Author: Regan Bozman

Translation: TechFlow

Why do people always say that this cycle has ended? Why is everyone feeling miserable? We can attribute all these problems to the fact that, under the current market structure, retail investors can no longer make real money.

Some thoughts on returning to the origin and breaking free from the current cycle

Why are retail investors absent from this round of market trends? The answer is simple—this is because the "traditional" cryptocurrency market (such as infra tokens) no longer has 500x price increases. There is now a more interesting casino with better memes, which they can easily obtain.

In fact, we are reenacting what is happening in the VC/IPO market, where companies remain private for a longer period, meaning more upside is kept "private" (e.g., venture capital funds), and retail investors cannot enter.

Cryptocurrencies once reversed this situation and made the acquisition of asymmetric upside more democratic. But not anymore! L1 and L2 have raised more funds from venture capitalists. There are no public token sales. Venture capitalists make money. Retail investors are marginalized. Perhaps it's not so surprising that retail investors' fantasies about this cycle have been shattered.

One important reason companies are willing to remain private for longer is that venture capital funds now have five times more funds than ten years ago. Companies can now raise over $1 billion in private markets without dealing with the additional expenses of public markets.

Unsurprisingly, the same trend has emerged in crypto venture capital—there is now more money flowing into crypto venture capital funds than five years ago.

Cryptocurrencies should solve this problem!

ICOs aimed to democratize capital formation and further gain risk returns. They have absolutely succeeded in doing so.

Buying Ethereum at 30 cents during the ICO in 2014 and seeing it rise to $3,000 today means a return of 10,000 times in 10 years, which can definitely beat any venture capital return during the same period. Anyone on Earth can participate, which is fantastic.

The industry has clearly grown, so entry prices have naturally risen, but these opportunities have not disappeared. $SOL was launched at a price of $0.22 in 2020, and now it is priced at $140, which means a return of 636 times in 4 years, possibly beating almost all venture capital returns in the past five years.

In this cycle, we have moved away from this market structure. There are almost no retail investors who have the opportunity to buy tokens before they are issued or to buy tokens at a low price in the public market.

Airdrops are indeed an improvement, as early users can gain some financial benefits compared to the existing venture capital paradigm. But financially, they are not as good as token sales. By definition, you can only make so much money from airdrops.

We have transitioned from a market with unlimited upside to a market with limits—a huge change. Investing $1,000 in SOL's ICO has now turned into $636,000; whereas investing $1,000 in Eigen can only turn into about $1,030… even if it increases by 10 times, it's only $1,300. In the previous cycle, you controlled your own destiny; in this cycle, you are waiting for Eigen's generosity.

Financial nihilism means acknowledging that these markets have always been about money. Yes, this money has funded technological development, but it is this funding that has driven the entire industry. If the money part is weakened, the entire industry will collapse.

We can do a few things to improve the current issuance structure. The key is to create unlimited upside for early users and the community.

In other words, there are larger structural problems in the market, with L1 and L2 raising massive funds, resulting in valuations of tens of billions of dollars before going live. This brings two problems: (A) a large amount of selling pressure; (B) a lower limit on the issuance price when going live.

I believe one of the structural problems faced by most altcoins in this cycle is that the selling pressure from venture capital has not been offset by retail inflows. If $5 billion is raised before going live, there will be $5 billion of selling pressure (potentially even greater if the token price rises).

Raising funds privately at high valuations means you will try to unload at a higher valuation. This could lead to a situation where the market can only go down.

The relationship between venture capitalists and retail investors does not need to be hostile. Everyone made money on $SOL.

However, it becomes even more difficult if you try to pour too much venture capital into a market with low liquidity. If you deprive the most important market participants of unlimited upside, it is almost impossible.

We can blame and argue about meme coins, but this completely ignores the essence of the problem. Meme coins are not the problem—the current market structure is the problem. Let's return to our democratic roots and solve the problems of the current market.

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