"Alienation" in the currency circle: the transformation from value creation to currency selling economics

After returning from Consensus in Hong Kong, I met some friends in China one after another, and familiar laughter still echoed in my ears. Old friends are still active, KOL, Agency, market makers, traders - people have not dispersed and the market has not collapsed, but what has changed is the "qi" of this market.

This is not a bull market, nor a bear market. It is not a well-known market for greed or fear rule, but an indescribable "alienation" - an industry atmosphere that old leeks have never experienced and that makes people feel like they are a different world.

In this era, there is only one business left in the currency circle: selling coins.

Three pillars: creation, discovery, circulation

Roughly speaking, the currency circle has been running on three wheels:

Value creation - Bitcoin, Ethereum, stablecoins, Layer2, DePIN, AI Agent, etc. meet user needs through technological innovation and create actual use value.

Value discovery - VC investment, transaction pricing, capture potential assets, realize price discovery through market mechanisms, and promote industry development.

Value circulation - Market makers, Agency, media, KOLs, etc. build a sales channel for coins to assist projects to reach retail investors and complete the first-level to second-level circulation.

These three should be a market ecosystem where gears are interlocked and complementary. But now, what we see is:

The first two are withered, and the third is prosperous.

Projects no longer pursue users and products, VCs no longer study trends and tracks, and there is only one voice left in the entire market shouting: "How to sell coins?"

Coin selling economics and resources club

A reasonable and healthy market should be inseparable from three links. The project party makes good products, meets user needs, obtains profits and capital market premiums; first- and second-level institutions provide capital allocation for the project party, intervene during the trough period, and exits at the peak period to make profits; and the selling channels laid out by the circulating party also provide higher capital efficiency for the capital market.

But after talking about the current currency circle, there are no project parties and VCs discussing which areas of the currency circle still have opportunities to innovate, what products can be made, or what needs to meet. Even in the second half of 2024, when VC coins are generally falsified, there is still local industry popularity like AI Agent, which can stimulate entrepreneurs' enthusiasm.

Secondary institutions are also generally flat, the altcoins are at their peak when they are launched, the liquidity of meme coins is almost exhausted, and the persistence of BSC is still inadequate.

Under this market, there are only the third category of active institutions in the industry, including MM market makers, Agency and intermediaries. The topics they talk about are nothing more than: how to brush out good data or get a relationship with the big exchange, how Agency promotes and sells to buy, and how to actively market makers cooperate with the paying community to dump more trading volume.

The market participants are extremely homogeneous and are trying every means to squeeze out the increasingly scarce existing funds in the currency circle.

In this way, the top resource parties (top projects, large exchanges and their currency listing departments, strong resources MMs and agencies) form an unbreakable community of interests. The blood in the currency circle is input from the LP end to the VC, from the VC to the head project, and the other end is penetrated by the capillaries of retail investors in the secondary market, feeding the parasitic organizations of these communities of interests, and then increasing.

The disappearance of entrepreneurs

After FTX went bankrupt in 2022, there was a darkest moment in the currency circle, with Bitcoin falling 18,000, and the copycats were silenced.

But unlike this moment, a large amount of funds in the currency circle are deposited in the hands of VCs and secondary funds/large investors. These funds have a hematopoietic function. VCs will be invested in entrepreneurial projects. Entrepreneurs can generate positive externalities, create value and attract funds to enter the market;

At this moment, a large amount of funds are sucked by the intermediate links. The entrepreneurs only want to earn the difference after entering the company and become middlemen in VC and secondary markets. They do not have to create value, but only create "empty shell" stories. Based on traditional business logic, if the downstream distribution channels have to consume most of the costs, they will inevitably cut down the upstream R&D and operation funds.

The project party simply gave up making products directly, and all the funds were used to connect the promotion and distribution links. Anyway, there were no products and users to buy stocks. Now the promotion and distribution can also be packaged as "meme" drivers. The less they were used in products and technologies, the more funds could be used to buy stocks and pull the market.

The innovation path in the currency circle has become:

"Tell a good story → Quick package → Find a relationship → Cash out and run away."

product? user? value? That is the self-touching of the romantic .

Pumping water is fate

On the surface, the project party spent money on the Shanghai Stock Exchange and the price of the coin. Hello, I, everyone, the fund was withdrawn, the second-level retail investors also had room to move around, and the middlemen made a lot of money to pump water.

But in the long run, the loss of positive externalities has led to only middlemen becoming larger and larger, and the proportion of pumping is getting higher and higher after forming a monopoly.

Upstream project parties have reduced production and research costs, and the regulatory pressure and pumping squeeze have led to serious asymmetry in the risk-return ratio, so they have no choice but to leave. The downstream retail investors are becoming more and more serious, "every time they take over", and after the money-making effect is lost, a large number of people have withdrawn from the circle;

In essence, intermediaries, whether they are exchanges, MMs, agencies, or communities, are service providers. Service providers do not directly create value and positive externalities. When service providers and water pumps become the largest interest groups in the market, the entire market is like cancer patients with tumors. The final outcome must be that the cancer cells become more and more fatter and the host nutrients are drained and withered and decayed.

The power of cycles and post-disaster reconstruction

The currency circle is ultimately a cyclical market.

Optimists believe that after this dry-up trough of liquidity, one day there will be a real "spring of value". Technology innovation, new usage scenarios, and new business models will re-inspire the enthusiasm for innovation. Innovation will never die, and the bubble will eventually end. If there is light, it is a lighthouse.

Pessimists believe that the bubble has not yet burst, and the currency circle still needs to undergo a deeper "avalanche reshuffle". Only when the water pumper has no coins to draw and the market structure dominated by the middlemen collapses can real reconstruction be ushered in.

And in between, practitioners have to travel through a chaotic and muddy stage: questioning, internal friction, burnout, and doubting life.

But this is the essence of the market - cycles are fate, and bubbles are also preludes.

The future may be bright, but the tunnel leading to light will be long.