The 11 Big Bets of 2025: The Truth Behind Trillions of Dollars Flowing In

This has been a year full of dramatic twists and turns. From Tokyo’s bond market to New York’s credit sector, from Istanbul’s foreign exchange to global stock markets, investors collectively bet on a series of seemingly certain stories—only to find that reality often defied expectations. Some made a fortune, while others lost everything. And most ironically, those trades that seemed “rock solid” in the end were ruthlessly slapped in the face by the market.

Gold prices repeatedly hit new highs, while “steady” mortgage giants fluctuated like meme stocks, and textbook arbitrage vanished overnight. Trump’s return to the White House became a catalyst, fueling a massive global capital shift: European defense stocks surged, the crypto story was rewritten, and emerging markets staged a rollercoaster. Behind these phenomena lies a collective gamble by investors on political upheavals, balance sheet restructuring, and market fragility.

“Trump Concept” Collapse in the Crypto Realm

Initially, this looked like the most dreamy script for crypto investors: a powerful figure taking office at the White House, pushing digital asset reforms, installing “own people” in key positions, even family members jumping in.

The story came fast and went just as quickly. During the presidential campaign, Trump and his family launched multiple digital tokens—ranging from Trump meme coins to First Lady tokens, and even WLFI tokens from World Liberty Financial. Each new move sparked brief rallies, only to fall back into decline. By December 2025, Trump meme coins had fallen over 80% from their early-year peaks, Melania meme coins nearly 99%. Even American Bitcoin related to the Trump family retreated about 80% from September’s top.

This exposes the iron law of crypto markets: whether or not there are “friends” in the White House, the cycle of rising → leverage inflow → liquidity drying up remains unchanged. Political factors can generate hype, but they can’t save assets lacking fundamental support. Since the October peak, Bitcoin has been heading toward an annual decline, and all kinds of tokens tied to Trump have become the year’s biggest speculative traps.

AI Investment’s “Big Short” Warning

In November 2025, a disclosure of hedge fund manager Michael Burry’s holdings ignited market concerns—he held put options on Nvidia and Palantir Technologies, with strike prices 47% and 76% below their then-closing prices.

Why did this cause such a stir? Because these two stocks have been the core AI trading drivers that propelled global stock markets upward for three consecutive years. Burry, famous for “The Big Short” book and film, deeply revealed the roots of the 2008 financial crisis. His appearance brought doubts to a market dominated by AI concept stocks, with passive funds flooding in and volatility suppressed.

From the clues Burry revealed, his put options on Palantir, bought at $1.84, soared by 101% in less than three weeks. While it’s unclear how much he ultimately earned, it demonstrates that once confidence wavers, even the strongest market narratives can quickly reverse. This also implies that AI trading built on a few concept stocks and leverage harbors structural risks.

European Defense Stocks: From “Stain” to “Favorite”

Geopolitical reshuffling shifted capital flows. As Trump reduced aid commitments to Ukraine, European countries were forced to significantly increase defense spending. The result? Defense stocks once discarded by asset managers over environmental issues suddenly became hot favorites.

Data speaks volumes: by December, German Rheinmetall’s stock surged about 150%, Italy’s Leonardo SpA gained over 90%. The Bloomberg European Defense Stock Basket rose over 70% this year. Even goggles manufacturers, chemical producers, and printing companies’ stocks were snapped up. Some asset managers even redefined their investment mandates—defense stocks, once excluded from ESG funds, now became “defensive weapon allocations.”

The underlying logic is: when geopolitical landscapes change, capital flows tend to shift faster than ideological shifts. Banks even started issuing “European Defense Bonds,” marking a redefinition of defense value—from a reputation burden to a public good.

“Currency Devaluation” Narrative: More Hype Than Reality

Early 2025 saw a new investment theme: due to heavy debt burdens and political unwillingness to resolve issues in major economies like the US, Japan, and France, investors began favoring gold and cryptocurrencies while dismissing the dollar and government bonds. This label was called “devaluation trade.”

It peaked in October. At that time, the US faced the longest government shutdown in history, and both gold and Bitcoin hit record highs—rare for two assets often seen as competitors. But from a trading perspective, the story was more complex: Bitcoin later plummeted along with the overall crypto market, the dollar stabilized gradually, and US Treasuries, rather than collapsing, might have delivered their best annual performance since 2020.

Meanwhile, the volatility in commodities like copper, aluminum, and silver was mainly driven by Trump’s tariff expectations and macro growth factors, not currency devaluation fears. The surge in gold, seemingly a negation of fiat currencies, was actually a concentrated bet on interest rates, policies, and protectionism. This reminds us that when multiple factors intertwine, a single narrative often masks the true market drivers.

South Korea Stock Market: Can Political Goals Sustain the Rally?

President Lee Jae-myung set an ambitious target for South Korea’s stock market: KOSPI 5000 points. This is rare—political leaders rarely set such explicit market goals.

What was the result? By December, the KOSPI soared over 70% year-to-date, easily outperforming major global indices and moving toward the target. JPMorgan, Citi, and other Wall Street banks now believe this goal could be achieved by 2026, partly thanks to the global AI boom and South Korea’s position as Asia’s top AI investment destination.

But there’s a harsh reality: the main driver of the KOSPI rally was foreign capital, while domestic retail investors were net sellers. Although Lee Jae-myung often reminds voters that he was once a retail investor, his reform agenda failed to convince domestic investors. Instead, record $33 billion flowed out of local retail into US stocks, chasing overseas high-risk assets like cryptocurrencies and leveraged ETFs.

The chain reaction? Capital outflows led to a weakening won. Even with the stock market soaring, underlying doubts about the domestic market’s long-term prospects remain—a warning sign worth noting.

Saylor vs. Chanos Bitcoin Bet

In early 2025, as Bitcoin soared, Michael Saylor’s MicroStrategy stock also skyrocketed. Legendary short-seller Jim Chanos saw an opportunity: Strategy’s valuation relative to its Bitcoin holdings was suspiciously high, so he decided to short Strategy and go long Bitcoin.

In May, Chanos publicly announced this move. The two then exchanged barbs—Saylor said Chanos didn’t understand the business model, Chanos responded that his explanation “violated financial logic.” Strategy’s stock hit a new high in July, up 57% year-to-date. But as the crypto treasury grew and Bitcoin’s price retreated, Strategy and its imitators’ stocks started to decline, and the premium shrank.

From Chanos’s public short to November 7 (his claimed close date), Strategy’s stock fell 42%. This bet exposed a key issue in the crypto market: assets’ balance sheets inflate on confidence, which is maintained by rising prices—until confidence wavers. At that point, the premium is no longer a feature but a risk.

Japanese Government Bonds: From “Widow Maker” to “Cash Cow”

Shorting Japanese bonds was once a hedge fund nightmare. For decades, investors borrowed yen to sell, expecting rising yields to push up returns. But the Bank of Japan’s easing policies repeatedly punished “reckless” shorts.

In 2025, everything changed. Japanese bond yields surged—10-year yields broke above 2%, hitting multi-decade highs; 30-year yields rose over 1 percentage point, setting record highs. Factors included rate hikes and Prime Minister Sanae Takaichi’s largest post-pandemic spending plan.

A Japanese bond yield index fell over 6% this year, making it one of the worst performers among major markets. Fund giants like Schroders, Jupiter Asset, and RBC BlueBay discussed selling Japanese bonds. With benchmark rates rising, investors saw potential profits. Especially considering Japan’s government debt-to-GDP ratio, among the highest in developed countries, betting against Japanese bonds might present a rare multi-year opportunity.

The “Betrayal” Game in Credit Markets

The richest returns in the 2025 credit market didn’t come from “correct predictions” but from “betraying” other investors. This sounds like a financial version of “Game of Thrones.”

The case of Envision, a healthcare staffing company, is illustrative. The company needed financing but had to pledge assets already encumbered. Most creditors opposed, but Pimco, King Street Capital, and Partners Group “betrayed” and supported new financing. The result? Their debt secured by Amsurg (Envision’s outpatient surgery business) was converted into equity. When Amsurg was sold to Ascension Health for $4 billion, these “betrayers” earned about 90% returns.

This case reveals a harsh reality of today’s credit markets: years of low default rates and ample liquidity have weakened standards across the board. Doing the right thing isn’t enough—greater risk lies in being “caught in the act.”

Fannie Mae and Freddie Mac’s 367% Frenzy

Since the financial crisis, the two agencies have been under government control. Hedge fund managers like Bill Ackman bought large amounts of stock, betting on privatization. Progress was slow, and their stocks languished in the OTC market.

Trump’s re-election changed everything. With market optimism that the new administration would “release the two agencies,” their stocks ignited a meme-like frenzy. In 2025, this excitement peaked: stock prices soared 367% from the start of the year to September’s high, with intraday gains reaching 388%, making them the biggest winners of 2025.

The trigger was news in August that the government was considering an IPO of the two agencies, with a valuation potentially reaching $500 billion, involving a 5%-15% stake sale to raise $30 billion. Although subsequent doubts about IPO timing caused some pullback, most investors remained confident. Ackman even advised the White House in November to list the agencies on the NYSE, reducing the Treasury’s preferred stock holdings. Michael Burry also joined in December, announcing a long position on the two agencies and in a lengthy 6,000-word article suggesting these companies, once rescued by the government, might “no longer be the Black Wind and White Wind.”

Turkey’s Carry Trade: The March Tragedy

2024 was the golden age of Turkey’s carry trade. Over 40% yields on bonds, supported by the central bank’s dollar peg, attracted billions from Deutsche Bank, Millennium Partners, and others. Traders borrowed overseas at low cost to buy high-yield Turkish assets—an apparently perfect arbitrage.

Then came March 19. That morning, Turkish police raided and arrested a popular opposition mayor in Istanbul, sparking protests. The lira plunged, and the central bank was powerless. Societe Generale’s FX strategist Kit Juckes summed it up: “People were caught off guard, and they won’t go back easily.”

By day’s end, outflows from lira-denominated assets were estimated at around $10 billion, and the market never truly recovered. By December, the lira had depreciated 17% against the dollar, making it one of the worst-performing currencies globally. This warns investors: high interest rates can be enticing but can’t withstand sudden political shocks.

The “Cockroach Warning” in Credit

The turbulence in the credit market in 2025 wasn’t driven by a single catastrophic collapse but by a series of smaller events exposing systemic issues. Companies once considered routine borrowers found themselves in trouble.

Saks Global, after paying just one interest, restructured $2.2 billion in bonds, now trading below 60% of face value. New Fortress Energy’s new bonds fell over 50% within a year. Tricolor and First Brands filed for bankruptcy, with billions in debt wiped out. Some cases involved complex fraud, others overly optimistic forecasts that failed.

More worrying is that years of low default rates and ample liquidity have weakened standards across the board—from bank protections to basic underwriting. Lenders like JPMorgan, whose CEO Jamie Dimon issued a classic warning in October: “When you see a cockroach, there are probably more.”

This will also be the theme for 2026.