Part 1: What is the current market sentiment?

What excites you most about cryptocurrencies?

In which sectors are you investing?

When attending conferences, I always ask these questions to my venture capitalist and hedge fund colleagues. They usually have the most macro-level insights into the industry's direction. But at the Breakpoint conference last December, the answers were not encouraging.

Most answers focused on sectors with market consensus:

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

Some answers also revealed deeper concerns:

For example, "There's nothing to be excited about," "Non-encrypted businesses use blockchain infrastructure," and "Take a break and wait and see."

Overall, bets seem to lean more towards industry "maturation" than "innovation." A pervasive sense of nihilism permeates these conversations.

This sentiment, though rarely expressed explicitly, is felt by most. It stems from the proliferation of scams, the listing of projects with low liquidity and high valuations, the hype surrounding new tokens on trading platforms, and the KOL marketing games. This sentiment reflects the current state of the industry but cannot predict the future; in fact, it could be argued that the future may not be a continuation of today.

Betting on mature sectors or areas with clear product-market fit (PMF) is essentially a subconscious form of "risk aversion," rooted in nihilism. Participants want to avoid the worst aspects of the industry and are unwilling to take risks for innovation in an environment where tokens are generally performing poorly.

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

The problem is that market efficiency remains low, and this inefficiency continues to support the prices of many Altcoin. Industry maturity means prices will revert to fundamental value—in fact, this will cause most tokens to fall in the short to medium term. Unless you short, it's difficult to find fundamentally based investment opportunities.

While trend-following trading in areas with existing PMF (Product-Market Fit) is logically sound, it's difficult to execute in the liquidity market due to the persistent problem of "adverse selection." Most of the time, if you buy tokens in a consensus-driven sector, you're either buying low-quality, bandwagon-following tokens or entering the market when valuations are ridiculously high.

For example: You say you're optimistic about the prediction market in 2025? Then which token did you actually buy?

Part Two: What is the real value of cryptocurrencies?

Industry maturity means moving towards fundamental pricing. But this exposes a core problem: the scale of fundamentals is too small to support current valuations or drive the market.

So, what exactly drives token prices? The following chart roughly divides cryptocurrency market capitalization by asset class, with adjustments made to illustrate the issue more clearly:

Two main adjustments were made:

• A 75% discount is applied to the Layer 1 section as a whole, and a 50% discount is applied to the application section as a whole.

This reflects the view that a large portion of these two asset classes lack the fundamentals to support their current valuations.

After the adjustment, two points stand out:

1. Market size cannot support a grand narrative.

Despite the significant attention given to the application layer, the actual market size remains small. Last year, total on-chain transaction fee revenue was approximately $10 billion, and not all of that revenue went to token holders. On a global scale, this figure is negligible. In fact, the total valuation of the entire on-chain application ecosystem, before adjustments, was less than that of a food delivery company like DoorDash.

2. Even after the decline, speculative premiums still dominate Altcoin valuations.

Looking deeper:

Fundamentals

Fundamentals determine the price floor. For most tokens, this floor is far below the current price. Even at current valuation levels, the vast majority of token market capitalization is still driven by a speculative premium—the value people assign to them based on the expectation of reselling them at a higher price in the future. This premium is highly correlated with overall market volatility and naturally decays over time. The more mature the sector, the less room for speculation.

This situation is unlikely to change in the short term. Therefore, as speculative premiums diminish, most existing Altcoin will underperform Bitcoin. The faster the industry matures, the faster this weakness will emerge.

Layer 1

Layer 1 remains an important category, but the rules of the game have changed. A general-purpose public chain has likely already emerged as the winner. Minor performance improvements are unlikely to shake the established network effects such as liquidity and developer ecosystem. New general-purpose public chains will no longer command the premium seen in past cycles. Meanwhile, application-specific chains will gradually be valued based on their "application" category.

Revenue and Application

Focusing on revenue is a correct approach, but it's often misunderstood in the crypto space. People frequently discuss revenue multiples, but very few crypto businesses truly possess a sustainable moat. Much revenue comes from incentives, and cash flow has historically been fragile. Even with a strong business and stable cash flow, it's often unclear whether a token can effectively capture that value. A low valuation multiple doesn't necessarily mean it's a good investment.

The application layer remains the category with the greatest long-term potential, but truly solving problems will take time. From a liquidity investment perspective, there are huge opportunities here, but the timeline may be longer than the market generally expects.

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

The core conclusion remains unchanged: no matter how attractive the revenue narrative, and no matter how much capital is betting on industry maturity, speculation remains the primary driver of market capitalization. Fundamentals will take time to expand to a sufficient scale; until then, valuations will continue to be determined by expectations, not cash flow.

Part Three: Trading Directions to Watch in 2026

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

Speculation always flocks to areas where valuations are still unclear, narratives are still forming, and market size is undefined (with unlimited room for imagination).

In short: bet on innovation.

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

• Able to create entirely new assets or markets on-chain.

• There are feasible paths to obtain a "currency premium".

• Difficult to value due to novelty or unclear cash flow attribution (which is also an important reason for the currency premium narrative).

• There are certain barriers: technical barriers, cognitive barriers, or acquisition barriers (difficult to arbitrage + better allocation).

• Adapting to a larger global trend – unlimited market size

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

Specific tracks and projects worth paying attention to

1. uPOW (Proof of Practical Work)

uPOW shifts mining output from mere inflation to output with real utility, transforming "mining for distribution" into "adding value to assets." This direction has been discussed for a long time, and the underlying technology is now nearing feasibility. uPOW projects are novel and difficult to value, representing a new type of productive asset with the potential to gain a monetary premium. Currently, two key areas of focus are:

@nockchain: An early-stage project that needs time to develop, fits the theme, and benefits from zero-knowledge proofs and privacy narratives.

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

2. Ownership Tokens

The era of "atmosphere coding" has arrived. Small teams developing short-cycle, niche-specific MVPs will become the norm, and some of these will grow into actual companies. Lightweight fundraising processes and the growth-enabling effect of tokens will continue to be valuable. The core issue with these tokens is the claim to business value, but various mechanisms are being explored to address this. Opportunities lie both in the tokens themselves and in the launching platforms. Focus on two:

· @MetaDAOProject: Recommended multiple times, a clear leader in this field

· @StreetFDN: Earlier stage, positioned to serve offline startups

3. Distributed training and computing power market

Distributed training remains one of the most promising areas in AI x Crypto, with rollout progress slower than expected. Leading teams have begun testing, hoping for a full launch this year. Beyond the project tokens themselves, they are more likely to spawn a secondary application and token ecosystem built upon them. The real liquidity opportunities may lie there, although project tokens could also appreciate in value. Leading teams:

· @NousResearch

· @primeintellect

· @pluralis

4. The Social Metaverse

The digital social space continues to evolve. Product-market fit remains elusive, but experimentation continues. This year is expected to see further trial and error in the field. The winner may not yet have emerged; stay tuned.

· @zora: Demonstrates remarkable resilience; its creators and content tokens have enormous synergistic potential.

· @trendsdotfun: The Solana ecosystem project, reaching the Asia-Pacific market, has not yet received widespread attention.

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

· @ShagaLabs: Metaverse data research – more similar projects expected

5. Solana: @solana ($SOL)

General-purpose public blockchains have matured. With increasing network effects, marginal technological improvements are no longer as important as existing liquidity, developer ecosystem, and distribution channels. The winners are likely already decided.

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

Areas I think have little chance of success: robotics and meme coins.

Summarize

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

When sentiment is low, capital tends to retreat to "mature deals" and consensus narratives to mitigate risk. But in the crypto space, as in other industries, hedging doesn't guarantee above-average returns.

The industry is still structurally in a "pre-fundamentals" phase, with price discovery driven by speculative capital rather than cash flow. This shift will be slower than people imagine.

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

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