Chainfeeds Summary:

When the basic logic of a market is "make a quick buck and run," it is destined to be unable to establish any long-term sustainable assets (Compounders).

Source:

https://x.com/0xkyle__/status/1899503744620155233

Author:

Kyle

Viewpoint:

Kyle: In the crypto market, we have hardly seen any "Compounders" (compounding assets) that can grow in the long term, the core reason being the prevalence of short-termism and severe misalignment of incentives. Many project founders only want to "make a quick buck and leave," resulting in a market full of speculation and extremely short project lifecycles. Kun also mentioned that most projects in the crypto market would typically be weeded out before IPO under the TradFi valuation logic, but in the crypto market, every failed project can launch a token and obtain liquidity, thereby spawning one round of short-term speculation after another. The direct consequence of this is that the market is flooded with projects that do not actually accumulate real value, rather than enterprises with long-term growth potential. The market feedback mechanism is at work, and people are gradually choosing to exit tokens that lack long-term value. For example, the appeal of CEX exchange tokens has declined significantly, as retail investors are unwilling to continue to be the bag holders for these tokens. The era of generic L1s has passed, and the market is now flooded with an oversupply of L1 blockchains, most of which are not competitive. If you sort by market cap on CoinGecko, you'll find that L1 blockchains occupy half the market, yet Ethereum's performance has stagnated. If you bought Bitcoin in July 2023, your returns would be 163% to date; but if you bought Ethereum at the same time, your returns would be almost zero. Although Ethereum still has the highest TVL among public chains and is about to launch an ETF, its price still lacks growth momentum. Worse, the "Ethereum killer" wave of 2021 has spawned hundreds of new L1 chains, promising faster speeds, lower costs, and better developer experiences. However, despite receiving massive funding, most L1 projects have ultimately become failed cases four years later. There are currently 752 smart contract platform chains with tokens listed on Coingecko, but there are only a few active L1 projects. In the current market environment, liquid token projects must establish an investor relations (IR) system and regularly publish quarterly reports to clearly demonstrate project progress to investors. Although this practice has long been mature in the traditional finance market, it is still rare for projects in the crypto market to take this initiative. In fact, when I communicated with the BD managers of multiple crypto projects, they all said that if a project is willing to communicate regularly with fund managers and provide investor briefings, its IR level is already far ahead of the industry average. Currently, most projects' marketing methods are still at a basic level, relying on attending industry conferences and placing airport advertisements. However, the most effective way to attract genuine long-term investors is to directly demonstrate the long-term value of the project to the capital side. Buy Back & Burn, although a viable capital return strategy, is not the optimal solution. The essence of Buy Back & Burn is to use a portion of the revenue to reduce the circulating supply in the market to boost the token price. However, at the current stage, the vast majority of crypto projects are still in the early development stage, and what they really need to do is to invest the funds in product expansion, technology upgrades, and market expansion, rather than returning the funds to token holders prematurely. In addition, although some investors hope that projects can pay "dividends" or "distributions," the investor types in the crypto market are different from the traditional market, with more high-risk preferences, and they are more inclined to support high-growth, high-return projects. Therefore, adopting Buy Back & Burn prematurely will cause the project to lose greater growth potential.