On March 27, Yili Hua, founder of Liquid Capital (formerly LD Capital), published several long posts on X, offering a comprehensive critique of the current cryptocurrency market. He acknowledges that after a four-year cycle, prices have risen to new highs, yet he points out the industry media consensus that "the overall performance over the past four years has been disappointing," revealing the vast gap between price levels and actual participation experiences. On the surface, Wall Street is continually increasing investments through spot ETFs and various compliant products, with funds "flowing in continuously" on paper; however, inside the market, retail investors and the crypto middle class increasingly exhibit pessimism, retreating and waiting on the sidelines as the mainstream response. Wall Street is buying while those who originally formed the crypto soil are quietly exiting after rounds of structural blows, which is the core narrative he attempts to expose.

Looking Back at Four Years: Behind the Boisterous Bull Market

From the timeline, since the last complete cycle, the cryptocurrency market has gone through extreme prosperity and severe adjustments over the past four years. In terms of pricing, leading assets have repeatedly set historical highs, social media and candlestick charts are still filled with "bull market" narratives, but industry media has repeatedly cited "the overall performance over the past four years has been disappointing" to summarize the entire stage's investment returns. This discrepancy arises from the fact that the vast majority of ordinary participants did not share in the fruits of the cycle's recovery; instead, they were continually diluted by high volatility and frequent market mishaps. Many entered at the high in 2021, and even when prices returned to or slightly exceeded that year's levels after a long-term pullback, deducting time costs and mid-cycle adjustments, their actual returns still tend to feel like failures.

This sense of failure is further amplified by the misalignment of wealth distribution. On the surface, the market drama repeats itself, with new highs intertwined with emotional peaks, but the real beneficiaries behind the scenes are top institutions, a few surviving large players, and professional investors armed with more information and tools. Many small and medium participants either get caught at high positions during multiple rebounds or are weeded out by panic in the bottom range, ultimately creating an extreme contrast between dazzling prices and gloomy accounts. Unlike the "from coins to DeFi to NFTs" continuous prosperity from 2017 to 2021, while this cycle does not lag behind in terms of market capitalization and media hype, it lacks an intuitive memory of "everyone sharing in growth dividends." More individuals are left with a complicated and bitter mental account.

The 1011 Shock and the Retreat of Altcoins:

On top of this long-term gap, Yili Hua specifically mentions the narrative of "the 1011 event harvested the crypto middle class, while the retreat of altcoins harvested retail investors." Although the specifics of the 1011 event still lack publicly available systematic reconstruction, it has been regarded in traders' collective memory as a critical blow that crushed middle-class holders: the "crypto middle class," with larger positions, moderate leverage, and risk preferences between institutions and retail, were the first to be hit by high-level pullbacks and liquidity upheavals. Many haven’t genuinely returned to a heavily invested state since then.

In contrast, the retreat of altcoins resembles a protracted liquidation of retail investors. Retail investors tend to have more dispersed positions and limited risk tolerance, yet they are more likely to chase high-volatility assets driven by social media sentiment. When the mainstream narrative fades, and liquidity concentrates on major players and compliant products, the prices of numerous small and medium-cap assets continue to decline, even approaching zero. Those retail investors who entered at high levels filled with hope rarely see an opportunity to break even. The middle class is "crushed" by concentrated events, while retail investors are "eroded" in lengthy downtrends, with both groups bearing the full malice of the cycle at distinct points of vulnerability.

It is worth noting that these blows in market sentiment are no longer seen as single "black swans" but are summarized as a structural harvesting outcome: whether it is a liquidity trap at emotional peaks or the linkage failure among projects, platforms, and leverage structures, upon reflection, a high degree of consistency in "script-like" patterns emerges. Over time, the harvested groups no longer look forward to the next opportunity; instead, they opt to lower their participation, remain on the sidelines, or withdraw entirely. The long-term psychological aftermath manifests as a fundamental skepticism towards any new narrative—voices claiming "another skin-deep harvesting" become increasingly common in the community.

Wall Street's Real Money Involvement, Local

In contrast to the retreat of the middle class and retail investors is a dramatic shift in the flow of funds. According to industry media analysis, the current net increase in market funds primarily comes from Wall Street spot ETFs, various DAT products, and a few believers who continue to add positions. This indicates that traditional financial institutions are bringing long-term capital and asset allocation logic into the cryptocurrency space through compliant channels; meanwhile, most native crypto players either choose to reduce positions during rebounds at high levels or simply avoid high-risk assets, leaving behind only a handful of "long-termists" still buying in.

Yili Hua's critique focuses on this funding discrepancy: on one side, institutions like Wall Street continuously buy core assets like Bitcoin through ETFs and other tools with low financing costs and more mature risk management systems; on the other side, older players facing multiple rounds of blows and deteriorating liquidity and risk tolerance are forced to sell, becoming the "counterparty" of compliant funds. He refers to industry consensus that "exchanges, market makers, and project parties continually draw blood from the market." In this narrative, infrastructures that should serve ordinary investors are viewed as key links of structural deprivation, turning into an invisible pipeline transferring chips from weaker hands to stronger ones.

Under such a structure, the market presents an ironic landscape: a few true long-term believers continue to increase positions at low points, while the majority gradually become liquidity exits. The former are willing to trade time for space under macro and industry headwinds, while the latter passively provide chips and volatility returns for institutions amidst rounds of fluctuations. Prices can continue to rise under the impetus of ETF subscriptions and institutional buying, but the answers to "who is buying, who is exiting" are distinctly different from the last cycle.

Under Extreme Hawkish Expectations: Price Trends More Like

Yili Hua further shifts his gaze from the industry to the macro environment. He cites data from the CME Federal Reserve observation tool to point out that the market currently prices the Federal Reserve extremely hawkishly—it almost completely rules out the possibility of interest rate cuts until March 2027. In such a long-term high-interest macro backdrop, it becomes exceptionally fragile and abnormal for risk assets, which traditionally rely on low-interest rates and excessive liquidity for growth, to rise: with risk-free rates remaining high, the opportunity cost of holding high-volatility assets becomes greater, and any expectations regarding economic slowdowns or financial tightening will amplify the market's pullback momentum.

When the high-interest macro "ceiling" presses down, and the internal structure of the crypto continues to exhibit "exchanges, market makers, and projects drawing blood," many participants feel a dual squeeze: above them are hard constraints from policies and funding costs, while below them are structural harvests brought on by internal struggles and increased concentration of chips. Prices can sustain new highs driven by short-term inflows, but this increase lacks broad-based participation and real economic support; it appears more as a result of liquidity being precisely channeled rather than a resonance of widespread confidence. From this perspective, Yili Hua questions the current rise: is it truly the starting point of a new long-term bull market, or under extreme hawkish expectations, is it merely a short-term liquidity story driven by a minority of funds?

A Bull Market Without New Stories: Innovation Stalled

If the macro and structural flow of funds explains "who is buying who is selling," then the aridity of the narrative explains "why many do not want to buy anymore." Compared to the golden period from 2017 to 2021, which saw decentralized lending, AMM, NFTs, and GameFi, the crypto world has continuously thrown out disruptive narratives like DeFi and NFTs that made participants feel they were not just speculating but betting on a new order that could reshape finance and content distribution. Today, Yili Hua bluntly states, "the crypto space lacks genuinely disruptive innovation," and the industry is primarily compressing stock on old models.

The absence of new stories signifies an exacerbation of industry infighting: most new projects are merely making incremental modifications on the edges of old narratives, repackaging play styles, tweaking on-chain parameters, and retweaking incentive mechanisms but fail to provide a long-term vision compelling enough to persuade the middle class and retail investors to re-enter heavily. For ordinary participants who have experienced multiple cycles of "telling big stories—pumping—dumping—going to zero," every new concept or segment is more easily classified as "another round of foolish games," and they are no longer willing to bear the risk of becoming the last one holding the bag.

In this vacuum of innovation, funds struggle to flow towards truly value-creating application scenarios and instead oscillate between institutional arbitrage and foolish games: on one end, there are arbitrage products surrounding different regulatory zones, including ETFs, trusts, and various compliant vehicles; on the other end, there is highly financialized narrative speculation relying on airdrops, points, market-making subsidies, and short-term yield stimulating money in and out. For the middle class and retail investors, such an ecosystem lacks justification for long-term holding; once trust is broken, it becomes difficult to repair easily.

When Crypto Becomes an Institutional Game: Next

Connecting these clues, Yili Hua's critique points to three clear fractures. The first is the participant fracture: from the "1011 event" to the retreat of altcoins, middle-class and retail investors suffer losses at different stages, leaving fear and fatigue, while the newcomers are institutions and high-net-worth individuals coming in through ETFs and DATs. The second is the innovation fracture: compared to the explosion of agreements and narratives from 2017-2021, there is a lack of disruptive products capable of carrying a new cycle, and the industry is mostly infighting within old models. The third is the macro fracture: extreme hawkish pricing and long-term high interest rates make the ongoing rise diverge from traditional risk asset logic, deepening the collective unease about "this market lacks stability."

In this scenario, "the coexistence of Wall Street's continued accumulation and the retreat of retail investors" is likely not a short-term phenomenon, but a structural contradiction that will exist long-term: compliant products incorporating core assets like Bitcoin into traditional asset allocation frameworks render it more of an alternative asset rather than a lever for grassroots resurgence; meanwhile, the vast majority of old participants, who have been repeatedly harvested and exited midway, can only calculate "how much would it be worth now if I had not been washed out back then" as prices hit new highs.

To mend this fissure, the future can only hope for two things: more transparent distribution of benefits and the resurgence of genuine innovation. The former implies that critical links such as exchanges, market makers, and projects need to provide more equitable pricing relationships for ordinary participants in their rules, reducing invisible extraction and information asymmetry; the latter requires new agreements and applications that can prove crypto is not merely a more efficient speculative machine but an infrastructure capable of linking broader real-world value. Only when ordinary participants see the possibility that "long-term participation also has positive returns" can trust find the soil for reconstruction.

The unresolved question is: will the next round of wealth redistribution continue to harvest from the old or will it, under the participation of new players and the design of new systems, initiate a set of different game rules? As crypto increasingly resembles an institutionally dominated market, will the group that once elevated it to the altar choose to leave entirely, or in another unexpected turning point, return to the table?

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