Author: Noveleader
Compiled by: Ken, Chaincatcher
Back in 2021, you just started investing in cryptocurrency and became a fan of the industry, obsessed with how it works, and believing that with the right operation, anyone can make a fortune. You witnessed many stories of sudden wealth, saw the birth of many millionaires, and even thought that directly investing in Bitcoin was also a good strategy. The data you saw shows that Bitcoin is one of the fastest-growing assets, far surpassing any company in the speed at which it reached the milestone of a $1 trillion market cap.
Back to today, you sit at a family dinner where everyone is discussing their portfolios, talking about the long-standing good performance of the S&P 500 index, and feeling satisfied with their investments. You take out your phone and see that your portfolio has shrunk by 60% from its all-time high, and you let out a long sigh, quietly taking another bite of your meal.
Your cousin smiles and asks you, 'Hey, you've been investing in cryptocurrencies, right? How's your portfolio doing?' He adds, 'I'm so glad I stayed away and didn't throw my money in.'
You are at a loss for words because you cannot find a rebuttal. You could say that the New York Stock Exchange is planning to go on-chain to introduce 24/7 trading, BlackRock is tokenizing short-term government bonds, Robinhood has just launched its L2 testnet, and more institutions are adopting crypto technology. But you hesitate to speak because you know you are suffering significant losses, and these factors seem to be of no help.
You feel confused because the price of Bitcoin has retraced to the level at which you initially invested. Moreover, you did not just invest in Bitcoin; that is only a small part of your portfolio. You have also discovered many other cryptocurrencies along the way that you thought had huge upside potential—perhaps one of the more than 17,000 tokens listed on CoinGecko, or perhaps one of the millions of tokens issued on platforms like Pumpfun over the past year or two.
Over the years, far too many tokens have been created, and for the healthy development of the industry, 99% of them need to go to zero.
This is evident in the following fact: the top five tokens account for 84.4% of the entire crypto market's market value, which makes you wonder how to deal with the remaining tokens and whether they still hold value. The rest of the market (15.6% or $330 billion) accommodates thousands of other tokens.
To illustrate this more intuitively, the concentration in the crypto market is much higher compared to traditional finance. In the US stock market, the seven tech giants account for 31% of the market capitalization, while the top 500 companies (i.e., the S&P 500 index) account for 84.7%. Traditional finance has a hundred times more companies than cryptocurrencies, yet it only reaches the same market capitalization share as the top five crypto assets.
If the crypto industry wants to achieve a similar representative distribution, the following scenarios need to occur:
Top tokens depreciate while lower-ranked tokens appreciate.
There is a huge external liquidity push or large-scale adoption.
Bottom tokens lose value, replaced by top tokens.
For a healthy system, the first scenario is more favorable for value distribution, but it is unlikely to happen because most assets are correlated with Bitcoin, and this also means that the main assets are losing trust, which is not ideal.
Certain tokens, such as HYPE, have gained significant market share over time due to their strong market acceptance and product-market fit, fitting the second scenario. Hyperliquid is clearly one of the few winners from last year; they indeed have excellent token and product consistency, as they reinvest most of the fees generated by the platform into token buybacks.
Continuing to explore the second scenario, that is attracting value from external entities (or institutions), the crypto industry performs reasonably well in digital asset trusts/funds, at least in terms of accumulation, although their prices have also fallen significantly now. For Bitcoin, digital asset trusts have accumulated 997,257 BTC (5% of the circulating supply); for Ethereum, this number is 6.16 million ETH (5.1% of the circulating supply). Additionally, there is reason to believe that they have already occupied a large portion of the main asset circulating supply, so any further intervention would lead to excessive control being concentrated in the hands of a few entities.
The third and final scenario is something that must happen quickly for the following reasons.
Tokens are unlocking every month, and in the coming years, a large supply will be unlocked. Just this year alone, token unlocks will add $8.51 billion in value to the market, while this number will reach $17.12 billion over the next five years. However, it remains unclear whether there is enough demand to absorb these supply unlocks and the selling pressure they bring.
For most tokens, combined with factors like distorted token economics, this will lead them to continue trending towards zero.
To increase demand, these projects need to succeed commercially. However, many crypto businesses end up failing. For a trillion-dollar industry, among the more than 5,600 protocols listed on DeFiLlama, only 76 have generated over $1 million in revenue in the past 30 days, accounting for just 1.3%.
Interestingly, even if the threshold is lowered to protocols generating over $100,000 in revenue in the past 30 days, only 237 protocols meet the standard.
Moreover, when you observe revenue concentration, you find that the top 10 protocols in 2025 will account for 80% of revenue, with the top three accounting for 64%. Tether alone accounts for 44% of the total revenue in the crypto industry. Surprisingly, among these 10 protocols, only 3 have issued tokens so far (Hyperliquid, Pumpfun, Jupiter), and reviewing their relative performance, only HYPE has performed better.
This also points out one thing: issuing tokens is not always the best choice.
In 2025, about 118 major tokens will be issued, with 84.7% falling below their valuations at the time of token generation events. These numbers look very bad and often disappointing, leading us to question whether it is worth investing in new tokens. These tokens were issued at bubble-like valuations, and the price trends throughout the year are concerning, remaining in a downward state even now, as the broader market performance is also not ideal.
10/10 (the day that changed everything)
The occurrence of the 'October liquidation event' was due to macro pressures revealing design flaws. It exposed the weak designs of many things in the crypto space, whether it is centralized exchanges like Binance—liquidating positions worth millions due to price errors of assets like USDe, BNSOL, and wBETH; or lending protocols like Silo and Morpho—accumulating bad debts in the Stream Finance collapse that occurred weeks later.
Since then, asset prices have not recovered, and the $19 billion liquidation cascade still affects us. The total value locked in decentralized finance has decreased by 44% since that event (from $165 billion to $94 billion). Protocol revenues have declined, and the bear market has officially begun.
Consistency issues
When you let go of the steering wheel while driving for a moment, does the car veer off course? If so, it indicates that there is a consistency issue with your steering wheel and tires. Similarly, in the crypto space, this consistency issue often arises between the protocol and the tokens it issues. Last December, when Circle acquired Interop Labs (the team behind the Axelar interoperability stack), the AXL token was not included in the transaction, and the token price plummeted immediately after the announcement. This is the inconsistency.
So, why does this inconsistency arise? A project typically involves two entities: the lab and the decentralized autonomous organization (DAO)/token holders. The lab is the 'team' in token economics; they are the initial developers of the project, raising funds for growth by selling part of the company’s equity and granting tokens to early investors. In some cases, venture capital firms even receive more favorable terms than anyone expected, such as 'refund rights.'
Tokens are not legal representatives of enterprises, nor do they provide any actual rights to company profits like equity. Investors have these rights through the equity they hold when they receive tokens. So they are in a more advantageous position, but what about token holders? In aligning the product with the tokens, they are entirely subject to the project party.
This is a concern for a very small number of protocols. They usually demonstrate this consistency through token buybacks. Hyperliquid reinforces this consistency through buybacks. Some might argue that they should use the collected fees more to promote protocol growth, such as incentives and strengthening insurance funds, and they are not wrong. These things should indeed be done, but building a moat around a good token is the best marketing strategy. Making your users rich is the best thing a product can do, and that is exactly what Hyperliquid did with its first airdrop.
Aave, as the largest decentralized finance protocol, uses its revenue for buybacks, while also facing similar controversies about better uses of funds and directing them towards growth (I understand the current inconsistencies and hope the decentralized autonomous organization (DAO) and labs can resolve this issue for the benefit of AAVE tokens). Last year, Uniswap fully aligned the interests between the tokens and the token holders after its tokens had existed for over five years.
These protocols are genuinely safeguarding the interests of holders. Clearly, there are other examples, but even so, the number is still less than our demand. These are the tokens worth appreciating. Everything else should drop, and people should rotate into those protocols that generate revenue and are most consistent with their tokens, which are conducting buybacks, achieving intrinsic growth, and trying new methods to attract more users.
So, am I saying these tokens are the best investment choices? Probably not. I do not provide any financial advice; I simply tell you what to look for when investing in any protocol. Regardless of ups and downs, it ultimately depends on the token unlocks spread over the years (token economics), the incentives they distribute (which lead to token dilution), and other expenditures. Therefore, even if there are buyback plans, the selling pressure may still be greater.
Conclusion
The crypto industry is currently in a reshuffling phase, speculative tokens will stop receiving inflows of funds, while real tokens backed by underlying businesses that support their growth will emerge. Not many realize this and see the opportunity, but protocols with real revenues are the ultimate key.
They are growing and forming trends, and even if not today, they will become popular soon.
The era of non-cash flow-generating tokens has ended, and last year's countless failed issuances are proof of that. This is why the issuance of MegaETH based on key performance indicators makes sense: it first tries to determine the demand for the chain and its products, runs some revenue data, and then issues tokens. Another interesting model they adopted is the collaboration with Ethena to launch USDm to prevent the value generated by stablecoins from flowing out of the ecosystem and to use it for token buybacks. Time will tell if their model succeeds, but it is a great starting point for rethinking the way tokens are issued today.
So, I firmly believe that the crypto industry is evolving, and most crypto assets should go to zero, with only a few exceptions.