Original Title: Why "Fundamentals" Still Aren't the Trade for 2026.

Original Author: @airtightfish, Cryptography Researcher

Original translation: AididiaoJP, Foresight News

Part 1: How is the current market sentiment?

"What excites you most about cryptocurrency?"

"What areas are you investing in?"

Whenever I attend conferences, I always ask venture capitalists and hedge fund professionals these questions. They usually have the most macro-level insights into industry trends. But at last December's Breakpoint conference, the answers I received were not encouraging.

Most responses are focused on the market consensus tracks:

For example, "stablecoins," "perpetual contracts," "prediction markets," "real-world assets (RWA)," and "digital banks."

Some responses also reveal deeper concerns:

For example, "There's nothing to get excited about," "Non-cryptographic businesses using blockchain infrastructure," and "Taking a temporary break to observe."

Overall, people's bets seem to lean more toward the "maturation" of industries rather than "innovation." Beneath these conversations, a general sense of nihilism lingers.

Although rarely openly discussed, this sentiment is widely felt by most people. It stems from the continuous emergence of scams, projects with low liquidity but high valuations, coin hype on trading platforms, and KOL (Key Opinion Leader) marketing games. This sentiment reflects the current state of the industry but cannot predict the future; in fact, it is likely that the future will not simply be an extension of the present.

Betting on mature markets or areas that already have clear product-market fit (PMF) is essentially a subconscious "risk-avoidance behavior," rooted precisely in this nihilism. Participants want to avoid the worst aspects of the industry, and in an environment where tokens generally perform poorly, they are unwilling to take risks for innovation.

I believe that by 2026, these directions will not be good liquidity trading options:

The problem is that market efficiency remains low, and this inefficiency continues to support the prices of many copycat coins. Industry maturation means prices will return to their fundamental values—this will actually lead to most tokens declining in the medium to short term. Unless you are shorting, it is difficult to find investment opportunities based on fundamentals.

Trend-following trading in fields with an existing PMF (Product-Market Fit) may seem reasonable in direction, but it's difficult to execute in liquid markets due to the ever-present issue of "adverse selection." Most of the time, when you buy tokens in consensus-driven projects, you're either purchasing low-quality, follow-the-crowd tokens or entering at valuations that are already wildly overinflated.

For example: You say you have a positive outlook on the market in 2025? Then which token have you actually bought?

Part 2: What is the actual value of cryptocurrencies?

Industry maturity implies a shift toward fundamental-based pricing. However, this exposes a core issue: the scale of fundamentals is too small to support current valuations, and it is also difficult to drive the market.

So, what exactly is driving token prices? The following chart roughly categorizes cryptocurrency market capitalization by asset type and has been adjusted for a more intuitive explanation:

Two main adjustments were made:

Apply a 75% discount to the entire Layer 1 sector and a 50% discount to the entire application sector.

This reflects a view that a significant portion of these two major categories of assets lacks fundamentals strong enough to support their current valuations.

After the adjustment, two points stand out:

1. The market size cannot support grand narratives.

Although the application layer has received significant attention, the actual market size remains quite small. The total on-chain transaction fee revenue last year was approximately $10 billion, and not all of this revenue belongs to token holders. From a global perspective, this figure is relatively insignificant. In fact, the total valuation of the entire on-chain application ecosystem, before adjustments, is still less than that of a single food delivery company like DoorDash.

2. Despite experiencing declines, speculative premiums still dominate altcoin valuations.

Looking more closely:

Fundamentals

Fundamentals determine the price floor. For most tokens, this floor is significantly lower than the current price. Even at current valuation levels, the market capitalization of the majority of tokens is driven by speculative premiums—that is, the value assigned by people who expect to resell them at higher prices in the future. This premium is highly correlated with overall market volatility and naturally diminishes over time. The more mature a sector becomes, the less room there is for speculation.

This situation is unlikely to change in the short term. Therefore, as the speculative premium fades, most existing altcoins will underperform compared to Bitcoin. The faster the industry matures, the sooner this weakness will manifest.

Layer 1

Layer 1 remains an important category, but the rules of the game have changed. The winner-takes-all public blockchain is likely already here. Minor performance improvements are unlikely to disrupt the network effects already established in liquidity, developer ecosystems, and so on. New general-purpose public blockchains will no longer command the kind of premium seen in previous cycles. Instead, application-specific chains will gradually be valued according to their "application category."

Income and Applications

Focusing on revenue is the right direction, but it is often misunderstood in the crypto space. People frequently discuss revenue multiples, yet there are very few crypto businesses with durable moats. Much of the revenue comes from incentives, and the cash flows have historically been fragile. Even if the business is strong and cash flows stable, it is often unclear whether the token can effectively capture this value. A low valuation multiple does not necessarily mean it is a good investment target.

The application layer remains the category with the greatest long-term potential, but it will take time to truly solve the underlying issues. From a liquidity investment perspective, there are significant opportunities here, but the timeline may be longer than what the market generally expects.

"People always overestimate short-term changes and underestimate long-term transformations." — Amara's Law

The core conclusion remains unchanged: regardless of how attractive the revenue narrative may be, or how much capital is invested in the industry's maturity, speculation will continue to be the main driver of market capitalization. It will take time for fundamentals to scale to a sufficient size; until then, valuations will still be determined by expectations rather than cash flows.

Part III: Trading Trends to Watch in 2026

In a single asset or market, speculative premiums tend to fade over time. This is an old story in the crypto world—AI agents, early DeFi, and NFTs have all gone through such cycles.

Speculation always flows toward areas where valuation is still unclear, narratives are still forming, and market size is undefined (with limitless imagination potential).

Bet on innovation.

The assets most likely to absorb speculative premiums in 2026 typically have the following characteristics:

· Can create entirely new assets or markets on-chain

· Having a feasible path to achieve "currency premium"

· Difficult to value due to novelty or unclear cash flow ownership (this is also why the narrative of monetary premium is important)

· There exists a certain barrier: technical threshold, cognitive threshold, or access threshold (hard to arbitrage + more optimal allocation)

· Align with broader global trends—market size with no upper limit

These conditions delay the arrival of market efficiency, prolong the window of mispricing, and thus leave room for speculation.

Specific sectors and projects worth paying attention to

1. uPOW (Useful Proof of Work)

uPOW shifts mining output from mere inflationary issuance to productive output with real utility, transforming "mining for distribution" into "mining for value creation." This direction has been discussed for a long time, and now the underlying technology is approaching feasibility. The uPOW project is novel and difficult to value, representing a new class of productive assets with potential for monetary premium. Currently, two aspects are of particular focus:

@nockchain: An early-stage project that requires time to develop, aligns with this theme, and benefits from zero-knowledge proofs and the privacy narrative.

@ambient_xyz: Currently in the private pre-mining phase, expected to launch this year. It has a strong cyberpunk style and uses POW (Proof of Work) to provide computing power for evergreen large language models.

2. Ownership Tokens

The era of "atmosphere coding" has arrived. Short-cycle, niche-market MVPs (Minimum Viable Products) developed by small teams will become the norm, with some of them growing into real companies. Lightweight fundraising processes and the growth-enabling effects of tokens will continue to hold value. The core issue with such tokens is their claim to business value, but various mechanisms are already being explored to address this. Opportunities lie not only in the tokens themselves but also in the launch platforms. Pay attention to two key areas:

· @MetaDAOProject: Repeatedly recommended, a clear leader in this field

· @StreetFDN: Earlier, focused on serving offline startups.

3. Distributed Training and Computing Power Market

Distributed training remains one of the most promising areas in AI x Crypto, though the launch progress has been slower than expected. Leading teams have already begun testing, and there is hope for a full rollout this year. Beyond the project tokens themselves, these initiatives are more likely to give rise to secondary applications and token ecosystems built upon them. True liquidity opportunities may lie there, although the project tokens could also see price increases. Leading teams:

· @NousResearch

· @primeintellect

· @pluralis

4. Social Metaverse

Digital social spaces continue to evolve. Product-market fit remains elusive, but experimentation persists. The field is expected to keep iterating through trial and error this year. The winners may not have emerged yet, so stay tuned:

· @zora: Demonstrates strong resilience, with significant potential for synergy between creators and content tokens.

· @trendsdotfun: A Solana ecosystem project, reaching the Asia-Pacific market, yet to receive widespread attention.

· @tryfumo: It's included because it demonstrates that execution capability itself is a moat.

· @ShagaLabs: Metaverse data direction — expect to see more similar projects

5. Solana: @solana ($SOL)

General-purpose public blockchains have matured. As network effects strengthen, the importance of marginal technological improvements has become less significant compared to existing liquidity, developer ecosystems, and distribution channels. The winners are likely already determined.

Solana has a strong core ecosystem, with rare long-term vision for builders and capital, and a reliable roadmap for continued expansion. The next wave of speculation will occur on top of existing infrastructure. Regardless of the specific narrative, Solana is structurally prepared to accommodate a significant amount of such activity.

Fields where I think the chances are slim: robots, memecoins.

Summary

Nihilism is not insight; it is a lagging emotional reaction to price movements, a symptom of industry problems rather than a prophecy of the future.

When emotions are low, capital tends to retreat into "mature trades" and consensus narratives to avoid risks. However, just like in other industries, risk-avoidance in the crypto space cannot generate excess returns.

The industry is still structurally in the "pre-fundamental" stage, where price discovery is driven by speculative capital rather than cash flows. This transition will be slower than people expect.

Speculative bubbles always follow innovation. Believe in innovation, explore new applications, spend time communicating with builders, and bet on innovation.

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