The Era of Intense Competition in the Crypto Market: Returning to Real Growth Driven Value

Key Points

• The entire crypto market is in crisis, not just VC coins.
• Overinvestment and irrational valuation are the root causes of the current issues.
• The market forms a pyramid-like class structure, with the level of internal competition continuously rising.
• The survival space for projects is shrinking, and real growth has become a key driving factor.

The crypto market is overall in distress

Currently, not only VC coins but also most tokens including fully circulating altcoins, Meme coins, and even ETH are underperforming compared to BTC. The simple circulation rate of tokens cannot explain the continuous decline of Alts.

From a macro perspective, the previous "four-year deterministic bull market" rule has been broken. Since Q2 2024, market liquidity has been unusually sluggish. The BTC market share peak lagged behind the price peak, and BTC's breakthrough to new highs has not led to a widespread rally in altcoins, indicating that the entire crypto market is in trouble.

The reasons for this phenomenon include:

1. The effect of BTC halving is diminishing, as the increasing base limits the room for rise.
2. The overlap of BTC ETF and halving cycles creates an illusion of a bull market.
3. The overall trend of the global economic cycle is changing.

The Deep Reasons Behind the "VC Coin Effect"

The "VC coin effect" is essentially the result of over-investment and mispricing. The boom from 2020 to 2021 allowed some funds and projects that should have gone bankrupt to survive and receive unreasonable amounts of financing. These projects eventually appeared in the secondary market at unreasonable valuations, exacerbating the downward pressure on the market.

However, VC is not the root cause. In the current highly competitive landscape, the market has formed a pyramid-like class structure:

1. Top-level participants ( such as exchanges, market makers, etc. )
2. Early Investors
3. Project Team
4. Foundation
5. Ecological Builders
6. VC
7. Regular Users

Each level of profit comes from the exploitation of the lower levels, and liquidity is drained from the market. This leads to increased distrust among the lower levels and escalating internal competition.

Return to Real Growth Driving Value

In the era of intense competition, the survival space for projects has sharply diminished. The past "theory of technology", "theory of background determinism", and "narrativism" are no longer sufficient to support project development. The only thing the market believes in is real rise, including user rise, revenue rise, and adoption rise.

value organic rise

1. Reassessing the importance of the market. The essence of a project is a business, and profit is fundamental.
2. Pursue real rise. One should not overly rely on various data manipulation tools.
3. Configure an excellent CMO. The CMO's salary should not be lower than that of the CTO and should focus on strategic thinking.

Values KOL cooperation

1. Directly connect with high-quality KOLs. Avoid the "adverse selection" of low-quality KOLs.
2. The founder communicates personally. One-on-one interaction with important KOLs.

Pay attention to protocol revenue

1. Establish sustainable sources of income. This includes external income ( such as Tether ) and internal income ( such as Gas fees ).
2. Achieving surplus potential. Revenue should be sufficient to cover operating costs.
3. Improve governance mechanisms and economic models. Balance the interests of all parties to ensure long-term development.

build a real economic model

1. Achieve sustainable protocol revenue. Such as Curve, MakerDAO, Uniswap, etc.
2. Match the token cycle with the project growth cycle.
3. Treat incentives as investment behavior. Value the construction of the developer ecosystem.
4. Solve the issue of the solidification of chip structure classes. Avoid infinite dilution of chip costs.

In the current market environment, only projects that truly focus on organic growth, protocol revenue, and sustainable economic models can survive and thrive in the era of intense competition.