Web 2 are not presented in the form of indexes. For the value of the Web3 world, or the entire digital world value of future humans, BTC is the most suitable index.

Why is the value of the Web3 world necessarily measured in BTC?

Because, since the birth of computers and the internet, humans are destined to spend more and more time in the virtual world rather than the real world. In the future, when we put on VR/AR glasses, we can sit at home and visit Yellowstone National Park, experience the palaces of the Tang Dynasty in China, enter the virtual meeting room you set up and have coffee face to face with friends on the other side of the earth… The boundary between reality and virtual will become increasingly blurred, this is what the future digital world, or metaverse, looks like. And there, you will need to decorate the virtual space, if you want the digital people there to dance for you, you will always need to pay - this cannot be US dollars, Chinese yuan, or physical assets. The most suitable and only currency that I can think of that can be accepted by the whole digital world is Bitcoin.

Remember in the movie ‘The Revolution of 1911’, Mr. Sun Yat-sen held a 10 yuan bond: ‘After the revolution succeeds, this bond can be exchanged for 100 yuan’.

3. Back to the Present

We live in a country with a stable economy, and the fiat currency can be trusted. However, this does not mean that the financial systems of the entire world are as stable as the society we live in: the first thing the new president of Argentina did when he took office was to announce the cancellation of Argentina’s fiat currency system - anyway, no one in Argentina trusts the government’s issuance of fiat currency, so it’s unnecessary. In 2023, Turkey’s inflation rate reached +127%, and correspondingly, the ownership rate of digital currency among its people reached as high as 52%. Especially in third world countries, in the process of gradually improving the information technology infrastructure in recent years, traditional fiat mobile payments and digital currency payments have developed almost simultaneously. In contrast, similar to the vigorous development of information technology in China around 2010, skipping the 1.0 era of POS machines and bank card payments directly entered the 2.0 era of mobile payments, third world countries have started to develop in recent years, and the 3.0 era of digital currency payments has directly replaced the 2.0 era of mobile payments, making digital currency payments a common scene in daily payments.

Here we come to an interesting debate, Bitcoin has no controller, so it cannot fulfill the macro-control function of fiat currency by the government. In fact, the US dollar is also issued by corporations, so-called government macro-control has to give way to the interest groups behind it, and the power of capital is the driving force of the world. If you insist on saying that fiat currency has macro-control, then the interest groups mining Bitcoin are the biggest controllers.

Changes in inflation rates of major economies in recent years

Changes in Argentina’s inflation rate in recent years

From a micro perspective, as the speed of capital flow accelerates, the technology and financial cycles are becoming shorter. In an environment with relatively weak economic anti-fragility, the traditional equity market requires a lock-up period of 8-10 years, which has raised concerns about liquidity due to the characteristic of long-term investment. However, tokenized equity provides the possibility of early realization, not only attracting more retail funds, but also offering early investors more flexible exit expectations.

In the traditional equity market, angel rounds or early-stage investors typically seek partial exits through equity transfers or corporate buybacks after about 5 years since the establishment of the company, when the company has entered a relatively mature stage of development but still has some time before an IPO or acquisition (usually 8-10 years). This approach can effectively mitigate the time cost of investments, but compared to token rights, its liquidity is clearly more limited.

The attractiveness of the token rights model lies in its ability to allow early investors to realize capital withdrawal earlier through token issuance or circulation, while attracting a broader range of market participants. This flexibility may have a profound impact on the traditional equity market. For reference, please see ‘The Cryptocurrency Capital Theory Quadrilogy Part 2 (II): Battlefield without Gunpowder - VC or Token Fund?’

On the other hand, the financial markets of most sovereign countries around the world are extremely fragmented and lack liquidity. The inherent global financial characteristics of crypto have greatly attracted these funds, including South Korea, Argentina, Russia, and others. The stock market development of some Southeast Asian countries, mainly Vietnam, cannot keep up with the speed of wealth accumulation of the middle class, which has directly skipped the stage of participating in the local financial market and completed the transition to crypto. Against the background of global digital currency compliance and integration with mainstream financial markets, the investment needs of private assets in these countries cannot be met by weak local financial infrastructure—the main board market (KOSPI) and the startup board market (KOSDAQ) of the South Korean stock market have more than 2,500 listed companies, but 80% of the market capitalization is less than 100 million US dollars, and the daily trading volume can be ignored. The digital currency market, which has absorbed funds from global retail investors, has the most sufficient liquidity and has become their best investment target.

Doge current market value and trading volume

Samsung’s current market value and trading volume

Note: From the figure, it can be seen that the current market value of Doge is about 60 billion US dollars, while the market value of Samsung is about 234 billion US dollars, which is about 4 times the market value of Doge. However, the 24-hour trading volume of Doge has reached 5.5 billion, which is tens of thousands of times that of Samsung.

In the strategic position of the global cryptocurrency market, the United States is likely to undergo a new reform of the cryptocurrency legal system in 2025. The two most important bills, FIT21 and DAMS, which are regulated by the Commodity Futures Trading Commission (CFTC) rather than the Securities and Exchange Commission (SEC), will affect the future of the cryptocurrency industry. The core of these two blockchain bills is to treat token issuance as commodity trading rather than securities issuance, thereby falling under the jurisdiction of the CFTC. Considering that these two bills were proposed by the Republican Party, and the current SEC chairman Gary Gensler represents the Democratic Party’s position, the bills face significant resistance. However, if Donald Trump is reelected as president and the Republican Party maintains its dominance, the possibility of these bills being passed will significantly increase.

To explain this bill in simple terms, it treats issuing coins as commodities and legalizes them under the supervision of the CFTC. This can greatly promote the enthusiasm for coin financing. Companies can legally and compliantly raise capital through coin issuance, attracting more capital into the crypto market. Additionally, with a stable channel for long-term compliant development, more people will continue to engage in this industry even after making money. Most importantly, after the United States takes the lead in implementing this bill, it will officially unveil global competition in the digital currency financial market, blockchain technology market, and between countries, including the competition for projects and talent in the completely globalized and freely flowing crypto market. If the U.S. policy becomes more friendly, issuing coins may no longer be a gray industry but a prestigious financial innovation. Founders who currently reside in crypto-friendly countries like Singapore and Switzerland may soon experience a large-scale migration.

Four, looking back to 2016, when the types of crypto in the world can be counted on one hand

BTC is like game currency, it can be directly deposited into the exchange with RMB for ‘recharge and purchase’ in our generation, the indigenous people of the token circle, looking forward to the future. (Refer to the end of the specific reference “How should we invest in digital currency in 2021?” Part One)

That is also my dream.

My original idea was to achieve these goals in 8-10 years.

But we only took four years.

Also at that time, I had a new dream - since Bitcoin has been gradually accepted by mainstream society as a monetary asset, then other digital currencies, or tokens, besides digital equity, should also play the role of digital commodities, so that in the future digital world of humanity, besides financial value, they can also generate utility, enabling humanity to better enter the digital world.

Oh, right, this thing was later given a new name by everyone - NFT.

“The digital goods of the metaverse era” is my definition of the ultimate future of NFTs, as well as the most important part of realizing the web3, digitization, and mass adoption of “internet era goods”.

That’s why I was determined to build the NFT industry in early 2021. In the series of articles “The Road to the Future: Five Steps to Web3”, there is my description of its future.

5. Of course, the most visually appealing and attractive aspect, or perhaps even the aspect that would make more people willing to read my articles, naturally relies on the increase in BTC.

Of course, the most intuitive way to attract people, or to make more people willing to read my articles, naturally depends on the rise of BTC.

**The key point is here. It is necessary to mention my forecast for the BTC market: The peak of this round of BTC appears at the end of 2025, and the reasonable range should be between 160,000-220,000 US dollars. After that, in 2026, it is recommended for everyone to be out of the market and recuperate.

In my paper titled “Bitcoin Valuation Model under Miner Market Equilibrium: Based on Derivative Pricing Theory” published on January 1, 2019, I mentioned the bottoms of the four-year cycles from 2018 to 2021,

And the bottom of the four-year cycle from 2022 to 2025 that I mentioned.

From the current perspective, the entire cryptocurrency circle is at a critical crossroads. Today’s digital currency industry is like the turn-of-the-century internet industry, and the bubble burst is not far off in the next 1 to 2 year window. **With the passage of crypto-friendly laws such as FIT21 in the United States, and the completion of compliance supervision of assets such as currency rights, a large number of very traditional old money that once lacked understanding of crypto or even completely scoffed at it will begin to accept BTC and carry out 1% -10% level allocation. However, after that, if blockchain and digital currency cannot be gradually combined with traditional industries, and truly usher in the transformation of “blockchain + industry”, just like the Internet industry combined with consumption, social networking, media, etc. and changed them, I really don’t see any new capital, and there is any reason for this industry to have amazing growth opportunities. DeFi in 2020, NFTs and metaverse in 2021, these are all in the right direction, and they also set off a wave of innovation at that time. In the whole year of 2024, BTC has repeatedly reached new highs, but the blockchain industry as a whole has not been completely devoid of enough innovation to talk about, and the market is just flooded with more memes and Layer 1&2&3, and there is no new “business concept innovation”. And, as far as I can see, in 2025, the industry-wide atmosphere dictates that I am pessimistic about the emergence of milestone “business concept innovations”.

When the water rises, the boats rise with it. Now, the water is flooding, and small rafts are everywhere. The boatmen are competing to see who can row faster, even mocking the heavy iron ships powered by machines. But when the waves recede, the wooden boats will be stranded, only by maintaining constant machine power can they sail out of the harbor and embrace the sea.

Even, make an interesting prediction, the sign of the peak of the bubble in the coin circle will be Warren Buffett, the largest Bitcoin opponent in the world, starting to change his tune and even participating in the industry. The phase of revolutionary victory is often the moment of greatest crisis lurking.

The current cryptocurrency market can be compared to the Internet era of 1999. After experiencing a rapid and explosive growth, the cryptocurrency industry may undergo a severe adjustment due to a huge bubble starting from the end of 2025. Looking back at history, the Internet industry welcomed Netscape’s initial public offering (IPO) in December 1995, followed by Yahoo’s listing in April 1996, which sparked a market frenzy. On March 10, 2000, the Nasdaq Composite Index reached a historical peak of 5408.6 points. However, the bubble quickly burst, and the market entered a winter period in 2001. Although the general winter period lasted until 2004, the true low point was in October 2002, when the Nasdaq Composite Index almost fell below 1000 points, marking the industry’s lowest point from a financial perspective.

In 2020, MicroStrategy successfully drove the appreciation of the company’s stock by purchasing BTC, achieving a significant stock-crypto linkage effect for the first time. In February 2021, Tesla’s announcement of purchasing Bitcoin became a landmark event for the entry of giants. These historical moments inevitably evoke thoughts of the ‘1995-1996’ of the blockchain industry - the initial surge of the Internet boom.

Looking ahead, I believe that by the end of 2025, the price of Bitcoin may reach a long-term cyclical peak, but in early 2027, it may touch a new low. Once the FIT21 bill is passed, it may usher in a wave of nationwide issuance of digital currency, just like the unprecedented boom of the ‘dot-com’ era.

If the threshold for token financing is lowered to almost zero, and even ordinary people can issue their own tokens as easily as high school students can make a website, then the limited capital in the market will be quickly diluted by the influx of various tokens. In such an environment, the final ‘crazy bull market’ belonging to token issuers may not last for more than three months. Subsequently, due to the imbalance of market supply and demand and the exhaustion of capital, the industry will inevitably usher in a comprehensive collapse.

However, in the next 12 months, we still have the potential for BTC to nearly double in beta, and for ordinary people, there are countless early coin opportunities that can increase by hundreds or even thousands of times in a very short period of time due to global liquidity gathering. Why not participate?

And looking back at the surging waves of the past, the Internet industry, which was criticized as a “bubble” by many media outlets. Today, the Nasdaq index has broken through the 20,000-point mark. Looking back, in 2000, it seemed like a mountain peak, but now it’s just a small hill. Even if you entered the Internet industry in 2000 and have persisted until today, it is still almost the most correct choice.

BTC, one hill after another.

It has been 3202 days since I bought my first BTC on March 7, 2016.

I still remember, the price at the moment I clicked the mouse was 2807 RMB, which is less than 400 US dollars.

Many people have asked me, how much do you think BTC can go up to?

The question doesn’t make sense. The price of gold, these days, all these years, is also constantly hitting new highs.

A meaningful question is, how high can the price of BTC rise before a certain point in time?

See.

The best is yet to come.

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