Written by: Spencer Bogart, General Partner at Blockchain Capital
Translated by: Glendon, Techub News
At present, the cryptocurrency industry finds itself in a paradox: as an industry, we have achieved accomplishments far beyond the wildest imaginations. However, the prevailing sentiment is one of malaise and frustration, which we have not seen in a long time. This article will delve into the ongoing "mass repricing."
The industry's previous predictions were correct
The industry's view on on-chain payments and remittances has proven accurate. In 2025, the trading volume of stablecoins reached a historic high of 33 trillion USD, up 72% year-over-year. In just the year 2025, retail trading volume skyrocketed from 314 million transactions to 3.2 billion transactions.
The industry had predicted that native cryptocurrency applications would achieve widespread adoption, and this judgment has also proven precise. Polymarket is a great example, having become a popular global event prediction tool. Phantom has emerged as a wallet used daily by millions of users—its monthly active users have reached 15 million and continue to grow.
The industry also firmly believes that decentralized finance (DeFi) can operate successfully. If Aave is viewed as a bank measured by its deposit scale, it is already large enough to rank among the largest banks in the world.
Moreover, the industry asserted that nearly all large fintech companies and banks would implement on-chain strategies. Today, giants like Stripe, BlackRock, SoFi, Goldman Sachs, Citi, JPMorgan, Visa, PayPal, Revolut, and Nubank have all entered the space.
We now seem to have a clearer understanding than ever that the technology being built is undoubtedly correct. However, the current atmosphere is devoid of any celebratory sentiment.
Discrepancy Between Expectations and Reality
Given such remarkable success, why isn’t there overwhelming joy? Simply put, the answer is price: in recent months, token prices have been on a downward trend, leaving a sense of stagnation.
However, since the inception of the cryptocurrency market, it has endured countless major pullbacks, so why does the current market pessimism seem more pronounced? Some point out that while precious metals and stock prices are hitting new highs, token prices continue to fall. But we believe this is merely a factor exacerbating market pessimism: it is like rubbing salt in a wound, but not the wound itself.
The real reason may lie in the market forcing industry participants to accept a new and harsher reality: the divergence between user growth and token price may not self-correct. The rules of the game have changed, and new data may render long-held theories ineffective.
This contrasts sharply with previous pullbacks driven by cyclical factors; it reflects more of a structural repricing, where the market is reassessing where value is most likely to flow.
In past market downturns, teams could focus internally, fully dedicated to product development, believing that as long as they successfully launched a widely used network or protocol, token prices would rise accordingly. But now, this confidence seems to be lacking. Protocols have been launched, user adoption has surged, yet token prices have not followed suit.
For builders and investors who express their beliefs through holding tokens, the end result is that while their theoretical understanding of industry trends is accurate, there is a misalignment in asset allocation.
Failures of Existing Theories
A simplified token theory is primarily based on the following three beliefs:
- People will develop things that can create immense value.
- These things will capture a substantial portion of the value created.
- The captured value will flow to the token holders.
For years, the industry's primary concern has been simple: can this thing operate normally? Can it scale? These critical questions have now been answered (yes, it can operate normally; and yes, it can scale), and the market's focus has shifted to value capture. At this point, the situation has also become clear: the judgment on the first question was correct. Absolutely correct, and beyond doubt. However, most of the value has not flowed to token holders.
Value Shifting to Higher-Level Applications
Most people invest in cryptocurrencies through tokens. Moreover, most tokens represent infrastructure sectors, such as Layer 1 networks, Layer 2 networks, cross-chain bridges, oracles, middleware, protocols, decentralized exchanges (DEXs), vaults, etc.
However, today, the entities capturing the most value are distinctly different from the infrastructure sector: Phantom, Polymarket, Tether, Coinbase, Kraken, Circle, Yellow Card. These companies have not issued tokens yet.
The reason is simple: in the cryptocurrency space, the most valuable asset is user relationships.
If a product controls the user interface and the transaction process, it controls the distribution channel. Once the distribution channel is in control, it can monetize almost any on-chain product (such as trading, lending, staking, minting, etc.) that users come into contact with.
On the other hand, infrastructure is becoming increasingly interchangeable. When block space is abundant and switching costs are low, the only thing left for competition is price. Cross-chain bridges, L2 networks, decentralized exchanges, and even liquidity can be replaced. As a result, pricing power is also weakened.
Ultimately, in the economic game between the infrastructure layer and the distribution layer, we believe the distribution layer is winning with an absolute advantage. Controlling the distribution channel means having routing capabilities. Routing capabilities lead to the commoditization of infrastructure. Commoditized infrastructure drives economic models toward marginal costs.
This is not self-evident
This phenomenon of the "reversal" of value capture is causing significant turmoil in the industry. The reason is that it contradicts many long-held theories and the architectural assumptions about how infrastructure networks and protocols can capture most of the value.
However, this uncertainty is not a unique anomaly within the cryptocurrency space. Across various cycles of technological development, it is actually a common recurring theme. Historical experience shows that critical questions about value capture and profit distribution are rarely answered definitively in early stages.
For example, during the early stages of the internet, some assumed that telecommunications companies would emerge as the biggest winners. After all, they control the "pipes" through which data flows, and every byte of data passes through these "pipes." This optimistic view held that telecom companies could charge proportionate fees based on the value of transmitted data, which was not without merit. However, fierce market competition drove data prices down to marginal costs, leading telecommunications companies toward commoditization. Meanwhile, value continued to flow to upper-level applications.
However, not every technological cycle allows the application layer to emerge as the biggest beneficiary. In the case of semiconductors and cloud computing, it was ultimately the infrastructure providers that captured a significant amount of value. In these instances, it was factors like scarcity, capital intensity, and switching costs that concentrated economic power at the bottom of the infrastructure layer.
Today, artificial intelligence is facing the same dilemma: will foundational models capture value, or will open-source software lead to commoditization, thereby pushing value to upper-level applications?
In the cryptocurrency space, there was also an assumption that liquidity and network effects would produce sustainably competitive infrastructure winners, leading to significant value capture. However, to this day, applications and aggregators sit between users and underlying infrastructure, directing traffic rationally based on fees. The result is a structural decoupling: the "pipes" are busier than ever, yet value capture is shifting to upper-level applications, to the levels where user relationships reside.
What Will Happen Next?
This is neither a requiem for tokens nor a signal that infrastructure investments are coming to an end.
Cryptocurrency has now gone through three distinctly different development stages: first, the speculative phase; then, the validation phase; and now, we are in the phase where value is ultimately being settled. The current unease and discomfort stem from this final transition.
The infrastructure and applications are in a continuous feedback loop: as applications reach new scales, they will eventually encounter bottlenecks that require the next generation of infrastructure to resolve, thus opening new opportunity cycles. Additionally, there are indeed some excellent infrastructure products with strong pricing power in the market, but this capability must be proven through practice rather than assumed to exist.
Meanwhile, tokens will make a comeback, but they may take on a different new form, shifting focus from governance to direct participation in application layer economics, or even becoming tokenized equity instruments with direct claims on cash flows.
Hyperliquid is a typical example; it is an on-chain application with a workable distribution strategy and has achieved a high degree of economic unification around a single asset. Moreover, broader development in this direction is already taking shape: Morpho, Uniswap, and now Aave seem to be progressing toward unifying protocol and application layer economics around their respective tokens.
At present, the market landscape has shifted, and the market has sent a clear signal: mere functionality is not enough; mere scalability is insufficient to sustain the market. The market demands a direct and verifiable connection between usage, revenue, and asset value.
The industry's judgment on the technology is correct. Now, the market is deciding who can achieve returns. Those builders who not only address value creation issues but also achieve value capture will define the next era of the industry.
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