The Alienation of the Crypto Assets Market: From Innovation to a Single Trading Model

After recently attending a blockchain conference in Hong Kong, I exchanged views with some industry insiders from my country. Although familiar faces are still active in this field, the overall atmosphere of the market has changed significantly.

The current market state is neither a bull market nor a bear market. It presents an unprecedented "alienation" state that makes experienced practitioners feel unfamiliar and ill-adapted.

In this new era, it seems that there is only one business model left in the Crypto Assets field: selling tokens.

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

Traditionally, the Crypto Assets industry operates based on three core segments:

1. Value Creation: Meeting user needs through technological innovation, such as Bitcoin, Ethereum, stablecoins, etc.

2. Value Discovery: Including venture capital and trading pricing, capturing potential assets and driving industry development.

3. Value Circulation: Establish token sale channels to facilitate the flow from the primary market to the secondary market.

These three links were originally supposed to support each other and jointly build a healthy market ecosystem. However, the reality is:

The first two links are gradually declining, while the third link is thriving exceptionally.

The project party no longer pays attention to user needs and product quality, and venture capital is no longer deeply researching industry trends. The entire market has only one voice: "How to sell tokens?"

Token Sale Economics and Resource Centralization

In an ideal market, these three links should be closely connected: the project party focuses on product development to meet user needs, achieve profits and market premiums; investment institutions enter during the low period and exit during the peak period; while circulation channels enhance the efficiency of the capital market.

However, the current Crypto Assets market has deviated from this ideal state. Discussions around innovation and investment have almost disappeared, replaced by how to manipulate data, build relationships to go online on mainstream trading platforms, and how to market and promote to attract buyers.

Market participants have become highly homogeneous, all striving to compete for the increasingly scarce stock of funds.

This has led to the formation of a solid interest community among leading resource providers (such as top projects, large trading platforms and their listing departments, strong market makers, and agencies). Funds flow from investors to venture capital, then to leading projects, while also gathering from retail investors, ultimately nurturing this interest community and enabling it to continuously grow.

The Disappearance of Innovative Spirit

Unlike the market downturn in 2022, when a large amount of capital was trapped in venture capital and institutional investors, this capital has a self-sustaining function, allowing it to invest in innovative projects, create value, and attract new funds.

And now, a significant amount of funds are absorbed by intermediaries, and the project parties only focus on the price difference after listing, becoming intermediaries for venture capital and the secondary market, no longer emphasizing value creation, but solely focusing on creating "shell" stories.

This has led project teams to abandon product development, using all funds for marketing promotion and listing, because projects can successfully go public even without actual products and users. Today's marketing can even be packaged as "meme" driven; the less investment in products and technology, the more funds available for listing and driving up prices.

The innovation path of the Crypto Assets industry has become:

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

The harms of excessive drainage

On the surface, it seems that the project party using funds for listing and price manipulation benefits everyone: funds can exit, retail investors have room for speculation, and intermediaries earn substantial profits.

However, in the long run, the loss of positive externalities leads to an increasingly strong monopoly position of intermediaries, with the extraction ratio continuously rising.

Upstream project parties reduce R&D investment, facing regulatory pressure and high extraction fees, and may ultimately choose to exit. Downstream retail investors face increasingly fierce zero-sum games, and after the profit effect disappears, a large number exit the market.

Essentially, intermediaries (such as trading platforms, market makers, agencies, etc.) are service providers and do not directly create value. When these siphoning parties become the largest beneficiaries in the market, the entire market resembles a cancer patient, potentially leading to the collapse of the entire ecosystem.

The Power of Cycles and Reconstruction

The crypto assets market is essentially a cyclical market.

Optimists believe that after the current low point of liquidity shortage, a true "value spring" will eventually arrive. Technological innovations, new application scenarios, and business models will reignite the passion for innovation.

Pessimists believe that the market still needs to undergo a deeper reshuffle, and only when the siphoners have no coins to siphon and the market structure dominated by intermediaries collapses can a true reconstruction be achieved.

During this process, practitioners will go through a period filled with doubts, internal struggles, and burnout.

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

The future may be bright, but the road to brightness may be long.