IOSG Outlook 2025: Crypto's Schrodinger's Cat

By Momir @IOSG

Schrödinger's cat is a very interesting thought experiment - in simple terms, this law summarizes that in quantum mechanics, macroscopic objects can be in multiple states until you observe them. In the Schrödinger's cat experiment, a cat is placed in a sealed box. Before opening the box, the cat can be in a superposition of alive and dead. Until you open the box, everything will "collapse" into one result: either alive or dead.

This experiment is actually quite similar to the current cryptocurrency market. Just like the cat in the box with two states at the same time, the current crypto industry is also in an uncertain stage, with many possibilities coexisting in the future. These possibilities will only become a clear reality when the market changes or external factors intervene.

The “superposition state” of top assets

BTC

1. Survival

BTC has the potential to solidify its position as a global reserve asset and truly realize its vision of “digital gold.” However, achieving this vision is highly dependent on several key factors:

• The US government includes BTC in its national reserves and starts purchasing BTC (less likely).
• Multiple governments or central banks from the top 20 economies hold BTC as a reserve asset (low to medium likelihood).
• An increasing number of global public companies, inspired by MicroStrategy’s success, are beginning to convert large amounts of their cash reserves into BTC (medium to high probability).
• Systemic shocks (such as the collapse of a government or bank) increase BTC’s appeal as a risk hedge, further strengthening its role as a “safe haven asset.”

2. Death

If the above key scenarios are not achieved, BTC’s future momentum may be weakened:

• Government indifference: If major economies are not interested in BTC, market sentiment may become pessimistic, and everyone's attention will shift from chasing new highs to whether big players like MicroStrategy will cash out or even sell.
• MicroStrategy's risk: Now, MicroStrategy is a big supporter of BTC, but if its leverage operation leads to a sharp sell-off in the market, it may become a "burden" for BTC. Do you remember how giants like Alameda Research and Three Arrows Capital (3AC) were killed by the market? Once the liquidation line is triggered, the shorts will chase the target like smelling blood, triggering waves of sell-offs. If MicroStrategy also goes this way, the situation may get out of control.
• Technical issues: Whether BTC can cope with the challenges of quantum computing is also a big question. If BTC cannot adapt to this new risk, it will not be able to serve as a secure and tamper-proof value storage carrier.

BTC is now in a quantum superposition state, either becoming the cornerstone of the crypto economy or being regarded as an outdated technology - it all depends on market attitude and ultimately which result it will "collapse" into.

ETH

1. Survival:

ETH is expected to dominate the blockchain field in the future and further strengthen its position as a "programmable BTC alternative". So why might institutional investors pay more attention to ETH next? There are many reasons:

• Institutional interest: ETH’s level of decentralization is very high. Apart from BTC, it may be the only blockchain asset that governments and institutions are willing to accept.
• Quantum-resistant computing capabilities: In the long run, ETH is more likely to smoothly transition to quantum-resistant technology than BTC. We expect ETH's transition to be much smoother than BTC.
• Sustainable Economy: ETH has a large amount of on-chain activity, and the natural fees generated can provide a stable income stream for validators and miners. Its flexible token economics can adjust between inflation and deflation modes according to market demand, making it far more sustainable than BTC in the long term.
• Developer ecosystem: ETH has attracted the most developers and has been the preferred ecosystem for development teams for seven years.
• Diverse leadership: ETH has multiple teams driving its adoption, including Base (arguably the most important crypto institution in the United States), Arbitrum, ZkSync, Starknet, and others.
• Resisting centralization risks: ETH does not need to worry about a single entity like MicroStrategy monopolizing the market as BTC does.
• Blockchain trilemma: ETH is the only public chain that has successfully balanced the blockchain trilemma - it has achieved decentralization, scalability and security through innovative solutions like Rollups. This makes ETH the most technologically advanced and versatile blockchain, suitable for both institutional and retail users.
• Ecosystem growth: ETH has a large and active ecosystem. The momentum created by such a large ecosystem can enable ETH to benefit to the greatest extent under new favorable policies and clear regulatory policies.

2. Death:

In the worst case, ETH may miss the entire cycle due to some internal and external risks:

• Leadership, Leadership, Leadership:

• Leadership vacancy: Since the ETH community is large and decentralized, this feature allows some opinion leaders to constantly create confusion within the ETH community and spread contradictory statements, making the ETH ecosystem more fragmented.
• Cultural Challenges: The new US government promotes a cultural shift from "woke culture" to "down to earth." This shift means that society moves from political correctness and moral discussions to unconventional communication. ETH's culture is often considered more "woke" than other ecosystems. It emphasizes inclusiveness, political correctness, and community-led moral discussions. While these values contribute to diversity, they sometimes bring some challenges (inefficient communication, moral judgment, and hesitation in making bold decisions). Some of the more vocal members of the community often play the role of moral courts, which limits direct dialogue and may also create friction when taking a more forceful leadership style.

• Challenges from competing chains: Competitors like Solana continue to challenge ETH’s dominance. A large number of public chains outside the ETH ecosystem have flourished. If this trend continues, ETH’s position as the preferred platform for attracting outstanding developers will be further challenged.

In the future, ETH may be hailed as an upgraded version of BTC and become the king of blockchain; or it may fall into trouble due to some characteristics that come from its bloodline.

Solana

1. Survival:

Solana can shine with its flexibility and active community:

• Combination of Meme and AI: In 2025, Meme will still dominate the economic attention of the cryptocurrency circle. Solana is leading a new trend under this Meme trend - In response to the rapid growth of AI Agent in the industry, the very forward-looking Solana team immediately introduced Agent SDK.
• DePIN: Solana’s years of planning in the DePIN field are finally paying off. With the final implementation of a large number of DePIN solutions, Solana has the opportunity to become a leader in integrating blockchain with DePIN.
• Developer Leadership: Solana focuses on cutting-edge verticals and rapid innovation in the industry, challenging ETH’s dominance among developers. Sonala’s focus on the developer community makes it a disruptor among many ETH challengers.
• Institutional Certification: If the Solana ETF is approved, it will be a crucial milestone. This means that Solana’s ecosystem has been recognized by institutions, and its status among institutional and retail investors will be further enhanced.

2. Death:

• From hunter to prey: Solana has experienced a dramatic turnaround in the past 18 months. Its alternative roadmap and calm response to the FTX crash have allowed it to regain its place among the leading blockchains. But now Solana is no longer the dark horse, but a player with a bit of "big brother" temperament. As a result, the attention of speculative investors has begun to turn to its opponents, such as Sui, Hyperliquid, Aptos, Monad, etc. Looking at these emerging chains, they all claim to provide fast and integrated solutions, and each one is challenging Solana's position.
• Over-betting on Meme: Solana’s rise is inseparable from Meme and speculation. Although this strategy successfully attracted market attention, it also brought Solana the risk of declining speculative enthusiasm. Without sustainable on-chain activities (such as a prosperous DeFi ecosystem or other lasting narratives), the decline of Meme will severely hit Solana’s on-chain economy. The attention economy is inherently very short-lived, and the long-term growth of an ecosystem cannot be overly dependent on market attention.
• Developer stickiness: In 2022, Solana experienced the largest developer loss in the history of blockchain, and the public's concerns about the long-term growth of Solana's ecosystem also come from this. Solana's success in the past 18 months can be attributed to speculators, but during this period we are still skeptical about whether Solana has cultivated a loyal and resilient developer community. When competition intensifies in the next few years, an excellent developer community will be a moat for Solana to maintain its leading position.

Solana is standing at a crossroads of survival and death: its flexibility, active community and innovation make it potentially disruptive to ETH. But in the face of growing competition, speculation and developer stickiness issues, whether Solana can maintain momentum will determine whether it can continue to dominate the market.

Investment institutions look at the track

2.1 Crypto x AI

Crypto x AI is the most innovative and dynamic area in the industry in recent times. It has attracted almost unparalleled market attention and provided a wide range of reverie. Sovereign AI (AI systems powered by decentralized crypto infrastructure) represents a revolutionary opportunity (but in fact, there are many risks in giving AI so much power). These systems can achieve true autonomy and interact with other agents and humans on-chain using non-custodial wallets. We will even see AI agents in the future purchasing human services when they need to perform off-chain tasks.

Months before AI agents became a market focus, we wrote about the potential of this field: The Agent Wars: Silicon Valley Titans vs. Crypto Challengers (Link: https://x.com/momir_amidzic/status/1825895123315458281)

In addition to AI Agent, many other areas in Crypto x AI are also worthy of our attention, which we have also shown in the Crypto x AI industry map in June 24:

2.2DePin

DePIN is a highly innovative and diverse field that combines cryptoeconomic models with off-chain hardware to solve many challenges in traditional industries.

Core target industries and application scenarios

The DePIN project covers multiple industries:

• In edge computing, DePIN provides distributed processing capabilities for latency-sensitive applications.
• In terms of energy and power infrastructure, DePIN can incentivize the adoption of renewable energy.
• In the wireless networking space, DePIN focuses on community-driven 5G and IoT connectivity, bypassing the limitations of traditional telecom providers.
• DePIN supports decentralized crowdfunding solutions for other important industries such as mapping and high-precision positioning services.
• In terms of computing and storage, DePIN provides a decentralized alternative to traditional cloud services, providing secure data storage and processing.
• CDNs can achieve cost-effective and scalable digital content distribution through DePIN.
• Data scraping projects like Grass can build a network of millions of nodes through token incentives. It can use the Internet bandwidth contributed by participating nodes to scrape massive amounts of data.

Although DePIN is a very promising field, not all DePIN projects are equally promising, and the success of a specific project is highly dependent on itself.

We are looking forward to DePIN projects that can provide clear and measurable value, such as reducing costs, improving efficiency, or entering untapped markets. The success of DePIN often comes from the new business models it implements, which cannot be replicated by centralized systems. This advantage enables projects to have better market penetration, distribution, and accessibility. DePIN can also drive cost efficiency and better unit economics by reducing operating costs or improving resource utilization, making its decentralized model more competitive and sustainable. In addition, capital expenditure optimization is an important advantage of the DePIN project because it spreads infrastructure costs to the community through token incentives, enabling faster expansion and wider participation.

On the other hand, we should try to avoid DePIN projects that use tokenization improperly. Their failed token economics often lead to unsustainable ecosystems. The tokens of some projects do not bring actual efficiency gains or improvements over traditional methods, but simply rely on token incentives to cover up potential inefficiencies and subsidize usage costs in the short term. Tokenization alone cannot justify decentralization, and sometimes the results are worse than the existing centralized model.

2.3 Payment

Stablecoins have become a mainstream payment medium in the crypto industry. And due to their programmability, cross-border practicality, and increasingly clear regulatory framework, stablecoins are expected to become the standard settlement currency for global payments.

Although stablecoins have obvious advantages over fiat currencies in terms of programmability and cross-border liquidity, their wider adoption is still constrained by regulatory challenges and inefficient on-chain and off-chain mechanisms. However, a crypto-friendly U.S. government may provide regulatory clarity and create a healthier environment for efficient, liquid, and low-cost crypto-fiat transactions.

Short term (1–3 years): Remittances and consumer applications

Stablecoins will first dominate cross-border remittances, providing a faster and cheaper alternative to SWIFT. Debit/credit cards (Visa/MasterCard) associated with cryptocurrencies will also simplify consumption and build a bridge between on-chain wealth and real-world transactions. This will benefit those who are not in the US dollar banking system, individuals who have difficulty obtaining traditional payment cards, and cryptocurrency holders who want to spend their assets conveniently.

Medium term (3–7 years): Commercial adoption

Businesses will increasingly adopt stablecoins due to their low fees, instant settlement, and programmability. Companies will be able to seamlessly switch between cryptocurrencies and fiat currencies, offering customers two payment options. This dual-track approach will increase efficiency and further integrate stablecoins into mainstream commerce.

Long term (7 years and above): Pay taxes with stablecoins

Stablecoins will become mainstream legal tender, widely accepted for paying taxes and fees, eliminating the need to convert them into legal tender. At that time, stablecoins will subvert traditional financial infrastructure and promote low-cost P2P transactions between consumers and merchants, thereby significantly reducing dependence on banks and credit card companies.

2.4 Consumer Applications

Consumer Applications This area is very exploratory, but also more difficult to define, often overlapping with other areas such as AI, DePIN and Payments. This area covers a wide range of applications, including but not limited to AI-driven consumer solutions, consumer-oriented DePIN projects and payment solutions designed for consumers.

In addition to actual application scenarios, consumer applications in the crypto space also have speculative and gamification elements. A very important category here is blockchain games. They incorporate speculative economic elements and memes, and are still one of the most successful consumer interaction experiments in the industry. These speculative applications often blur the boundaries between entertainment, finance, and practicality, creating unique opportunities for innovation.

Looking ahead, new experiments combining crypto with consumer-facing applications will bring even more opportunities. Game mechanics that incorporate economic incentives show great potential, providing new ways to engage users and drive adoption. The design space in this area is vast, and we expect it to bring breakthrough innovations in 2025.

IOSG's Portfolio

1. Usual

2024 has been a very successful year for Usual, which has reached $1.5 billion in TVL in just six months and has successfully entered the top 5 stablecoins. The governance token has also been listed on Binance, the world's largest CEX. Their fierce momentum has not stopped, and Usual is expected to break into the top 3 of the stablecoin market in the next 12 months, shoulder to shoulder with giants such as Circle and Tether. Usual's scalability is on par with its competitors, and their ambitious goals seem within reach.

On the DeFi side, Usual’s strategic partnerships with Ethena, Ondo, and M0 will drive the next phase of growth. Notably, the yield product between Ethena and Usual can adapt to various market conditions — providing high crypto-native yields in bull markets and stable RWA-backed returns in bear markets. Meanwhile, on the CeFi side, the integration of Usual as collateral is just getting started. Usual assets will be deeply integrated into the foundation of the CeFi and DeFi ecosystems. As these integrations continue to advance, strong network effects will accelerate adoption and application.

Looking ahead, the Usual team remains focused on building a vibrant ecosystem around Usual assets. With their outstanding execution, we can be confident that innovation and breakthroughs are just around the corner.

We have previously published Usual’s Thesis: Link, and our story with the Usual team “Unusual”: Link

2. BTC Ecosystem

Although BTC is the oldest and most mature cryptocurrency, its life is still in a very early stage. We support a series of pioneering projects around the BTC ecosystem, who are shaping the next frontier of BTC development:

Babylon: A cryptographic breakthrough that allows trustless BTC staking, enabling BTC holders to secure external networks and earn rewards without relying on intermediaries.

BoB: A hybrid Rollup that leverages BitVM v2 for trustless BTC bridging. BoB creates a secure hub by combining Babylon’s fast finality with ETH’s data availability, enabling BTC to freely integrate with ETH’s DeFi ecosystem.

Solv: The largest BTCfi application, redefining the role of BTC in decentralized finance by unlocking returns for BTC holders and promoting the development of BTC-based financial products.

2025 is a critical year, and the innovation and development of the BTC ecosystem over the past few years will be transformed into production practice. This is one of the real needs for the prosperity of the BTC chain economy that we can test. We are confident in the evolution of BTC from a value storage tool to a trustless staking, DeFi, and cross-chain interoperability ecosystem.

3. AI track: Theoriq, Phala, Hyperbolic

Theoriq is an AI DePIN project that is redefining the future of AI collaboration. In Theoriq's framework, AI agents can not only work independently, but also collaborate as a dynamic collective. This forward-looking framework enables AI agents to work together to solve complex problems that a single agent system cannot solve. Theoriq introduces agents with memory functions, advanced evaluators, and user-friendly tools, and ensures that human feedback is always at the core of agent development, thereby driving compound growth in value. This forms a virtuous circle: agents continue to learn, adapt, and self-organize while collaborating effectively, creating an ecosystem of continuous improvement.

Theoriq operates in a self-regulating environment by integrating crypto-economic incentives. Specifically, agents are rewarded for good behavior and punished for mistakes, which maximizes the reliability and accountability of the framework. We led the seed round of Theoriq in 2022. At that time, Crypto x AI was still a non-consensus idea. Two years later, we are very happy to see Theoriq enter production.

Phala has been a long-term investment for us. We recently increased our investment in it as we recognize its great potential in shaping the future of Crypto x AI. As a pioneer in TEE technology, Phala has a unique advantage in meeting the security infrastructure needs of AI agents.

AI agents rely on TEE technology to securely manage key assets (such as wallets and social accounts) to ensure privacy, trust, and efficiency without sacrificing performance. In an environment where almost all Infra projects are exploring how to integrate TEE technology, Phala's superior solution is the first choice for many developers due to its reliability and scalability.

Hyperbolic is revolutionizing the field of AI infrastructure. As the leading GPU network, Hyperbolic focuses on reasoning and provides verifiable reasoning tools. In addition, they have pioneered a GPU layer that allows AI agents to rent GPUs through the SDK. This innovation enables GPU-rich AI agents to easily access the computing resources they need, thereby driving more complex and efficient workflows.

The Hyperbolic Inference Cloud is a platform where anyone can contribute GPU resources; it completely abstracts the heterogeneity of GPU hardware, making GPUs truly interchangeable. Hyperbolic has performed well and has become the first project to offer some of the most advanced open source AI models on its platform.

4. Gelato

Five years ago, we recognized the huge potential of Gelato early on. We led Gelato's seed round and continued to follow up in subsequent investment rounds. Over the years, Gelato has quietly evolved into the AWS of Web 3.0. Today, if you think of three random crypto projects, at least one will use Gelato's technology stack in the backend. Gelato has achieved success in terms of products, and its powerful and versatile technology stack includes RaaS, Functions, Relay, VRF, Account Abstraction, RPCs, Bridging, and Oracles. Its solutions cover a wide range of areas from payments, DeFi, infrastructure, consumer applications to AI agents.

2025 will be the year that Gelato moves from quietly supporting the ecosystem to telling its story, effectively marketing itself, and building compelling token utility. It is poised to be recognized not only as a critical infrastructure layer, but also as a mainstay of reliability and innovation in the Web 3.0 space.

5. Pledge and Re-Pledge

We have been actively investing in the two major themes of the ETH ecosystem - the staking and re-staking ecosystem of "The Merge" and "Shanghai Upgrade". We have deployed related projects, EigenLayer, ether.fi, Kiln, Renzo, Babylon and AltLayer, four of which have been listed on Binance. EigenLayer and ether.fi rank third and fourth among all DeFi protocols with TVL of US$15.7 billion and US$8.4 billion, respectively. In addition, ether.fi and Kiln are the fourth and fifth largest staking service providers for ETH, respectively, with Kiln managing US$13 billion in assets.

Looking back at the development of the ETH staking and re-staking ecosystem, we can clearly see that the value of ETH as a multi-functional asset is constantly being strengthened and expanded.

As the ETH roadmap progresses and the staking ecosystem matures, its importance in the blockchain industry continues to grow. Through staking and re-staking, ETH not only provides a solid foundation for network security and decentralization, but also demonstrates its unique attributes as a capital, consumer product, and value storage asset by expanding economic security and ecological richness.

Last words

The fate of the crypto industry in 2025 is like Schrödinger’s cat. Its success or failure is not determined by its own characteristics, but by how it is viewed by the outside world. On many levels, value is a construct shaped by collective consensus. BTC may be “digital gold”, ETH may be the backbone of decentralized innovation, and Solana may be a nimble disruptor, but their ultimate fate depends on the narrative we choose to accept and the meaning we give to their existence.

In a world of infinite possibilities but limited attention spans, market perception becomes the ultimate currency. Crypto markets are driven not just by technology or utility, but by belief, trust, and stories that capture our imagination. What we pay attention to determines what survives and thrives, just as the act of observation causes Schrödinger's paradoxical cat to collapse into a single state. The collective gaze of markets, institutions, and individuals will determine which futures win out in crypto and which will fade away. Ultimately, it is our perceptions and opinions—and the stories we tell ourselves—that will determine the foundation of the future digital economy.