The current Web3 and crypto market can be summed up in one sentence: coin prices are holding up, but the industry is in a deep bear market. This is an unusual situation for the industry. In the past, prices and trading volumes moved up or down together. But now, for the first time in over ten years, we’re seeing a serious disconnect between them.

While this situation may seem strange, the reason is actually quite simple—it’s all about liquidity. Many are wondering why coin prices and market cap seem stable, yet the industry is in such a slump. The question itself is a bit off. Remember, the U.S. federal funds rate is still at record highs, and we’re in a cycle of tightening liquidity. In times like these, both the stock and crypto markets are expected to be in a bear market. So the real question is: why are coin prices doing okay when the industry is struggling?

1. Major Structural Changes

When something unusual happens, there’s always a reason. Beneath the current mismatch between coin prices and the state of the industry lies a fundamental shift in the market structure. Few have noticed that at the start of this year, the crypto market underwent a significant and structural transformation. The approval of the Bitcoin ETF has created a new, almost completely independent digital currency market: the U.S. stock market. This is a turning point in the history of crypto development, and the disconnect between coin prices and the broader industry is a new phenomenon stemming from this new market structure.

Now that there are two markets, we’re seeing two seemingly contradictory outcomes. The “decent” coin prices are being driven by the U.S. stock market, while the “struggling” industry is still tied to the traditional crypto market.

The Bitcoin rally that began in the second half of last year has largely been fueled by the ETF. However, the funds flowing into the ETF have mostly stayed on Wall Street, with little to no capital entering the broader crypto market or supporting new crypto projects. Instead, the crypto market is still grappling with a liquidity shortage, worsened by high interest rates and competition from AI. Without external liquidity injections, internal competition within the industry is inevitable. The difficulties we’re seeing in the crypto space right now are a clear sign of this liquidity crunch.

A true bull market will only come when liquidity becomes more available. When that happens, funds will flood back into the crypto market, and a bull market will surely follow.

There are increasing signs that the Federal Reserve’s rate-cutting cycle is only a few months away. The federal funds rate is currently at historic highs, and on the optimistic side, this rate-cutting cycle could last long enough to give the industry an extended period of growth. On the pessimistic side, if inflation spikes after the rate cuts, the Fed may be forced to raise rates again, leading to a period of chaos. Personally, I’m cautiously optimistic about the future, but even if we enter a chaotic era, 2025 is still likely to be a strong year.

In the long run, there will be a major showdown between these two markets. However, it will only determine who comes out on top—they are likely to coexist for the foreseeable future.

2. Four Promising Sectors

Many people are trying to guess which sectors will shine in the next bull market. Here are my personal thoughts and reasons, though this is not financial advice, and I take no responsibility for any outcomes.

BTCFi

I won’t deny it—this is a bit of self-promotion. Right now, Solv Protocol and Babylon are the two leading forces in BTCFi. To break it down: Babylon leads on the native BTC stack, while Solv dominates the BTCFi space on the EVM stack. The two projects have a great partnership. So as one of Solv’s co-founders, I’m confident in BTCFi, and it’s no surprise I rank it as the top opportunity sector. But let me explain why I think BTCFi deserves this spot.

First, BTC is the only asset that can bridge both the U.S. stock market and the crypto market in the next cycle. ETH isn’t there yet, and other assets are even further behind. Only BTC has the potential to link the consensus and liquidity of these two massive markets.

Second, BTC is huge—really huge. If BTCFi can tap into just 5% of BTC’s assets in the next cycle, along with some derivatives, it could potentially grow to a scale of hundreds of billions.

Third, the infrastructure problems that have held BTCFi back are mostly solved. Whether it’s the Lightning Network, sidechains, BTC Layer 2, or bridging BTC to EVM chains via cross-chain bridges, whether it’s multi-signature wallets or BTC Script smart contracts, the tech today is far ahead of what it was in the previous cycle. In BTCFi, almost anything you can think of can now be done.

Fourth, there’s been a mindset shift within the BTC community. Through Solv’s experience with BTCFi, we’ve learned that BTC hodlers and ETH fans are two very different groups with distinct growth paths, ideas, and mindsets. In the past, BTCFi didn’t gain traction mainly because BTC hodlers weren’t interested. However, with the boom in the ordinals ecosystem last year, two major changes have occurred. First, a group of active DeFi veterans has joined the BTC community. Second, a small but growing number of traditionally conservative BTC hodlers are starting to change their mindset, and they’re now more willing to engage with BTCFi development.

Aside from the four more straightforward reasons I’ve already mentioned, there’s a deeper reason why I’m confident about BTCFi.

Those who have been around in the industry for a while will remember that before 2018, many projects were directly funded with BTC, and BTC had high liquidity and activity. However, after the painful collapse of the ICO bubble in 2017-18, and especially with the rise of stablecoins, BTC retreated into the role of digital gold, and its activity significantly declined. As a result, many people started to believe that BTCFi might be a dead-end. But anyone familiar with the history of global monetary systems knows that this is a problem humanity has faced and solved before.

During the gold standard era, which lasted for centuries, gold, as the primary currency, faced a similar challenge. The core issue was that gold was trusted for its ability to hold value and resist inflation, which was the very foundation of its role as the standard currency. But precisely because of this, people tended to hoard gold in reserves. However, money is meant to circulate, and hoarded money isn’t effective. In other words, gold’s role as a store of value conflicted with its role as a medium of exchange. So how was this issue solved?

In September 1717, Isaac Newton, as Master of the Royal Mint, proposed pegging gold to the British pound. This was one of Newton’s most significant contributions, beyond his work in math and physics. It’s absurd that people unfamiliar with economics dismiss Newton’s later years as uneventful. What Newton actually did was create a flexible reserve system for gold. He allowed people to safely store “naked” gold while using the highly liquid British pound as a voucher. This system created a two-tier monetary system that balanced security with liquidity, enabling rapid economic growth. During this golden era of economic history, gold rarely appeared directly in economic transactions, but it was still the foundation behind everything.

I believe BTCFi is at a similar turning point today. If BTCFi grows well in this cycle, it could become the stabilizing force for the entire crypto economy. While solving the need for secure storage, BTC can participate actively in the crypto economy in the form of “vouchers,” driving the growth of the crypto economy effectively and sustainably. This is the core reason I’m optimistic about BTCFi.

On a related note, many people ask me how Solv positions itself. If you understand the deeper reason I just explained, Solv’s vision becomes clear. Solv’s goal is to create a flexible reserve for BTCFi, so that BTC, as digital gold, can truly activate the crypto economy.

Meme Coins

Those who know me understand that I’m not a big fan of memecoins, and that’s largely because of my personal values. But despite this, I still have to count meme coins as one of the sectors I’m most optimistic about.

It’s not just because meme coins are one of the few areas still generating buzz in the bear market, but more because meme coins have an increasing advantage in addressing the ethical challenges within the crypto world.

Memecoins have two key strengths.

The first one is obvious: they’re cheap to get into.

The second one is more subtle: meme coins prioritize fairness and transparency over value promises.

So, what’s the biggest difference between memecoins and so-called value coins? It’s that value coins promise value first, while meme coins promise fairness and transparency first. Now, I’m not saying meme coins are perfectly fair—there’s often some trickery behind the scenes—but generally, there’s less information asymmetry with meme coins than with value coins.

Which is harder to achieve: value or fairness? As Wang Yangming said, “It’s easier to remove thieves from the mountains than from one’s heart.” Creating value for an asset is relatively easy, but distributing that value fairly is much more difficult. Value coins start easy but get hard. Since there’s no real regulatory framework in this industry, once a value coin starts gaining traction, the team faces temptations to take advantage of the situation. This is where the real test comes in, and very few pass it. Once a value coin team breaks its promises, the coin loses both its fairness and its value. Memecoins, on the other hand, don’t have to promise any value at all—they can be entirely speculative. But they start with a relatively fair set of rules and more symmetric information. From this foundation, it’s even possible to add value to meme coins through secondary development. This “hard first, easy later” approach makes it easier to build fairness with memecoins than to try to restore fairness to a worthless value coin.

Don’t get me wrong—I strongly believe that crypto should be about creating real value, and I work hard to make value coins succeed. But I also have to admit that, for many people, favoring memecoins is a rational choice.

That’s why I think that in the next cycle, while the chances of an individual striking gold with a specific meme coin will remain low, the meme coin sector as a whole will continue to thrive. I also believe we’ll see some third-party developers build applications around existing meme coins, adding value to them through secondary innovations.

Stablecoin Payments

Is blockchain really just for speculation and nothing else? A lot of people think that way, but they’re completely wrong. The biggest application of blockchain right now is payments, and the fastest-growing segment in payments is stablecoin payments.

To be honest, including stablecoin payments in my list of top sectors is kind of cheating. That’s because stablecoin payments aren’t something that might take off in the future—they’re already happening. Stablecoins have long been widely used in the crypto industry as the main asset for investments and incentives. But more recently, stablecoins have started to make inroads into cross-border trade. Especially in the past couple of years, many small and medium-sized cross-border businesses have begun using stablecoins on a large scale for B2B payments within their supply chains. In this area, blockchain payments are showing their strengths—instant payments, clearing in minutes, and transaction records that are traceable for life. Once businesses get the hang of it, they don’t need much convincing to keep using it.

The only hurdle right now is regulation.

There’s a common misconception in the crypto space that major countries will keep cracking down on stablecoin payments for the long term. But as the team behind the ERC-3525 token standard, we’ve had deep conversations and collaborations with central banks and global financial organizations over the past two years. I can tell you that’s not the case at all. From the Bank for International Settlements to the World Bank, from central banks in Southeast Asia and some African countries to large international banks handling massive cross-border transactions, they’re all well aware of the benefits stablecoins offer. Most of them understand this is an unstoppable trend, and they’re actively learning and adopting it.

This isn’t a case of “crying wolf” or pretending to embrace something while actually fearing it. It’s based on sound theory and real-world experience. What they’re grappling with now is how to balance accepting stablecoins as a legitimate payment method with enforcing anti-money laundering (AML) and anti-terrorist financing (ATF) measures, which every responsible financial institution and law-abiding country must have in place. Much of the current research in this field focuses on solving this problem. Once they crack that, stablecoin payments will flood the financial industry like a tidal wave.

Stablecoin payments will undoubtedly be the first successful part of the Real World Asset (RWA) sector. Many people think RWAs will take off in the next wave, but I believe the timing isn’t quite right yet. Stablecoin payments will lead the way, and only after they see significant growth will other RWA assets begin to gain traction. That’s probably going to take at least another cycle. Still, the upward trend for RWAs is clear, and patient investors will start positioning themselves for it soon enough.

Web3 Social Networks

In the next phase, I believe we’ll finally see a leading player emerge in Web3 social networks—this is my boldest prediction. The topic has been talked about for a long time, and every attempt so far has failed. So why do I think the breakthrough is coming soon?

The key reason is that new approaches and solutions have emerged, with Solana Blink and TON as standout examples.

First, let’s get one thing clear: Web3 is about the internet of value, and Web3 social networks are essentially platforms where users can interact with value, not just content. In other words, Web3 social networks build on what Web2 social networks already do well; they’re an upgrade, not a replacement. Web2 social platforms already excel at content creation and sharing, so there’s no need to reinvent the wheel. If you try to build a new social platform that spends most of its resources replicating what Web2 networks have already mastered, and then expect users to leave behind years of accumulated connections and data to move everything to your new platform, that’s not just difficult—it’s a bad idea. Why not simply add a value layer to existing Web2 social networks, allowing users to make payments, trade, and carry out value-related activities on the platforms they already know and use?

This approach is so simple and logical, yet for years, Web3 social entrepreneurs missed it. Thankfully, with TON and Solana Blink, the idea has finally broken through. What do these two have in common? They’re adding a value layer to existing, high-traffic Web2 social networks rather than trying to build a new platform from scratch and hoping people will migrate for ideological reasons. In other words, they’re making Web3 adapt to the traffic, instead of expecting users to come find Web3. A lot of people are missing the forest for the trees, obsessing over data and criticizing TON for having traffic but lacking value, or mocking Blink for making noise without much action. These criticisms might be fair in isolation, but they ignore the larger trend and miss the importance of this shift in thinking about Web3 social networks. I’m not saying TON or Blink will necessarily succeed, nor am I claiming they will be the final winners. Just like MiTalk came before WeChat, and Musical.ly came before TikTok, these platforms might not be the ones to ultimately dominate, but they’re paving the way and pointing us in the right direction. That’s what matters most.

Social networking has always been the king of all applications, and it will continue to be so in Web3. There’s no fundamental issue with Web3 social networks; they just haven’t succeeded before because the thinking was wrong. Now that this approach has broken through, we’re set to see a surge in Web3 social payments and social transaction platforms, which will shape the landscape of Web3 over the next decade. I’m extremely confident in this future.

Disclaimer：

1. This article is reprinted from [Yan Meng @ Solv Protocol | ERC-3525]. All copyrights belong to the original author [@myanTokenGeek]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.