Q3 2025: The Intersection of Cryptocurrency Regulation and Market Transformation

Source: Talking Li and Talking Outside

In previous articles, we have always been optimistic about the possible performance in the second quarter of this year. From the current results, it is relatively good, with Bitcoin's quarterly return rate at 30.32% and Ethereum's quarterly return rate at 37.91%, both exceeding the median level. As shown in the figure below.

As for the possible performance in the upcoming third quarter, according to the expectations in previous articles, we will maintain a cautious attitude towards the overall market, as the market may still face some existing uncertainties, such as:

1) Trump's Tariff Policy

In April of this year, Trump announced a 90-day buffer period for the Liberation Day tariff plan against the EU and other countries (Trump named April 2 as Liberation Day), and according to the timeline, this buffer period ends on July 8.

If there are no new negotiations or plans by then, Trump may continue to restore tariffs of up to 50%. Although the market has already digested this to some extent, for the risk-sensitive markets (crypto market, stock market) that are highly sensitive to macro situations, if this tariff plan continues to be implemented, it will undoubtedly increase the short-term volatility risk in the market.

From some of the latest news available online, the U.S. Treasury Secretary hinted that the tariff policy may continue to be considered for extension until September 1. However, Trump stated in an interview that "it can be extended or shortened." In any case, it seems that the U.S. will not suffer losses, and whether to extend depends on the level of compromise from other countries.

2) Federal Reserve's Interest Rate Meeting

It seems that many people are looking forward to the Federal Reserve starting to cut interest rates in July, and the latest interest rate meeting is indeed in July. However, based on the information currently known, the probability of a rate cut in July is low, and there may be some variables involved.

There have been reports online that Trump is considering announcing a replacement for Powell by September or October at the latest, and Trump recently stated in an interview: "Yes, I know who I want to choose from three or four people. Fortunately, Powell's term is ending soon, and I think he is terrible."

However, we believe these are just superficial statements. If Trump continues to nominate Powell, so what? Trump only cares about interests and does not care whether his statements contradict each other. If Trump and Powell (including the forces behind both) can reach a consensus on interests, it is not ruled out that the market may see a rate cut as early as September this year. Currently, the probability of a 0.25% rate cut (i.e., 400-425bps) in the September meeting has risen to 75.9%, as shown in the figure below.

In addition to the important macro events mentioned above regarding tariff policies and Federal Reserve interest rates, there are still many other uncertainties to pay attention to in the crypto market in the third quarter, such as:

• Progress of the Stablecoin Bill (Stablecoin Bill GENIUS). It is expected to further advance to negotiations in both houses in the third quarter.

• Progress of the Market Structure Bill. Currently, it is still in the early stages, and we will see if it can be pushed forward together with the Stablecoin Bill in the third quarter.

• Regulatory changes regarding stablecoins by banks. Currently, the Federal Reserve, OCC, and FDIC have lifted several restrictions on regulatory letters for banks (referring mainly to U.S. banks), meaning that banks can easily participate in stablecoin and crypto asset businesses. We should see more banks participating in cryptocurrencies in the third quarter (conversely, capable crypto-related listed companies may also venture into banking).

• Transmission effect of the popularity of crypto concept stocks. If the crypto concept continues to ferment and speculate in the stock market (such as U.S. stocks) in the third quarter, some announcements or dynamics from related listed companies may also affect the trends of some crypto projects themselves. For example, previously (on May 8, Bloomberg reported that Robinhood was considering developing a blockchain platform to allow European investors to trade U.S. stocks, and it was said that Robinhood was already in talks with Arbitrum and Solana), there were rumors that the U.S.-listed company Robinhood might launch its own L2 blockchain based on Arbitrum, which could also benefit ARB's short-term speculation. Additionally, it is said that Robinhood plans to launch ETH or SOL Staking, which theoretically would also benefit ETH or SOL. We may see more announcements or dynamics from other listed companies similar to Robinhood in the third quarter.

• SEC's regulatory changes regarding the crypto industry. Earlier this year, the SEC established a Crypto task force and has carried out a series of related work, as shown in the figure below. Let's see what new actions they can take in the third quarter. Additionally, regarding ETFs, we mentioned in previous articles (such as the one on June 15) that at the end of May, the SEC issued a statement (i.e., Statement on Certain Protocol Staking Activities) clarifying that staking transactions do not fall under securities trading. This seems to significantly increase the probability of ETH ETFs incorporating staking features this year. Many people are also focused on the SOL ETF, which, if it receives preliminary approval in July, could potentially be launched by the end of the third quarter or the beginning of the fourth quarter.

In short, the third quarter of this year should be a relatively important market period from a macro cycle perspective, which we might call: the season of convergence between crypto regulation and market transformation. Whether at the macro level, political level, policy level, or market level… we may continue to witness some different changes.

As for the longer-term trends in the crypto market, there are currently two main viewpoints:

One is to continue the historical cyclical pattern, such as a bull-bear cycle lasting 4-5 years. In this case, we would expect to see a new bear market in 2026, followed by another bull market in 2028-2029.

The other is to transform and break existing patterns, similar to the U.S. stock market entering a super cycle. This super cycle may occur during this round of crypto bull market or the next, where Bitcoin, after undergoing a series of transformations (along with various phase shifts between mini bull and bear markets), will officially enter a multi-year long bull and slow bull cycle.

However, these are currently just speculations. Regardless of the outcome, from an investment perspective, only by continuing to "survive" in this field can we witness everything firsthand, and it seems we are approaching a new era of crypto.

While looking to the future, it is still important to grasp the present. Specifically, in the upcoming week, there will still be opportunities and risks coexisting. We will gradually begin to experience some significant data changes, including the U.S. June ISM manufacturing data (Tuesday), U.S. June ADP employment data (Wednesday), U.S. June unemployment rate data (Thursday)… and so on. If the subsequent developments based on various macro or policy aspects do not meet market expectations, it is not ruled out that we may experience another round of corrections or significant volatility starting in the third quarter.

The overall market in recent days has actually been relatively flat, with Bitcoin fluctuating around $108,000, lingering near previous highs. However, compared to the flat market, people's moods seem to be more subdued and pessimistic.

As for the possible market trends ahead, Bitcoin's market structure still appears relatively intact and is fundamentally similar to previous cycles (such as the last bull market cycle). If the script does not change, we are likely to see Bitcoin continue to break new historical highs in the third quarter (or postponed to the fourth quarter).

Of course, this perspective also considers other angles. For example, comparing Bitcoin with the S&P 500, we find that the overall trend structure of Bitcoin and the S&P 500 is basically in sync, albeit with some slight delays at times. Currently, the S&P and Nasdaq are jointly breaking new highs. If this situation can continue, the likelihood of Bitcoin continuing to rise will be relatively high, as shown in the figure below.

Additionally, comparing Bitcoin with the DXY (U.S. Dollar Index), we find that in most cases, when the dollar weakens, Bitcoin tends to perform well. Currently, the dollar remains in a low range. If the dollar's trend cannot quickly reverse and continues to fluctuate in the low range, it is not ruled out that some funds may continue to choose to enter Bitcoin for risk hedging, thereby pushing Bitcoin's price higher again, as shown in the figure below.

However, these are also potential trend speculations. In the short term, the market cannot be accurately predicted because we never know what will happen tomorrow (in the future). What we can do is make various speculations based on possible occurrences or existing data.

Above, we mainly discussed Bitcoin. In previous articles, we have repeatedly mentioned that the current crypto market should be divided into two independent plans: one for Bitcoin investment and another for altcoin investment, which should not be mixed. Yes, because compared to Bitcoin, due to overall insufficient liquidity and the market itself being severely diluted (for example, the excessive increase in new altcoin projects), the overall performance of altcoins has been disappointing so far. Although we have already experienced three mini altcoin seasons in this cycle, as shown in the figure below.

However, through discussions in daily groups and observations of comments in the public account backend, it seems that many people have not made much money on altcoins; instead, many are still stuck or experiencing losses.

Although some people no longer believe in altcoin seasons and related indicators, we still believe that some experiences (market behaviors) are worth referencing at this stage of market development. In fact, whether in historical bull market cycles or this round of bull market cycles, most of the time (theoretically over 90% of the time) Bitcoin dominates the market. Except for a few projects under special speculative conditions (such as AI concepts that have surged several times in this cycle), most altcoins perform poorly throughout a complete cycle, and it is only in the final stages of a bull market that altcoins are most likely to perform excellently.

In other words, although this round of cycle has seen poor overall performance of altcoins due to severe dilution and other issues, with the TOTAL2 market cap not even exceeding the previous bull market's peak, as shown in the figure below.

From the current performance of Bitcoin's dominance (BTC.D), we seem to be in a relatively interesting phase. If Bitcoin can continue to set new highs similar to the last bull market (comparing the current market with the situation in September 2021), then it is likely that Bitcoin's dominance will decline afterward, and we will have the opportunity to see mini altcoin season for the fourth time, with TOTAL2 reaching a good position again (but considering the issues on-chain in this cycle, the current TOTAL indicator may differ from historical cycles, which we discussed in our article on February 3).

The traditional altcoin season in the minds of veteran investors: when the altcoin season arrives, it seems that almost all coins are rising. To put it bluntly, back then, you could make money just by randomly buying in OK or Binance with your eyes closed.

The mini altcoin season that started in this cycle refers to the absence of the spectacular scene of traditional altcoin seasons. We will only see a few leading, story-driven altcoins perform excellently, while most altcoins (especially various low-quality projects on-chain) not only cannot set new highs but may also head towards zero.

Additionally, the mini altcoin season in this cycle can be roughly divided into several main stages. The initial stage focuses on the speculation and explosion of individual "new concepts" like AI and inscriptions. The mid-stage concentrates on the speculation and explosion of SOL + Memes, while we are currently theoretically entering (or have already entered) the later stage, which is currently focusing on individual narrative fields like Stablecoin and RWA.

This division is quite clear. In other words, aside from Bitcoin, if altcoins hope to allocate some positions again, it is best to concentrate on narrative fields like Stablecoin and RWA. Moreover, we mentioned in previous articles that the popularity of the Stablecoin concept is currently being reflected in the stock market. If funds (speculation) have the opportunity to return to the crypto market later, now is still a good time for you to continue your research. Because when Bitcoin is in a high consolidation phase, when altcoins have made most people lose hope, and when more and more people leave the crypto market to speculate in stocks… this may be your new opportunity. For example, regarding Stablecoins, projects related to stablecoins like AAVE and ENA still have some performance space.

Of course, we still reiterate the old saying from previous articles: if there are new performance opportunities for altcoins in the upcoming third quarter (or fourth quarter), it is essential to ensure timely profit-taking (i.e., converting your altcoins into BTC or USDC). Opportunities and risks are often proportional; surges are for better crashes, and crashes are for better surges. In the later stages of a bull market, preserving profits is more important than taking higher risks to gamble.

The first half of 2025 has ended so abruptly. We hope that as we enter the second half, we can continue to maintain focus, thoughtfulness, and patience. Although many people now say "crypto is dead," perhaps what has "died" is just some people's positions. Although the crypto market has developed for 17 years so far (counting from the appearance of the Bitcoin white paper in 2008), the simple "violent dividend period" and "barbaric development period" are passing or becoming history. However, comparatively speaking, this field is still one of the few opportunity areas for ordinary people.