Editor’s Note: Today, we’re handing things over to Brownstone’s resident crypto expert, senior analyst Ben Lilly. He has more than a decade of experience working in the crypto industry. And today, you’ll hear from him about what’s been holding it back and why 2025 is gearing up to be one of crypto’s most significant years yet. Read on for more from Ben…
The Permissionless Hash: An Unknown Upper Bound By Ben Lilly, Senior Analyst, Brownstone Research 
154% in 2023… 60% in 2024 before the election… And now, 40% since the presidential election. Bitcoin is on an absolute tear, surging to new highs over and over as it closes in on $100,000. Wall Street can now package up Bitcoin shares to clients thanks to the newly created ETF instruments trading in the market. It was a major talking point in this year’s Presidential election. And now, U.S. politicians are discussing a strategic Bitcoin reserve. Its progress is becoming one of the most significant financial phenomena of our time. And if you’re like the many who feel underexposed to this run and are thinking you’ve missed out… that the biggest gains are behind us… and by getting involved now, you’d be buying the top… Believe me, the best is yet to come. And 2025 will be the biggest year for the digital asset industry ever. The reason is two-fold. First, the industry is responding like a loaded spring. It’s been held back so aggressively that we are witnessing the release of that spring. And second, the industry moves in cycles. First Bitcoin moves as we see today, which prepares the rest of the cryptocurrency market to come to life. Let’s dive in… Hostility Toward the Crypto Industry For those who don’t know me, I’m Ben Lilly, the senior analyst for Brownstone’s cryptocurrency research. I work closely with Jeff every day and we’ve known each other for years. I’ve been involved in the crypto industry for more than a decade. During this time, I’ve acted as an investor, advisor, consultant, head of research, and founder. My trading and analysis products are used by venture capitalists, hedge funds, prop desks, and high-net-worth individuals across crypto. My market analysis is regularly quoted in crypto news outlets such as CoinTelegraph, CoinDesk, Decrypt, NewsBTC, Bitcoinist, and others. I was even the first to uncover how Grayscale’s Bitcoin Trust was the main catalyst for price action in 2020. You can just Google my name and “Grayscale Effect” to see for yourself. For the last three years, I’ve had to watch as anything that smacked of progress in the cryptocurrency industry has been stifled by the current U.S. administration and U.S. regulators. The U.S. government has treated this industry as one filled with “Shadowy Super Coders.” Crypto has been shunned so badly that senators even platformed on creating an anti-crypto army. Even wrongfully stating crypto was a tool for terrorists. 
Their actions have followed suit. This chart from Cornerstone Research highlights how the SEC’s enforcement actions became a more regular occurrence over time. 
Politicians were making headlines with each act against the industry. And while you might think regulators were just picking on small violators, it’s been quite the opposite. The SEC has gone after some of the largest, most successful, and legitimate businesses in operation. These include entities like the publicly traded cryptocurrency exchange Coinbase, ConsenSys – that’s the firm behind the wallet MetaMask with 30 million active monthly users – and the largest onchain decentralized exchange, Uniswap. These are not criminal organizations. Yet, the current U.S. administration and its cast of regulators quite literally hate the digital asset industry. There’s been a complete refusal to offer simple guidance to anybody operating in the space. And anybody who does come to proactively engage and speak with regulators for clarity has often been met with enforcement actions. Even some on the inside have expressed this sentiment. Take SEC Commissioner Hester Pierce. Here’s what she said about the SEC regarding the entity’s war on crypto… “Our unreasonable approach to these applications has signaled that regulatory prejudice against new products and services can lead us to sidestep the law.” If that’s not enough, she’s even called the SEC “hostile to crypto.” That’s a commissioner speaking honestly about the organization she represents, and as a result, she is well respected by the blockchain industry. The United States has not been friendly to crypto, and this position has had negative consequences on the entire industry. One of the effects has been a brain drain. Many developers have packed up and moved out of the U.S. due to this stance. Here’s a chart from Electric Capital showcasing the sudden drop in U.S. developers as current SEC Chair Gary Gensler began his crusade shortly after taking office. 
This trend is awful to see when it comes to innovation. Can you imagine packing up your bags just to build technology you believe in… And while doing so, having to navigate a new set of laws, raise capital, find office space, and put a team together? It hinders progress, to say the least. And it’s not just jobs that moved out of the U.S. Tens of billions of dollars in investment moved offshore where blockchain companies aren’t hampered by regulations. The industry wasn’t going to put progress on hold just because regulatory conditions were poor in the U.S. It kept building. And as we’ve seen, Bitcoin – and some other high-quality digital assets – just kept climbing. But without a healthy cryptocurrency market in the U.S. – the largest economy in the world – there would always be a limit. But that’s changing… The Government Is Getting on Board The now President-elect noticed this reality when he spoke at a Bitcoin conference earlier this year in Nashville, Tennessee. During his talk he said, “The moment I’m sworn in, the persecution stops and the weaponization ends against your industry.” But he didn’t stop there… He went on further to say he would fire SEC Chairman Gary Gensler on day one. The crowd erupted with applause. His speech tapped into a vein of energy, and Donald Trump won the heart of crypto overnight. In the weeks and months that followed, the industry became one of the biggest forces in D.C. as it poured more than $130 million into the presidential election. It was dominant in the lobbying landscape with some reporting half of all corporate money has come in on this pretense. The overwhelming support and even organization of the industry helped unseat crypto skeptic and chair of the Senate Banking Committee, Sherrod Brown. And the results don’t end there… Some 275 pro-crypto candidates versus 122 anti-crypto candidates were elected into the House of Representatives, plus 20 pro-crypto versus 12 anti-crypto in the Senate. This was the election of crypto. And here’s a list of Trump appointees who own or are involved with cryptocurrency. Vice President-elect, J.D. Vance HHS Secretary, Robert F. Kennedy Jr. National Security Advisor, Michael Waltz Director of National Intelligence, Tulsi Gabbard Department of Government Efficiency, Elon Musk and Vivek Ramaswamy Secretary of Commerce, Howard Lutnick
And that’s just who we know of so far. The names being tossed around for other unfilled positions are also pro-crypto. Donald Trump is even looking to create a cryptocurrency role at the White House. All this momentum and it’s only been about two weeks since the election. The new administration is going to be the most accommodating for the digital asset industry that anybody could have dreamed of. And from what I see, it has re-invigorated the industry overnight. Various cryptocurrency conferences have announced plans to host events in the United States. Major companies announced they are planning to open offices in New York. And mergers are happening once again. There are even projects overhauling how their tokens can accrue value to holders in light of recent events. The pace of growth will be unprecedented. It’s setting up 2025 to be regarded as the most significant financial year for crypto of our lifetime. It’s not a major technological revolution coming in five or ten years… Or a major innovation unfolding this decade… This is happening as we speak and will transform everything we know about money, finance, and assets. That’s why you’ll be hearing more from me, Ben Lilly, and Jeff as things progress and develop. There is too much to share and we hope you join us on this exciting and financially promising adventure. It’s Just Getting Started The cryptocurrency market is anchored around Bitcoin. Where it goes, the rest of the market tends to follow. And if we look at Bitcoin, it goes through four-year cycles. These cycles revolve around its monetary policy. Specifically, the number of new coins that enter circulation gets cut in half every four years in an event the industry refers to as a “halving.” This supply change ushers in a fresh round of price discovery. We can the multi-year cyclical behavior of Bitcoin’s price in the chart below. 
Now, what happens in the industry is Bitcoin tends to rise in value first. It attracts all the fresh capital flooding in. We can think of this as a giant vacuum sucking up capital. We see that right now with the Bitcoin ETF attracting $29.3 billion since January… $5.2 billion of which has flowed into Bitcoin in the last ten trading days. This flow of capital has caused Bitcoin’s market cap relative to the rest of the industry to swell from about $900 billion to nearly $2 trillion since the ETF began to trade. 
And just like each cycle, the share of the market tends to peak. This gives way to the rest of the market. This means small-cap tokens begin to outpace Bitcoin. For instance, in the last cycle, we witnessed the next-largest asset by market cap, ETH, rise 535% in 18 weeks after Bitcoin peaked. We can think of it like capital making its way down the risk curve. And there’s no reason we shouldn’t expect that to happen again. In fact, ETH is lagging behind Bitcoin in that it still sits below its all-time high. But it took ETH a little more than a month to form a new all-time high after Bitcoin broke its prior high. And even still, the total market capitalization of crypto still rose for another nine months. Its peak wasn’t realized until 11 months after Bitcoin broke through its all-time high. If we were to apply similar time frames to this cycle, the market looks poised to run for nearly all of 2025. And that’s ignoring the impact that regulators who are pro-crypto can have on this market. With everything that’s transpired in the last few weeks, the upper bound of this asset class is truly unknown. And we hope you join us to follow along. Until next time… Your Pulse on Crypto, Ben Lilly
Senior Analyst, Brownstone Research P.S. If you missed Jeff’s presentation last night, you can still go here to catch the replay… And you absolutely should, while you still have access. The Deep Access AI is similar to the deep learning technology we utilize over at Neural Net Profits to help us predict swings in cryptocurrencies. And now, he’s applying the same concept to help pinpoint – and profit from – volatility in stocks. You can go here to learn more about the underlying artificial intelligence… plus the ticker of the unexpected tech stock Jeff believes will be among the most impacted by the volatility he sees coming. | 
