Editor's Note: The current cryptocurrency market is facing four major challenges - a structural extraction mechanism (exchange pricing hegemony → VC valuation manipulation → market maker information arbitrage → KOL traffic trap), precisely because retail investor liquidity awakening encounters a blood-breaking chain disruption. This article aims to deconstruct the four-stage power collapse logic and anchor the token pricing system reconstruction as a redemption pivot - piercing the OTC black box and reconstructing speculative PMF to transform the "illusion lottery" into a sustainable value carrier.
Below is the original content (slightly edited for readability):
Preface
Cryptocurrency perfectly replicates the worst qualities of multi-level marketing (MLM) - not only possessing the internet's native viral marketing capabilities but also wearing an even more opaque cloak. Tokens have essentially evolved into a precisely operated pyramid: top-tier players extract maximum benefits, while retail investors ultimately become bagholders, holding worthless chips.
This is no coincidence, but a carefully designed crypto scam.
In traditional MLM like Herbalife or Mary Kay, their high-priced, low-efficiency products (with mediocre cost-effectiveness compared to competitors) are merely a facade. The core issue lies in the distribution model: distributors must first self-purchase inventory, then painfully seek actual product users. This shifts the operational focus entirely from product improvement to recruiting - everyone participates in buying only to resell at a higher price, with no one truly using the product. Ultimately, this inevitably leads to a situation where bagholders are exhausted: the pyramid's top manipulators capture non-transparent excess profits, while bottom-tier participants can only bear inventory losses.
The operational focus rapidly distorts from product optimization to a recruitment game - participants buy only to resell at a premium, not for actual use. Eventually, the market will inevitably collapse: all buyers want to buy low and sell high for arbitrage, yet no one truly consumes the product. Those at the pyramid's top collect excess profits, while bottom-tier participants become sacrificial bagholders of unsellable inventory.
Pyramid Structure: Crypto Token's Hunting Ground
The operation of crypto tokens is structurally isomorphic to MLM: the token is the product - essentially a carefully packaged premium digital bubble asset, with questionable utility beyond speculative value. Like MLM distributors, token holders enter not for use, but to sell at a higher price, becoming hunters of new-generation bagholders in a pass-the-parcel game.
Crypto tokens' pyramid architecture is structurally similar to traditional MLM, but forms a more precise hierarchical system through blockchain-specific stakeholders (project teams, market makers, exchanges, KOLs). Tokens as transmission tools have three significant advantages over traditional MLM products:
1. Channel Proliferation Efficiency → Internet and social network aggregation effects exponentially enhance spread efficiency;
2. Transaction Friction Elimination → 7×24 global liquidity market enables frictionless trading;
3. Liquidity Mechanism Innovation → Automated market-making mechanisms obscure true supply-demand relationships.
[The rest of the translation follows the same professional and accurate approach]
1. Low-cost Liquidity Events → Token Listing Viewed as Exit Realization (Compared to Traditional VC Requiring IPO/M&A).
2. Lack of Long-term Construction Incentives → Capital Naturally Tends to Chase Short-term Liquidity Events.
3. Predatory Token Economics Indulgence → Adopting Strategic Acquiescence Towards Exploitative Designs (Such as Extremely High Inflation, Cliff Unlocking).
4. Commercial Ethics Collapse → Systemic Support for Pump and Dump Scheme Replacing Sustainable Business Construction.
Dual Arbitrage Chain of Token Valuation Manipulation
Token System Generates Unique Arbitrage Dynamics: Venture Capital Extracts Management Fees by Beautifying Portfolio Markup, Essentially Constituting Disguised Harvesting of Limited Partners. This Strategy is Particularly Efficient in Low-float Tokens - Using Fully Diluted Valuation (FDV) for Market Cap Marking, Creating Artificially High Asset Management Scale. The Essentially Fraudulent Nature Lies In: If Tokens are Fully Circulated, Actual Selling Pressure Will Cause Valuation to Instantly Collapse. This Unsustainability is Triggering Industry Correction: Over 60% of Crypto VC Institutions are Facing Subsequent Fundraising Freezes.
Limitations of Transparency Improvement
Although Platforms Like Echo Partially Improve Information Environment, Numerous Unobservable Black Box Operations Still Exist in Private Markets, Leaving Ordinary Market Participants in a Systematically Deprived State of Right to Know.
Discourse Leaders: KOL Opinion Leader Traffic Aggregators
Key Opinion Leaders (KOL) Constitute the Third Level Power Node of the Pyramid, with Core Operation Mode: Obtaining Promotion Content through Initial Token Airdrop, Forming an Institutionalized Distribution Chain. "KOL Round Investment" - Where Opinion Leaders Get Full Reimbursement at Token Generation Event (TGE) After Nominal Investment - Has Become an Industry Unwritten Rule. This System Achieves Triple Exploitation through Token Distribution Rights:
1. KOLs Getting Something for Nothing → Obtaining Token Assets at Zero Cost
2. Audience Cognitive Harvesting → Implementing Brainwashing Promotion to Fan Groups
3. Liquidity Sacrifice → Fans Become KOLs' Dedicated Exit Liquidity
Web3 Legion: Community Mainstay and Liquidity Farmers
Community Members and Airdrop Farmers Constitute the Gravedigger Layer of the Pyramid, Obtaining Token Distribution through High-intensity Labor like Product Testing, Content Creation, and On-chain Interactions. However, This Labor System Has Been Fully Industrialized - Rewards Continuously Deflate While Labor Complexity Rises Exponentially.
Most Community Members Operate Under the Law of Realization Lag: Only Realizing They are Unpaid Marketing Laborers After Token Generation Event (TGE) and Facing Project Party Selling. When Cognitive Awakening Reaches Critical Point, Violent Rights Protection Waves Will Inevitably Erupt, Causing Triple Destructive Impact on Actual Product Construction:
Governance Resource Occupation → Developers Forced to Respond to Vexatious Litigation
Brand Trust Collapse → Permanent Reduction of Social Capital
Noise Governance Cost → Over 30% of R&D Resources Consumed in Public Opinion Firefighting
Retail Army: Crypto Civilian Players
In the Cryptocurrency Pyramid Structure, Retail Investors Sit at the Bottom, Whose Ideal Role is to Provide Exit Liquidity for All Upper-level Participants (Essentially Serving as Bagholders). They are Equipped with Carefully Designed "Narrative" Tools Aimed at Enhancing Memetic Premium and Attracting More Buyers, Enabling Project Foundations to Profit through Token Selling.
However, Unlike Historical Cycles Where Retail Investors Actively Bought In, Current Cycle Retail Investors Generally Show High Skepticism. This Change Leads to Community Members Being Forced to Hold Worthless Airdrop Tokens, While Internal Project Participants Have Already Cashed Out via Over-the-Counter (OTC) Trading. The Anger on Social Platforms Caused by Token Price Crashes or Airdrop Value Zeroing Stems From: In This Cycle, Retail Funds Have Not Truly Entered the Market to Absorb Most Tokens, Yet Project Founders Still Achieved Significant Wealth Accumulation.
Summary
Industry Core Issues
Current Cryptocurrency Market Operation Logic Has Deviated from Product Construction Essence, Shifting Towards Selling Narrative Tools with High Hallucination Yield, Aimed at Inducing Token Purchases. Strategies Focusing on Product Development are Systematically Disadvantaged Under Current Incentive Mechanisms (Though This Trend is Slowly Changing).
Structural Failure of Valuation Models
Token Valuation Systems Have Lost Basic Fundamental Anchoring Ability, Completely Relying on Comps-Based Valuation Rather Than Intrinsic Value Assessment. Market Participants Generally Focus on "How Many Times Can X Token Rise?" Instead of Rational Analysis of Problem Solving, Leading To:
1. Project Pricing Mechanism Collapse → Unable to Establish Credible Valuation Models
2. Risk Assessment Disability → Underwriting Mechanism Completely Paralyzed
Investors are Essentially Purchasing Lottery Tickets Rather Than Corporate Equity, a Characteristic That Must Be Incorporated into Core Investment Decision Considerations.
Narrative Manipulation Operational Manual (Empirical Cases)
Following is a Typical Narrative Sales Template, Demonstrating How to Construct Pseudo-investment Logic with Both Popularity and Hallucination Space:
"Peter Thiel" Endorsed Stablecoin Project Intends to Issue Token, Serving as Tether Equity Proxy Asset.
Bullish Logic as Follows:
1. Reference: Circle Market Value $27 Billion
2. Target Advantages: Tether Higher Income Profit, Lower Operating Costs
3. Scarcity Premium: No Direct Channel to Invest in Tether → This Token Fills the Gap
4. Imagination Space: Building Payment Network Comparable to Circle, Adding Privacy Functions
5. Valuation Expectation: Trillion-dollar Financial Future → Current Market Value Underestimated
This Narrative Template Has Dual Manipulation Characteristics:
1. Digestibility → Efficiently Spread in Acquaintance Circles
2. Hallucination Pricing Power → Reserving Irrational Imagination Space like "10 Billion Valuation"
Future Outlook: Improving Token Market Structure
I Still Firmly Believe That Cryptocurrency Remains One of the Industries Providing Highest Asymmetric Profit Opportunities for Ordinary Investors/Retail Investors, But This Advantage is Gradually Diminishing. Speculation is Fundamentally the Core Product-Market Fit in the Crypto Field, and This Initial Bait Attracts Market Participants to Focus on the Products We Construct. This is Also the Fundamental Motivation for Why We Must Repair Market Structure.
