The Evolution of the Crypto World: From Innovation to Intermediary Dominance

Reflecting on the recent Hong Kong Consensus Conference, the feelings exchanged with domestic peers are thought-provoking. Although industry participants remain active, the market atmosphere has subtly changed. This is not a traditional bull or bear market, but an unprecedented "alienation" state that even seasoned professionals find unfamiliar.

Currently, the cryptocurrency industry seems to have only one core business left: selling tokens.

The Three Pillars of Industry Ecosystem

Looking back, the cryptocurrency industry mainly operates on three aspects:

1. Value creation: By means of technological innovations such as Bitcoin, Ethereum, stablecoins, etc., meet user needs and create actual use value.

2. Value Discovery: Including venture capital, trading pricing, etc., to uncover potential assets and promote industry development.

3. Value circulation: including market makers, intermediaries, media, etc., to construct token sales channels and promote the flow from the primary market to the secondary market.

Ideally, these three aspects should support and develop in synergy. However, the reality is that the first two are gradually declining, while the third is thriving.

The project party no longer focuses on users and products, and investment institutions no longer conduct in-depth research on industry trends. The entire market seems to have only one voice: "How to sell tokens?"

Token Sale Economics and Resource Monopoly

In a healthy market environment, these three links should be closely connected. Project teams develop high-quality products to meet user needs, gain profits and market premiums; investment institutions intervene during the low period and exit during the peak period; while circulation channels improve capital efficiency.

However, the current discussions rarely involve innovation opportunities, product development, or user needs. Even in some areas where there is still enthusiasm, such as AI agents, it is difficult to stimulate widespread entrepreneurial passion.

Institutional investors in the secondary market generally adopt a wait-and-see attitude, newly launched tokens often open high and close low, and meme coins suffer from severe liquidity shortages.

In this environment, the main active players are third-party institutions: market makers, agency firms, etc. They focus on how to optimize data performance, build relationships to enter large trading platforms, or how to market and promote to attract buyers.

Market participants have become highly homogenous, all trying to profit from the increasingly scarce stock of funds.

This has led to the formation of a solid interest community among major resource providers (such as top projects, large trading platforms and their token listing departments, well-funded market makers, and intermediaries). Funds flow from investors to venture capital, then to leading projects, and ultimately supplied by the retail market, nourishing this interest community.

The Decline of Innovative Spirit

After the collapse of a large trading platform in 2022, the cryptocurrency market experienced a period of extreme stagnation. However, unlike the current situation, a significant amount of funds were still in the hands of venture capital and large investors at that time, which had the ability to reinvest, support entrepreneurial projects, create value, and attract new funds.

Now, a large amount of funds are absorbed by intermediaries, and project parties often only seek to profit from the price difference after going public, becoming intermediaries for venture capital and the secondary market, no longer focusing on value creation, and only needing to package "shell" stories. From a business logic perspective, if downstream channels occupy most of the costs, upstream research and development and operational investment will inevitably be compressed.

Therefore, many project teams simply give up on product development and use all their funds for marketing and listing. After all, even without products and users, many projects can successfully go public. Today's marketing can even be packaged as "meme-driven"; the less investment in products and technology, the more funds are available for listing and price pumping.

The innovation path of the cryptocurrency industry has turned into:

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

Products, users, value? These seem to be nothing more than self-comfort for idealists.

Watering down becomes the norm

On the surface, it seems that the project party uses funds for listing and price manipulation, benefiting all parties involved: funds can exit, retail investors have speculative space, and intermediaries earn substantial commissions.

However, in the long run, the loss of positive externalities leads to the intermediaries becoming larger and larger, resulting in a continuously increasing proportion of extraction after forming a monopoly.

Upstream project parties reduce investment in product research and development, facing regulatory pressure and high fees, resulting in a severe imbalance of risk and return, forcing them to choose to exit. The zero-sum game among downstream retail investors is becoming increasingly intense, and the feeling of "always being the last buyer" makes the profit-making effect disappear, leading to a large number of investors exiting the market.

Essentially, intermediaries such as trading platforms, market makers, and agencies are service providers that do not directly create value or positive externalities. When the service providers and those taking a cut become the largest interest group in the market, the entire market resembles a host afflicted with cancer, and the end result is that the "tumor" grows larger and larger while the host ultimately exhausts its nutrients.

The Power of Cycles and Rebuilding Hope

The cryptocurrency market is ultimately a cyclical market.

Optimists believe that after the current liquidity crisis, a true "spring of value" will eventually arrive. Technological innovations, new application scenarios, and new business models will reignite the enthusiasm for innovation. The spirit of innovation will not die, and the bubble will eventually fade. Even a faint light may become a lighthouse guiding the way.

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

During this process, practitioners will experience a chaotic period filled with doubts, internal struggles, burnout, and self-doubt.

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

The future may be bright, but the road to that brightness could be exceptionally long and difficult.