Original source: Co-founder of Syncracy CapitalRyan Watkins
Compiled by Odaily Planet Daily, Qin Xiaofeng (@QinXiaofeng 888 )
Editor’s Note: Ryan Watkins, co-founder of Syncracy Capital, recently published an article titled “The Twilight Zone: Envisioning the Crypto Economy Beyond 2026.” He notes that crypto assets were overhyped in 2021, and since then, valuations have steadily returned to rational levels—with high-quality assets now fairly valued. The growth of the broader crypto economy is shifting from cyclical drivers to long-term secular trends, and the industry has already spawned several real-world use cases beyond Bitcoin. “Nothing is more powerful than an idea whose time has come, and the emergence of the crypto economy has never been more inevitable.”
The following content has been translated by Odaily Planet Daily. Enjoy～
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The crypto economy is undergoing the biggest transformation I've witnessed in my eight years in the industry.
Institutions continue to accumulate digital assets, while early crypto pioneers are dispersing wealth and cashing out. Enterprises are positioning themselves for S-curve growth, while disillusioned native users are exhausted. Governments worldwide are driving the global financial system toward blockchain integration, while day traders remain anxious over a few candlesticks on a chart. Emerging markets celebrate financial democratization, while American cynics lament it all as nothing more than a giant casino.
Recently, there has been much discussion about which historical period the current crypto economy most resembles.
Optimists compare it to the recovery period after the dot-com bubble burst, believing the era of speculation in the industry has ended, and long-term winners like Google and Amazon will emerge and climb along the S-curve. Pessimists liken it to an emerging market, similar to China in the 2010s, arguing that weak investor protections and a lack of patient, long-term capital that only buys and never sells could lead to poor asset performance even as the industry thrives.
Both perspectives have merit. After all, history is the best guide for investors beyond their own experience. However, the utility of analogies is ultimately limited. We must also understand the crypto economy within its own unique macroeconomic and technological context. Markets are not monolithic—they are made up of many individuals and stories, interconnected yet distinctly separate.
This is my best assessment of the source and destination.
The Red Queen's run
In the British author Lewis Carroll's "Alice's Adventures in Wonderland," the Red Queen tells Alice: "You see, here you must run as fast as you can just to stay in place. If you want to go somewhere else, you must run at least twice as fast!" In 1973, evolutionary biologist L. van Valen used this to propose the "Red Queen Hypothesis," which aptly describes the fierce rules of survival competition in nature: standing still means falling behind; stagnation equals extinction.
In many ways, the only thing that matters in financial markets is expectations. Above expectations, prices rise; below expectations, prices fall. Over time, expectations swing like a pendulum, and long-term returns are often negatively correlated with them.
In 2021, the expectations extrapolated from the crypto economy far exceeded the awareness of most people. This was evident in some ways, such as DeFi blue-chips trading at price-to-sales ratios of up to 500x, or eight smart contract platforms achieving valuations exceeding $100 billion. Not to mention the dazzling absurdities surrounding metaverses and NFTs. But the clearest indicator of the situation was the Bitcoin-to-gold ratio chart.
Despite all the progress we've made, Bitcoin's price relative to gold has not reached a new high since 2021—in fact, it has declined since then. Who would have thought that, in Trump’s “crypto capital,” following the most successful ETF launch in history and amid systemic dollar depreciation, Bitcoin’s performance as digital gold would be worse than it was four years ago?
For other assets, the situation is much worse. Most of these projects entered this cycle with significant structural issues, compounded by the challenges of responding to extreme expectations:
- The revenues of most projects are highly cyclical and depend on continuously rising asset prices.
- Regulatory uncertainty hinders institutional and enterprise participation.
- The dual ownership structure leads to misaligned interests between insider shareholders and public market token investors.
- Weak disclosure practices have created information asymmetry between the project team and the community.
- Lack of a common valuation framework leads to excessive volatility and no fundamental price floor.
The interplay of these issues has caused most tokens to continue losing value, with only a handful sensing the momentum of pre-2021 highs. The psychological impact is immense, as few things in life are more discouraging than consistently putting in effort with no return.
This disappointment is especially profound for speculators and opportunists who believed crypto assets were a shortcut to wealth. Over time, this struggle has led to widespread burnout across the industry.
This is certainly a healthy development. Minor efforts should no longer yield extraordinary returns as they did in the past. The era before 2022, when vast wealth could be accumulated merely through conceptual embellishment, was clearly unsustainable.
Nevertheless, a glimmer of hope lies in the fact that the aforementioned issues are well known and have already been priced in. Today, aside from Bitcoin, few crypto-native players are willing to seriously consider any other asset’s long-term fundamental narrative. After four years of hardship, this asset class now has the necessary conditions to deliver another surprising rally.
The Awakening Cryptoeconomy
As mentioned in the previous section, the crypto economy entered this cycle with numerous structural issues. The good news is that everyone now recognizes this, and many of these issues are becoming relics of the past.
First, beyond digital gold, numerous use cases are demonstrating compounding growth, while many others are in transition. Over the past few years, the crypto economy has spawned:
- A peer-to-peer internet platform that enables users to execute transactions and enforce contractual relationships without the need for government or corporate intermediaries.
- The digital dollar can be stored and transferred anywhere in the world with internet access, providing billions of people with affordable and reliable money.
- A permissionless exchange that enables anyone, anywhere, to trade top global assets across all asset classes, 24/7, in a single, transparent venue.
- Novel derivatives such as event contracts and perpetual swaps provide society with valuable predictive insights and more efficient price discovery mechanisms.
- Global collateral market that enables users to access credit without permission through a transparent, automated infrastructure, significantly reducing counterparty risk.
- A democratized asset creation platform that enables individuals and institutions to issue publicly tradable assets at extremely low cost
- An open fundraising platform that enables anyone in the world to raise capital for their ventures, breaking free from the constraints of local economies.
- A physical infrastructure network that builds more scalable and resilient infrastructure by crowdfunding capital and distributing operations to independent operators.
This is not an exhaustive list of all valuable use cases built in the industry to date. The key point is that many of these use cases are already demonstrating real value and continuing to grow, regardless of fluctuations in cryptocurrency prices.
