Editor's Note: This article delves deeply into the changes in the crypto market, particularly the fatigue felt by retail users. It is not difficult to see the transition from a venture capital-dominated market to the meme coin craze starting in early 2024. Although meme coins once provided a fairer opportunity for retail, they ultimately became too speculative, leading to a deterioration of market conditions. Retail users are weary of losses, the market has become fast-paced and highly competitive, emphasizing the importance of finding a new balance and calling for more attention to projects with real-world applications and fair issuance mechanisms.
The following is the original content (edited for easier reading):
As Kaitoai pointed out, in the last two weeks of January 2025, the word "fatigue" saw an increase in mentions on Crypto Twitter.
This cycle is different from others, with greater challenges, even surprising traders who have been through two or three cycles. The market is changing: the pace of narrative change is faster, and attention has become the scarcest currency. Last but not least, the increasing regulatory scrutiny and political intervention in the crypto space have brought new variables.
Why are people feeling fatigued?
Retail investors have missed out on opportunities for too long, and each time the target seems within reach, the market's playbook changes faster than the last. In the 2021 cycle, we saw venture capitalists achieving exponential returns compared to retail investors without private investment opportunities.
This continued until around 2023, when projects like TIA and DYM were launched, marking the end of retail investors' illusion about these venture capital extraction technologies.
What might be the most rational consequence of this? A movement seeking to change the power dynamics.
The long-standing "Meme Coin" narrative has gained more attention as venture capitalists no longer have private stakes to dump on unsuspecting retail buyers. This was beneficial for retail investors, who managed to find a level playing field. Until the narrative was overhyped and saturated, and users' attention span further narrowed. Let's see how the market landscape has evolved and where we might be headed, in an attempt to explain why people are feeling fatigued.
Phase 1 (Early 2024) - From VC Coins to Meme Coins
It feels like a lifetime ago, before the AI hype and meme coin frenzy, there was a time when the mainstream play for retail investors was airdrops. This was kickstarted by Arbitrum and other Layer 2 airdrops. Retail users saw the potential of earning through trying new protocols and chains, and airdrops became a business, with airdrop-as-a-service companies emerging.
However, the dream turned into a nightmare when these tokens started releasing and disclosing their token economics - all the effort, for what ended up being almost nothing? One of the most controversial releases was Scroll, a ZK-EVM L2.
After over a year of ecosystem promotion, the Scroll airdrop was a huge letdown, with the questionable allocation of 5.5% of the SCR supply to Binance instead of the community.
Additionally, most of these tokens had very low circulating supplies (circulating supply/total supply), with a large portion of the shares allocated to VCs. Another topic of discussion was TIA and DYM, where the narrative on Crypto Twitter was once about staking them in exchange for the expectation of future ecosystem project airdrops.
You guessed it: those airdrops never happened, and the token price trends only went down (the chart below is for DYM).
This is an overview of the different rounds and investor unlocks for TIA:
In the first unlock, over 97.5% of the TIA circulating supply was unlocked, worth over $1.88, with a daily TIA unlock volume of $10 million.
Ultimately, retail investors became fatigued with these types of tokens, meaning most token prices only went down, eventually even below their last fundraising valuation.
This is evident when we look at the dashboard provided:
This dashboard considers the best-performing investment returns for each VC in the data sample.
Venture capital returns in the previous cycle:
Venture capital returns in the current cycle:
The end of the venture capital era is so evident that even Hayes accurately pointed it out in his article in December 2024 - at the end of the dark tunnel, retail investors saw a glimmer of hope: meme coins.
Tired of the venture capital-driven machinations, retail investors finally had the chance to enter the permissionless market that blockchain was supposed to be open to.
Surely this must be the way forward, right?
Phase 2 - The Meme Coin Frenzy
After the venture capital era ended, users had to find a new playbook, and they discovered it through muststopmurad and his "meme coin super cycle".
For retail investors, meme coins seemed to be the closest thing to having an equal opportunity in the market - until they weren't.
Prices went up, Trump got elected, we're going to the moon.
But suddenly, the liquidity plug was pulled, and the market's attention shifted elsewhere, and all your meme coins crashed during the market correction.
Meanwhile, all the early insiders who had the chance to position themselves also had the opportunity to dump their bags. Perhaps the situation retail investors ultimately found themselves in was even worse than what they experienced with VC coins.
What's left now? Becoming more risk-prone, further narrowing the attention span, liquidity further fragmented, while trying to understand past mistakes through even more gambling disguised as "trading".
Pumpfun is just a symptom of the direction the market is heading.
jediBlocmates highlighted the net negative issues in this ecosystem.
Among the reasons mentioned, the Pump.Fun team has been constantly transferring large amounts of funds out. In the last month alone, they have transferred over 880,877 SOL to Kraken, totaling $211,410,480.
The impact of meme Bits and the Pump.Fun craze is evident in the market changes they have brought about: the narrative changes rapidly, the environment becomes like player-versus-player, and people no longer believe in anything.
Stage Three - Post-Market Trauma PTSD: People Feel Exhausted
After being lost to venture capitalists, users now bear the trauma of the Pump.Fun arena, hoping their next 100x gain can make up for their previous losses. The market has now changed forever, and the new gameplay is a reflection of this change.
Market rotation is becoming shorter and faster, in the previous cycles you could hold an opening position while sleeping, hold tokens for weeks, but now, at most only a few days or hours. New projects suck up all the liquidity: attention is scarce, everyone is playing the same game.
The influence of politics and regulation is constantly increasing: this is particularly evident in the launch of TRUMP, highlighting how external events could have an unprecedented impact on the market.
Unfortunately, once again, retail investors have lost their way in this game, and many tokens have become like the capital extraction mechanisms they are already very familiar with. In contrast to this trend, the launch of Hyperliquidx has drawn attention to community-led airdrops and issuances. Over 31% of the airdrop allocation went to the community, and the token price has risen more than 7 times since its launch, proving that fair issuance can be achieved.
However, it must be considered that not every project can replicate this model, as Hyperliquid, for example, has already taken on tens of millions in huge expenses to run for a long time.
Importantly, the launch of Hyperliquid has already brought about a paradigm shift in the industry. Along with the release of Kaito, the way projects are launching has also changed.
Where Does This Leave Us?
The stages considered here highlight two extremes:
1. The power of venture capitalists is too great: retail investors cannot participate in private rounds and can only serve as exit liquidity.
2. Unlimited access to meme Bits has led to a player-versus-player market, with overall market conditions becoming worse.
Both have the same consequence: dissatisfaction of retail investors and a demand for balance and stability.
We leave some possible thoughts to see what the future might look like: a return to utility, less focus on meme Bits, and more focus on utility projects.
Less focus on value extraction, more focus on value creation, avoiding zero-sum games. A return to fair issuance, inspired by Hyperliquid.
A completely new transformation of protocol marketing and token release methods, using tools like Kaito for marketing, growth activities, and emphasizing the influence of social graphs and communities.
Although we all know that price is the best marketing tool and has always been an important factor in attracting talented people and liquidity, it would be a shame to continue to focus on value extraction if a supportive regulatory environment is about to arrive.
The growth cycle of emerging markets is often full of ups and downs like a roller coaster, but it is crucial to have an ultimate goal and to map out a viable path for the majority. That is, to build something truly valuable.
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