Over the past few years, the crypto market has experienced rapid rotation across ETFs, Memecoins, Layer2s, on-chain finance, and various new narratives. A large number of projects, capital, and users flooded in within a short period, rapidly expanding both market size and asset count. But as liquidity begins to contract, the real questions the industry must face become apparent: how much of this growth stems from genuine demand, and how much valuation is built merely on attention and continuous capital relay.

This is not the first time an emerging technology has gone through a similar phase. The histories of railroads, radio, and the internet all show that a technology with long-term value does not lose its significance simply because the market experiences a bubble. On the contrary, bubbles tend to front-run future expectations, concentrating capital on business models that are not yet mature. When the funding environment shifts, companies lacking revenue, user retention, and competitive advantages come under pressure first, while the infrastructure and business models that survive will re-establish value during the adjustment period.

The Valuation Logic of Crypto Assets

In past crypto cycles, "new narratives" themselves often generated liquidity. A new L1, scaling solution, application concept, or token mechanism could attract capital quickly as long as it gained sufficient attention. However, as similar projects multiply, market attention becomes increasingly fragmented, and competition within the same track shifts from vying for users to vying for liquidity.

The number of chains, DEXs, and tokens in the crypto market is now enormous, and low-cost token issuance tools have further lowered the barrier to asset creation. A large number of homogeneous assets compete for limited capital simultaneously, leading to noticeable liquidity fragmentation in certain tracks.

This shift is driving an adjustment in the valuation framework. The market is beginning to focus more on protocol revenue, transaction demand, capital efficiency, user stickiness, and token value capture, rather than judging project quality solely by TVL, address count, or short-term trading heat. For projects lacking stable revenue streams, product differentiation, and long-term user demand, even if they still attract attention in the short term, it becomes harder to sustain the previous logic of continuous valuation expansion.

Further Divergence of Crypto Assets

Another notable shift in the current market is the widening divergence in capital structure between Bitcoin and a large number of small and mid-sized crypto assets. The institutionalization of Bitcoin continues to deepen, while many altcoins still face issues such as increasing token supply, homogeneous narratives, and insufficient trading liquidity.

This divergence implies that future market opportunities may no longer manifest as synchronized rallies across all assets. Capital is more likely to flow first into assets with ample liquidity, mature market recognition, and clear fundamental demand, while higher-risk projects will need to prove their value through actual products and commercial capabilities.

This also explains why a market correction does not necessarily equate to an overall industry downturn. As prices and valuations decline, capital may be re-concentrating. For mature assets, institutional participation, market infrastructure, and the refinement of regulatory frameworks are forming new support; for early-stage projects, higher financing barriers may force teams to move away from growth models that rely solely on token prices and refocus on products, users, and cash flow.

Considering Real Financial Demand

If the focus of the previous market phase was on creating more on-chain assets, the direction worth watching in the next phase is likely how to bring these assets into scenarios such as payments, settlement, financing, and asset management.

Stablecoins have already become a key representative of this trend. Unlike speculative tokens that depend on market sentiment, the demand for stablecoins stems more from transaction settlement, cross-border capital flows, on-chain payments, and the use of digital dollars. RWA tokenization is also expanding the connection between blockchain and traditional assets, gradually bringing bonds, funds, credit, and other real-world assets into the on-chain environment.

For project teams, this means that the focus of future competition will gradually shift toward who can generate more stable revenue and demand. For capital, investment criteria will become closer to traditional corporate analysis, including revenue quality, cost structure, customer retention, balance sheet conditions, and whether the business model can be sustained over the long term.

The Market Enters a More Rigorous Screening Phase

The crypto market remains highly volatile, with macro liquidity, interest rates, regulatory changes, and geopolitical risks likely to continue influencing asset prices. It is therefore difficult to simply conclude that the market has entered a definitive long-term uptrend. A prudent yet optimistic reading is more appropriate: infrastructure, institutional participation, and certain real-world use cases are improving, but macro and industry-specific uncertainties persist.

A more notable shift is the migration of evaluation criteria. In the early days of the crypto industry, growth speed, asset issuance, and narrative innovation were prioritized. As the sector enters a new phase, real users, revenue generation, liquidity quality, risk management, and the ability to address actual financial needs will increasingly serve as key drivers of long-term value.

Each market correction eliminates a portion of projects while re-concentrating remaining resources. For the crypto industry, the foundation of the next growth cycle will come from mature products, clear business models, and deeper integration between blockchain and real economic activity.

Disclaimer

This content is provided for informational purposes only and should not be regarded as investment advice or a trading recommendation. Digital assets are subject to price volatility and potential risks, and the availability of related products and services may vary depending on the laws and regulatory requirements of different jurisdictions. Please make sure to understand the relevant rules and carefully assess the risks before participating in any trading activities.