The Alienation of the Crypto World: From Value Creation to Coin Selling Economy

After recently attending a blockchain summit in Hong Kong, I have been meeting up with some old friends in the country. Although the familiar laughter remains, various players in the industry such as KOLs, intermediaries, market makers, and traders are still active, the atmosphere in the market has undergone subtle changes.

This is not a traditional bull or bear market, nor is it a market solely driven by greed or fear. On the contrary, we are facing an unprecedented phenomenon of "alienation"—an industry atmosphere that even seasoned participants find unfamiliar.

In the current era, it seems that there is only one dominant business in the crypto world: selling tokens.

The three pillars of the industry: creation, discovery, and circulation

Looking back, the cryptocurrency industry primarily relies on three core components to operate:

1. Value creation: Creating actual use value by meeting user needs through technological innovation, such as Bitcoin, Ethereum, stablecoins, layer two networks, decentralized IoT, and AI agents.

2. Value Discovery: Capture potential assets through venture capital and trading pricing, utilize market mechanisms to achieve price discovery, and promote industry development.

3. Value circulation: Build token sales channels through market makers, intermediaries, media, and opinion leaders to assist projects in reaching retail investors and completing the flow from the primary to the secondary market.

These three links should have cooperated and developed in synergy. However, the current market landscape presents a completely different picture:

The first two stages are gradually declining, while the third stage is exceptionally thriving.

The project party no longer focuses on user needs and product development, and venture capital no longer deeply researches industry trends and tracks. The entire market seems to echo only one voice: "How to sell tokens?"

token sale economics and resource club

In a healthy market environment, these three links should be closely connected: project teams focus on product development to meet user needs, obtain profits, and gain capital market premiums; primary and secondary market institutions provide funding support for projects, entering during downturns and exiting to profit during peaks; while the circulation link offers higher capital market efficiency.

However, current discussions within the crypto world rarely involve innovation opportunities, product development, or user needs. Even in the second half of 2024, although there is still some heat in niche areas such as artificial intelligence agents, it is overall difficult to stimulate the enthusiasm of entrepreneurs.

Institutional investors in the secondary market generally adopt a wait-and-see attitude. Newly launched small-cap tokens often reach their peak immediately after listing, the liquidity of meme coins is nearly exhausted, and the sustainability of certain emerging public chains is also yet to be tested.

In such a market environment, active institutions are mainly concentrated in the third category: market makers, intermediaries, and brokers. Their discussions primarily revolve around how to create good trading data, how to establish relationships with large trading platforms, how to conduct marketing promotions to attract buying interest, and how proactive market makers can collaborate with buying communities to increase trading volume.

The degree of homogenization among market participants is extremely high, all trying to find ways to profit from the increasingly scarce stock funds in the cryptocurrency market.

This has led to the formation of a strong interest community among major resource providers (such as top projects, large trading platforms and their token listing departments, well-resourced market makers, and intermediaries). Funds flow from liquidity providers to venture capital, then to leading projects, while also permeating from retail investors in the secondary market, ultimately nurturing all parties within this interest community.

The decline of entrepreneurial spirit

After the collapse of a large cryptocurrency exchange in 2022, the industry experienced a dark moment, with Bitcoin's price dropping to $18,000 and the small-cap token market in a state of gloom.

However, unlike the current situation, a large amount of funds were then trapped in venture capital and secondary funds/large holders. These funds have a blood-generating function; venture capital would invest in entrepreneurial projects, allowing entrepreneurs to create positive externalities, generate value, and attract funds into the market.

Now, a large amount of capital is absorbed by intermediaries, and project parties only seek to profit from price differences after going public, becoming intermediaries between venture capital and the secondary market, no longer focusing on value creation, but solely on creating "shell" stories. From the perspective of traditional business logic, if downstream distribution channels occupy most of the costs, it will inevitably reduce upstream R&D and operational expenditures.

Simply put, the project team directly abandoned product development and used all funds for promotion and listing. After all, many projects have successfully listed even without products and users. The current promotion can also be packaged as "meme" driven; the less investment in products and technology, the more funds are available for listing and price increase.

The innovative path of the crypto world has evolved into:

"Tell an engaging story → Quick packaging → Find relationships for listing → Cash out and exit."

Products, users, value? That's just self-comfort for idealists.

The extraction of water becomes fate

On the surface, the project team appears to use funds for listing and boosting the coin price, seemingly benefiting all parties: funds gain exit opportunities, retail investors in the secondary market have speculative space, and intermediaries reap substantial profits.

However, in the long run, the loss of positive externalities leads to the only intermediaries growing larger, resulting in a monopoly where the extraction ratio continues to rise.

Upstream project parties are reducing product development costs, facing regulatory pressure and liquidity squeeze, resulting in a serious imbalance in risk-reward ratio, forcing them to choose to exit the market. Meanwhile, competition among downstream retail investors is intensifying, with an increasing feeling of "always being the one to take over"; after the profit-making effect disappears, a large number exit the market.

Essentially, whether it is a trading platform, market maker, intermediary, or community, they are all service providers and do not directly create value and positive externalities. When service providers and those taking a cut become the largest interest group in the market, the entire market is like a body afflicted with cancer, and the inevitable result is that the "cancer cells" continue to grow, while the "host" ultimately exhausts and dies.

The power of cycles and rebuilding hope

The cryptocurrency market is ultimately a cyclical market.

Optimists believe that after the current low point of liquidity scarcity, a true "value revival" will eventually arrive. Technological innovations, new application scenarios, and innovative business models will reignite the passion for innovation. The spirit of innovation will not die, and the bubble will eventually dissipate. Even a faint glimmer of light may become a guiding lighthouse for progress.

Pessimists believe that the bubble has not completely burst yet, and the cryptocurrency industry still needs to undergo a deeper "avalanche-style reshuffling." Only when the siphoners have no coins to siphon, and the market pattern dominated by intermediaries collapses, can true reconstruction be welcomed.

During this period, practitioners will go through a chaotic and difficult phase: filled with doubt, internal friction, burnout, and self-doubt.

But this is the essence of the market - cycles are fate, and bubbles are the prelude to new life.

The future may be bright, but the road to brightness is destined to be long and winding.