I am well aware that this kind of post is usually seen as a "bottom signal" by traders.

Author: Travis Kling

Translation: DeepTechFlow

After a rather rough summer for cryptocurrencies, I am releasing the third part of a series of articles, the previous ones being: "There is no excuse for these things to do anything or have any future use" and "Financial Nihilism: The Zeitgeist of Young America." This is about a 10-minute read titled "The Quiet Exit."

I have been focused on the cryptocurrency space for seven years and have been running Ikigai for over six years. I have a fairly extensive network in the U.S. cryptocurrency community and regularly communicate with dozens of industry insiders.

I have recently observed or heard about an attitude or position so much that it has become a trend. Cryptocurrencies are experiencing a widespread "quiet exit."

To give you some background, if you are not familiar with the term "quiet exit," it is a relatively new concept—

People frequently come to me to discuss the "quiet exit" attitude, in part because of the two articles I wrote previously, "There is no excuse for these things to do anything or have any future use" and "Financial Nihilism" here.

These two articles are the most popular long-form articles I have ever written. I am still mentioned on Twitter because of them. Last week, I attended a cryptocurrency conference, and at least six people mentioned these articles to me, so they have indeed struck a chord.

The widespread "quiet exit" trend is a continuation of the viewpoints in these articles, which accurately capture and predict the current state of the cryptocurrency space.

I have observed and heard that a significant portion of the cryptocurrency community is noticeably less involved than in previous years. The reason for their reduced involvement is that they have lost confidence in the potential for cryptocurrency projects to solve real-world problems and gain widespread adoption. From 2017 (the year I entered this space) to 2022, this dream has been repeatedly promoted and widely accepted—"cryptocurrencies will solve real-world problems and therefore gain widespread adoption." Many billions of dollars in venture capital funding have been raised based on this premise.

During this process, there were some phenomena that led people to believe that cryptocurrencies were heading in a certain direction: decentralized finance (DeFi) was one, NFTs were another, the proliferation of stablecoins was another, and Axie Infinity was another. In addition, the adoption rate and price of Bitcoin were rising, and it received support from people like Paul Tudor Jones, Saylor, and Elon, which made people optimistic about cryptocurrencies because Bitcoin was performing very well.

All of these factors, along with some smaller hotspots (such as decentralized autonomous organizations (DAOs) and the metaverse), kept people generally optimistic and also attracted many newcomers to the cryptocurrency space, whether as investors or full-time employees. At times, this optimism would turn into fervor, but even at the most fervent times, most people understood that many things were unstable, overvalued, and lacked product-market fit. These concerns have always existed. And in bear markets, when optimism turns to pessimism, these concerns are magnified, but even in the most severe bear markets (such as the end of 2018 and the second half of 2019), people still held strong optimism for various projects and had broad hopes for the potential of the technology.

I believe the sentiment we are currently facing is different (and many people seem to agree). As the truth is revealed, many things appear meaningless and absurdly overvalued, and the potential of existing projects is increasingly disbelieved.

The airdrop activity for exchanging points is an awkward and unwise failed attempt to drive user adoption. The frenzy of Memecoins is even more embarrassing and unwise. For many cryptocurrency participants who have experienced multiple cycles, it is gradually dawning on them that we have arrived at today with little actual achievement. This realization is a huge blow for those of us who have invested a lot of time and energy in this space over the years.

Suddenly, you may feel that most of your efforts in life have been in vain. You are dissatisfied with the current state and future direction of cryptocurrencies.

To rationalize this understanding, many people have experienced cognitive dissonance, but this understanding ultimately prevails. This has led many people to completely leave this space, and people are leaving the cryptocurrency community in droves. However, there are still some people who choose to stay, but their motivation, passion, and belief have greatly diminished. The main reason many people stay is that it is difficult to imagine doing something else or investing their funds in other areas. Would you go work for a regular company? That sounds like a disaster.

There is also a viewpoint of "voting with your wallet." Despite many people feeling severely disappointed in the potential of cryptocurrencies, they remain in this space because the returns, adjusted for time and risk, are still considered more attractive compared to other investment choices. This seems contradictory, but it is the reality—

"I believe that in most years, Bitcoin (BTC) will outperform all other asset classes, although there will occasionally be bad years. At the same time, I think in those rising years, there will be some selected altcoins that can significantly outperform BTC. It may be a few, or it may be many, but there will always be some. If I can identify these opportunities, I can easily achieve multiple returns. Therefore, I think it's worth continuing to pay attention to this space…"

Imagine that at the age of 30, you have about $2 million in liquid net assets, which you have obtained over the past five years through investing in cryptocurrencies. Although this is a large sum of money, it may not be enough for you to retire. You need to turn this $2 million into $5 million or even $10 million to truly settle down. And you are still young, not ready to retire.

You entered the cryptocurrency space in 2017 because it was then full of excitement, innovation, and potential. Although you have done well financially, you feel limited in the actual achievements of this space and are not as optimistic about the future of cryptocurrencies as before… but you have not exited. Because you don't know where else to spend your time? Trade stocks instead of investing in altcoins? That doesn't sound reasonable. The stock market is more competitive and efficient, but the returns are lower. Therefore, you choose to continue observing the market, hoping to seize an opportunity to triple your net assets within a year… this situation is quite common.

Despite more and more people feeling skeptical about "whether these things are useful or will be useful in the future," this view still prevails. Cryptocurrency enthusiasts are not clear about what will drive the next major surge. There is no DeFi summer, and there is no craze for NFTs. The gaming sector currently has almost no vitality. The metaverse has proven to be a complete joke. Decentralized social media has stalled. People are trying to be excited about the combination of cryptocurrencies and AI, but I (and many others) believe that this excitement may be misplaced (at least for now).

DePIN is making progress and growing rapidly, which is exciting—possibly the most promising part of the current altcoin space. Therefore, this is an area where people are hoping to drive future price increases through real-world applications. However, in the cryptocurrency space, such areas are few and far between.

Another aspect is the criticized cryptocurrency venture capital investment environment. In simple terms, the cryptocurrency market continues to reward venture capital that early invested in token projects, even if these projects have made little progress in their expected use cases, and venture capital can sell them to retail investors at huge profits.

Token projects can: create a chain reaction of airdrops; artificially inflate market value; hire market makers and pay high fees to ensure they profit regardless; list tokens on major exchanges; and then sell off in large quantities, causing their value to plummet. Even if the token price drops 85% after listing, early venture capital can still make multiple returns. This is a significant feature of the current altcoin market structure. The cryptocurrency market allows venture capital to recoup funds and raise new capital through investments that never truly had an impact. This is a typical case of misaligned incentives. It's hard to blame venture capital—they always act according to incentives. And so far, the market's attitude is: "Please venture capital, list more low-quality projects at absurd fully diluted valuations (FDV) on major centralized exchanges (CEX), and then sell them to us." Unless the market no longer provides this opportunity, it's hard to expect venture capital to change its approach. They have made enough money to buy private jets this way.

In the cryptocurrency world, there is a saying popularized by a friend of mine: "Do you want to do the right thing, or do you want to make money?" This has become a slogan for many cryptocurrency practitioners. I understand that it emphasizes profit above all, especially beyond the desire to prove oneself "right." But I would like to present a counterpoint—"If you make enough mistakes in the process of making money, you may eventually lose the opportunity to continue making mistakes and making money." We are now witnessing some situations like this.

All of the above can explain why there is a widespread "quiet exit" phenomenon in the cryptocurrency space. Returning to the traditional definition of "quiet exit" in the article in The New Yorker—quiet exits in the workplace disrupt the company's culture. This is something an ambitious CEO fears the most. When employees see others not working hard and not believing in the company's mission, they naturally develop thoughts of not wanting to work and not believing in the mission. We are imitative beings. Enthusiasm is contagious, and so is the lack of enthusiasm. Therefore, "quiet exits" will trigger more "quiet exits."

So far, in this cycle, we have not even come close to attracting as many new users as in previous cycles (excluding new ETF investors). Cryptocurrencies are not the preferred field for America's best and brightest young people. Since the damage brought by 2022, this industry still faces many embarrassments, and we have almost not taken enough measures to repair our reputation in attracting top talent. Imagine if you were considering joining a company where a "quiet exit" phenomenon is widespread, would this be the opportunity you want to seize?

So, what does this mean?

I am well aware that this kind of post is usually seen as a "bottom signal" by traders. In the cryptocurrency space, historically, buying in when market sentiment is most pessimistic and selling when it is most optimistic often yields amazing returns. And this widespread "quiet exit" phenomenon is undoubtedly a pessimistic signal, so people tend to buy heavily in such situations. I understand this.

Another counterargument to the points I am making here is "we are still in the early stages, bro." Stop saying that. It's not early at all. Bitcoin's market cap has now reached a trillion dollars, and almost half of Wall Street holds it. The market cap of other cryptocurrencies has also reached a trillion dollars. Tether holds more U.S. Treasury bonds than Germany. Over $20 billion in venture capital has poured into this space in the past four years. We are no longer in the early stages.

Stop comparing it to the "late 90s internet," look at what happened then. This is not the late 90s internet. Bitcoin and stablecoins have found their market positioning, while other cryptocurrencies are like lost in the sea. At best, they are just looking for solutions to problems, and at worst, they are ruthless and cruel scams.

Nevertheless, I believe there is still reason to be optimistic about altcoins. In my view, the most anticipated scenario is Trump winning in November, which will lead to an effective regulatory framework that allows the restructuring of altcoin structures to have characteristics similar to securities, thus achieving attractive value growth.

For years, we have been discussing the concept of value creation and accumulation, and the bridge connecting the two is the Token structure. Under the policies of the Trump administration, governance tokens without value may be eliminated, and pseudo-securities with income and burning mechanisms may be introduced—thanks to the U.S. regulatory framework allowing such innovation. In such an environment, you can imagine that the altcoin market will become more real in two years.

This is a development direction worth paying close attention to.

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