The cryptocurrency market in 2025 seems to be at a crossroads. Over the past decade, blockchain assets such as Bitcoin and Ethereum have experienced multiple cycles of frenzy and collapse. From the ICO craze to the NFT frenzy, and then the brief prosperity of AI proxies and meme coins, speculative bubbles have inflated and burst one after another, leaving a mess behind. However, the problem lies not in the bubbles themselves, but in the industry's inability to break free from this short-sighted cycle and nurture truly sustainable growth engines.
This article will start from first principles, strip away the appearances, and directly address the fundamental issues in the cryptocurrency market: lack of long-term thinking, misaligned incentives, and inefficient resource allocation. By analyzing the absence of compounding assets, the ambiguity surrounding the positioning of Layer 1 blockchains, the lack of transparency in liquidity projects, and the short-sightedness of capital deployment strategies, I will attempt to provide investors and builders with a new framework for thinking, exploring how to find true value anchors amidst the clamor.
I. The Dilemma of Traditional Logic: From Inertia to Failure
1. The Inertia of Bitcoin
Historically, Bitcoin has been the bellwether of the cryptocurrency market. Data shows that in the bull markets of 2017 and 2021, the rise of Bitcoin drove the market capitalization of Altcoins to increase by more than 10 times and 5 times, respectively. However, this pattern no longer works in 2024. While Bitcoin's market capitalization soared from $33 billion at the beginning of 2023 to $1.4 trillion (a 324% increase), the market capitalization of Altcoins only grew from $85 billion to $350 billion, with $100 billion coming from the unlocking of locked-up tokens, $60 billion from the issuance of new tokens, and only $105 billion from real price appreciation. This indicates that capital is highly concentrated in Bitcoin, and the appeal of Altcoins has significantly declined.
2. The Sluggish On-Chain Activity
The ecosystem development of Altcoins is also a cause for concern. For example, although Aptos raised $300 million in 2022, it only had 50,000 daily active users and less than $1 billion in TVL (Total Value Locked) at the beginning of 2025. Similarly, the transaction volume of Sui has dropped by more than 70% since its peak in 2024. These emerging chains lack innovation and user stickiness, and are unable to escape the fate of "hype-collapse". In contrast, Bitcoin has firmly established its position through decentralization and scarcity, but the widespread sluggishness of Altcoins reveals the lack of value creation in the industry.
II. The Diverse Faces under Market Volatility: Intertwined Emotions and Losses
1. The Cost of Violent Fluctuations
The market volatility in 2025 remains severe. For example, on March 10, the price of Bitcoin plummeted from $85,000 to $78,000, a drop of over 8% in 24 hours. According to Coinglass, about 125,000 people were liquidated that day, with a total loss of $630 million. On the same day, Ethereum's decline was even more severe, dropping from $2,400 to $2,100, a 12.5% drop, which quickly spread a sense of panic in the market. Furthermore, on March 13, Bitcoin fell again to $75,000, and the number of liquidations surged to 158,000, with a total of $790 million in capital evaporating. These frequent violent shocks catch investors off guard, causing those who sell at a loss to miss out on potential short-term rebounds, while those who hold on watch their assets shrink significantly.
2. The Vicious Cycle Driven by Emotions
Market sentiment has become increasingly polarized in this type of volatility. During bull markets, greed drives blind following, as seen in the "Layer 2 craze" at the beginning of 2025, where many new tokens surged 400%-600% in their first month of listing, but over 80% returned to zero within two weeks. In bear markets, fear triggers a chain reaction of sell-offs, exacerbating price declines. According to Coinglass data, as of mid-March 2025, the total liquidation amount had exceeded $25 billion, reflecting the widespread prevalence of emotional decision-making. Discussions on the X platform also show that investors expressed panic after the March 10 plunge, believing that "the market has no bottom", while some bottom-fishers briefly profited from the rebound the next day, further highlighting the amplifying effect of emotional fluctuations.
3. Guidance
- Emotion Management: Set clear stop-loss points (e.g., 10%-20%) to avoid being held hostage by fear or greed.
- Long-Term Perspective: Instead of chasing short-term fluctuations, it is better to screen for projects that can withstand market cycles, such as Uniswap (with an annual revenue of $700 million).
III. Returning to Essence: Unlocking the First Principles
1. Tracing the First Principles
The first principles originate from Aristotle, emphasizing the construction of knowledge from the most fundamental facts. In the cryptocurrency market, it requires us to step out of historical experience and short-term noise, and focus on the essence of technology and value. Taking Bitcoin as an example, its core lies in decentralization (no central control), cryptographic security (transactions cannot be tampered with), and a limited supply of 21 million coins. This scarcity makes it akin to "digital gold", laying the foundation for long-term value.
2. The Divergence from Traditional Thinking
Traditional investment relies on historical patterns, such as "Altcoins generally rise in bull markets", but ignores the essence. The success of Ethereum is not only due to market performance, but also because smart contracts have opened up the vast space of DeFi and NFTs. In contrast, many new chains in 2024 relied solely on hype and promotion, lacking a technological core, and were destined to be short-lived.
- Case Comparison: Solana's high performance (65,000 TPS) supports the expansion of its ecosystem, while Aptos' technical advantages have not translated into user growth.
IV. The Trap of Short-Termism and the Path to Breaking Free
In the traditional market, compounding assets like Amazon and Apple have stood the test of time thanks to their long-term vision and stable income. However, the cryptocurrency market lacks such benchmarks. Why is this the case, and how can it be changed?
- The Cultural Root of Short-Termism The cyclical frenzy in the cryptocurrency market has shaped a unique mindset among participants: quick cash-outs and timely exits. For example, during the AI proxy craze at the end of 2024, on-chain data shows that over 70% of tokens surged more than 500% in the first month after issuance, but over 90% fell below the issuance price within three months. This "casino logic" has accustomed investors to chasing short-term gains rather than long-term holding.
- The Distortion of Incentive Mechanisms The current token economic model exacerbates this problem. Many projects concentrate value in the hands of the team and early investors through high inflation or pre-mining. For example, despite Solana's TVL (Total Value Locked) growing to $30 billion in 2024, the rapid release of its token supply still led to severe price volatility, undermining the confidence of long-term holders. In contrast, traditional companies stabilize shareholder returns through dividends and stock buybacks, but cryptocurrency projects rarely have similar mechanisms.
According to Messari, more than 60% of L1 tokens saw their circulating supply increase by more than 50% during the 2024 bear market, diluting the rights of holders.
- The Path to Breaking Free: From the Top Down to the Product Level, the Industry Needs to Nurture Compounding Assets. The industry needs to make efforts on both the cultural and practical fronts:
(1) Top-Down Driving of Long-Term Thinking: Founders need to abandon the "earn and run" mentality and establish 5-10 year strategic visions. For example, the Hyperliquid team, focused on perpetual contract trading, achieved $500 million in revenue in 2024 and saw its token price quadruple even in the bear market. This stability stems from the deep alignment of the leaders' interests with the ecosystem.
Guidance: Investors should prioritize projects led by highly credible teams with long-term track records, such as those who have participated in open-source communities or the traditional tech sector.
(2) Building Revenue-Driven Products: Projects without cash flow are destined to be short-lived. Uniswap (with $700 million in annual revenue) and Jito (with $900 million) have proven that protocols that solve real needs can retain users.
Guidance: Focus on the revenue paths of projects (such as transaction fees, staking rewards) and assess their ability to withstand market cycles. For instance, Aave maintained $488 million in annual revenue during the 2024 bear market, demonstrating resilience.
(3) Redesigning Incentives: Token models should be tilted towards long-term holders. For example, reducing inflation rates or introducing burn mechanisms linked to revenue, rather than blind issuance.
V. The Action Blueprint for Investors
1. Adaptation of investment strategies for different types of investors
In the cryptocurrency market, different types of investors need to develop appropriate strategies based on their own circumstances.
Institutional investors: Should focus on long-term value growth projects, discover high-quality projects through due diligence and hold them for the long term, and participate in early-stage investments to obtain more returns.
Professional investors: Leverage their technical and experience advantages, conduct in-depth research on market trends and dynamics, layout innovative projects in advance, and use technical analysis tools to grasp trading opportunities.
Ordinary retail investors: Risk control is the primary task, choose to invest in mainstream cryptocurrencies, continuously learn investment knowledge, maintain rationality, and avoid blind following.
2. Investment decisions need to follow scientific methods and steps.
Collect project information: Comprehensively understand the project background, team, technology, market, economic model, and other information through various channels.
Analyze the value and risks of the project: Evaluate the innovation, practicality, and market competitiveness of the project, and consider technical, market, policy, and other risks.
Develop an investment plan: Determine the investment amount, cryptocurrency, and timing based on your own situation, and consider various scenarios and formulate countermeasures.
Track and adjust: Closely monitor project and market dynamics, timely adjust investment strategies and portfolios, and optimize investment returns.
In summary, investors should choose appropriate strategies based on their own characteristics, follow scientific decision-making methods, and achieve asset preservation and appreciation in the cryptocurrency market.
