Crypto Market Enters Value Reassessment Amid Project Closures

Author: Blockchain Knight

If you only look at price and current conditions, today’s crypto market can easily feel bleak—or even despised.

Even though Bitcoin has reached new all-time highs over the past year, spot ETFs have continued to attract institutional capital, and an increasing number of traditional financial institutions are entering the digital assets space.

On the other hand, most projects are deeply entrenched in decline, with many erasing all their gains from the previous bull market and even falling back to prices before the 2020 bull market began.

Meanwhile, market discussion continues to cool, with an increasing number of people choosing to leave the industry, leading many to wonder whether the crypto sector has entered a prolonged downturn.

This seemingly contradictory phenomenon highlights that today’s market cannot be simply defined as either a bull or bear market. What has truly changed is not just price, but the underlying logic of the entire industry.

Over the past decade, the crypto industry has achieved rapid growth through liquidity and narratives, with a single popular concept capable of supporting astonishing valuations.

But as liquidity returns to rational levels and institutional capital gradually becomes a market participant, this valuation framework is rapidly breaking down.

The market is beginning to refocus on a fundamental question: What value does a project actually create?

If I had to summarize today’s crypto market in one sentence, I’d define it as this: the current cycle is not eliminating the industry, but rather phasing out the old logic of growth driven by liquidity, narratives, and funding that dominated the past decade.

Understanding this may be more important than predicting when the next bull market will arrive.

Many people tend to compare today’s crypto market to bear markets in 2018 or 2022, but when viewed over a longer time horizon, it more closely resembles the period following the dot-com bubble burst in 2000 than a typical market correction.

After the dot-com bubble burst, the Nasdaq index plummeted, numerous internet companies went bankrupt, and venture capital rapidly cooled down.

At the time, many believed the internet was merely an overhyped concept fueled by capital, and that the entire industry had reached its end.

However, looking back today, more than twenty years later, it was not the internet that was truly eliminated by that bubble, but rather the companies that lacked viable business models and competitiveness.

Truly surviving companies, such as Amazon and Google, have not only navigated through business cycles but also become essential infrastructure of the internet era.

The cryptocurrency industry today is undergoing a similar process.

Over the past few years, abundant liquidity has driven rapid industry expansion. From DeFi and NFTs to L2s and AI agents, each new narrative has attracted massive capital inflows, enabling projects yet to be validated by the market to achieve billion-dollar valuations—truly astonishing.

But as liquidity returns to rational levels, this valuation logic begins to fail.

Therefore, rather than saying the industry has entered a bear market, it is undergoing a value reassessment.

The market is also asking a fundamental question: What kinds of projects truly deserve to exist in the long term?

Over the past few years, the number of crypto projects has experienced explosive growth. Each new trend quickly spawns a flood of homogeneous projects. The barrier to issuing tokens has become increasingly low, leading many to mistakenly believe that more projects equate to faster industry development.

But the facts are otherwise.

No industry can expand indefinitely. While the number of projects can grow rapidly, users and capital are always limited. When supply far exceeds demand, the market will eventually correct itself.

Today, the projects that have been eliminated share common traits: they lack real users, stable revenue, and unreplicable competitive advantages.

They once relied on market sentiment for short-term growth but failed to build long-term value; once liquidity tightened, this model was cast into oblivion.

Many perceive this as an industry downturn, but viewed differently, it is a necessary consolidation of supply during the industry’s maturation process.

After the dot-com bubble, many portals and search engines disappeared, leaving only a few platforms; similarly, hundreds of companies once competed in the new energy vehicle market, but now only a handful have truly survived.

Therefore, the exit or bankruptcy of many crypto projects now is eliminating not only ineffective supply but also inefficient development models.

As previously mentioned by the author, the cryptocurrency industry has been a narrative-driven market for the past decade.

From IXO to DeFi, from NFTs to the metaverse, and now to AI agents, each market cycle has almost always been accompanied by new narratives.

For the early stages of the industry, this model was not problematic; new technologies require a vision to attract developers and capital, as well as a market to nurture these dreams.

But as the industry matures, storytelling alone can no longer sustain long-term valuations.

In the past two years, a notable shift has been that more investment institutions are focusing on protocol revenue and active users, rather than solely discussing funding backgrounds, community hype, or sector concepts.

But for the cryptocurrency industry, revenue alone is not enough.

Value created by traditional enterprises ultimately reflects in shareholder equity, whereas in crypto, a protocol's success does not necessarily mean its token will become more valuable.

If a protocol generates significant revenue but fails to return value to token holders, the protocol's value will gradually become disconnected from its token.

Therefore, what truly matters is not just revenue, but value capture.

Over the past two years, an increasing number of protocols have begun discussing Fee Switch and Buyback mechanisms, both essentially aiming to solve the same problem: how to ensure that the value created by the protocol truly flows back to the token itself.

A token only has long-term value support when it can share in the profits generated by the protocol's growth, rather than merely serving as a governance tool or market asset.

This means the cryptocurrency industry is transitioning from a narrative economy to a value-based pricing model.

The market is no longer seeking the next hot trend, but a protocol that can consistently generate revenue and establish a value loop.

And this is exactly what Wall Street excels at.

Many believe the greatest significance of the approval of a spot Bitcoin ETF is that it brings new capital into the cryptocurrency market. However, beyond the capital itself, I believe the more important change is that the participants entering the market have changed.

In the past, the crypto market was primarily dominated by Crypto Natives, who were willing to pay a premium for new narratives and high growth potential.

Wall Street, however, focuses on a different set of criteria: whether a project has stable revenue, real users, and a moat. This means the cryptocurrency industry is gradually adopting valuation logic from mature capital markets.

This change has been reflected in the flow of funds.

In recent months, the projects that led the recovery from the downturn were not those with the latest narratives, but rather infrastructure projects that had already established viable business models.

For example, Aave remains the leading protocol for on-chain lending, Uniswap has long held a significant share of the DEX market, and Sky continues to support the stablecoin ecosystem. These protocols have weathered multiple market cycles, boast real users and consistent revenue, and are therefore more likely to gain market recognition.

Meanwhile, a new generation of infrastructure is emerging. Hyperliquid has rapidly gained users through high-performance on-chain derivatives trading, demonstrating that DeFi continues to innovate.

BlackRock’s launch of the BUIDL fund and Robinhood’s recent heavy push into RWA send a more significant signal: traditional finance is not just focused on Bitcoin, but on whether blockchain can become the next-generation financial infrastructure.

Infrastructure such as lending, trading, stablecoins, and RWA is gradually becoming the new pillars of the industry.

As more savvy institutional capital enters the market, the valuation framework of the cryptocurrency industry will return to its commercial fundamentals.

Previous market cycles have led many investors to develop a habitual mindset: whenever a bull market arrives, altcoins will inevitably experience broad gains.

However, this situation is unlikely to occur again in the future.

Over the past two years, AI has attracted significant capital and entrepreneurs not because it has a better story, but because it was the first to demonstrate tangible business value.

Capital has not left risk assets but is instead seeking more efficient paths with clearer returns.

For the crypto industry, this also signifies the beginning of a new era, where the market will increasingly focus on genuine value rather than liquidity-driven valuation bubbles.

Therefore, capital flows in the next bull market may be more concentrated than in the past.

One category consists of core assets that have become industry consensus, such as Bitcoin and Ethereum. The other category comprises on-chain financial infrastructure with genuine business models, such as stablecoins, lending protocols, and RWA-related ecosystems.

In contrast, projects lacking users and genuine revenue will find it increasingly difficult to attract funding in the future. Of course, low-probability events can still occur—after all, MEMEs still exist.

Looking back, after the dot-com bubble, many internet giants emerged, while countless once-hot star companies were eliminated.

Today, the cryptocurrency industry is also undergoing a harsh process of natural selection.

Upon closer reflection, the real issue lies with the industry itself, as a market filled with false prosperity will eventually be corrected by the market—though such a major shift may cause discomfort for most people. But once this hurdle is overcome, time will prove what truly holds value.

So what I’m saying is that the market isn’t eliminating blockchain technology—it’s eliminating the old logic that relied on liquidity and narrative-driven momentum. In the end, only projects that consistently create value will endure through cycles, and that’s the essence of sustainable business growth.