The game without winners: how the altcoin market broke

Behind the continued downturn and weak rebound of altcoins this year, the real pressure does not come from the market, but from structural imbalances. Chain data shows that a large number of projects originating from the 2021-2022 financing peak are releasing tokens in a concentrated manner, and supply is rapidly pouring into the market, but real demand is obviously insufficient. What is even more difficult is that the coin issuing mechanism itself has hardly changed. After the tide of venture capital funds, many teams still use coin issuing as the main means of financing or internal exit, further exacerbating selling pressure. This cycle of \"flooding of supply, lack of demand, and failure of mechanisms\" is dragging the altcoin market into a dilemma in which all parties lose.

1. Low circulation dilemma: a four-lose game

In the past three years, the entire industry has relied on a seriously flawed mechanism: low-circulation coin issuance. The liquidity of the project was extremely low when issuing coins. Often only single-digit percentages are maintained artificially with high FDVs (fully diluted valuations). The logic seems reasonable: if there is less supply, prices will be stable.

But low circulation will not remain low. As supply is released one after another, prices are bound to collapse. Early supporters have instead become victims. According to the data, most tokens have performed poorly since they were launched.

is that low circulation creates a situation where everyone feels that they are taking advantage, but in fact they are all losing money:

Centralized exchanges think that by requiring low circulation and strengthening controls to protect retail investors, but the result is that community resentment and poor currency price performance.

Token holders originally thought that \"low circulation\" could prevent insiders from smashing the offer, but in the end they did not wait for effective price discovery, but were counterattacked by early support. When the market requires insiders to hold no more than 50% of the currency, primary market valuations are pushed up to distorted levels, which in turn forces insiders to rely on low-liquidity strategies to maintain apparent stability.

The project party believes that low liquidity manipulation can support high valuations and reduce dilution, but once this practice becomes a trend, it will destroy the financing capabilities of the entire industry.

VCs thought that they could value their positions based on the market value of low-traded tokens and continue to raise funds. As a result, as the shortcomings of the strategy were exposed, medium-and long-term financing channels were cut off.

Perfect four-lose matrix. Everyone feels like they are playing big chess, but the game itself is unfavorable to all participants.

2. Market reaction: Meme coin and MetaDAO

markets have tried to break the game twice, and both attempts exposed how complex the token design is.

Round 1: Meme coin experiment

Meme coin is a counterattack against the low circulation of venture capital coins. The slogan is simple and seductive: 100% circulation on day one, no VC, completely fair. Finally, retail investors will not be cheated by this game.

Reality is much darker. Without the filtering mechanism, the market was flooded with unfiltered tokens. The replacement of the venture capital team by lone, anonymous traders not only did not bring fairness, but created an environment in which more than 98% of participants lost money. Tokens become running tools, and holders are harvested within minutes or hours of going online.

Centralized exchanges are in a dilemma. If you don\'t use Meme coins, users will directly trade on the chain; if you use Meme coins, you will have to take the blame if the currency price collapses. Token holders lose the most. The only real winners are the coin issuing team and platforms like Pump.fun.

Round 2: MetaDAO model

MetaDAO is the market\'s second major attempt, and the pendulum swings to the other extreme-an extreme tendency to protect currency holders.

There are indeed benefits:

● Currency holders gain control, making capital deployment more attractive

● Insiders can only cash out if they meet certain KPIs

● New financing methods have been opened up in a capital-tight environment

● The initial valuation is relatively low and access is fairer

But MetaDAO overkills, Brings new problems:

● The founder lost too much control prematurely. This has created a \"founder\'s lemon market\"-a model where strong and selective teams avoid and only teams that have no choice will accept it.

Tokens are still launched at an extremely early stage, with huge fluctuations, but the screening mechanism is less than the venture capital cycle.

● The unlimited additional issuance mechanism makes it basically impossible for first-tier exchanges to put on shelves. MetaDAO is fundamentally incompatible with the centralized exchange that controls the vast majority of liquidity. Without access to centralized exchanges, tokens are trapped in markets where liquidity is exhausted.

Each iteration wants to solve the problem for one party, which also proves that the market has the ability to self-regulate. But we are still looking for a balanced solution that takes into account the interests of all key players: exchanges, currency holders, projects and capital.

Evolution continues, and there will be no sustainable pattern until balance is found. This balance is not about satisfying everyone, but about drawing the line between harmful practices and legitimate rights.

3. What should the balance plan be?

A centralized exchange

● What should be stopped: requires an extension of the lockup period to hinder normal price discovery. These extended lockups may seem protective, but actually prevent the market from finding reasonable prices.

● What you have the right to demand: Predictability of the token release schedule and effective accountability mechanism. The focus should shift from arbitrary time locks to KPI unlocking, using shorter and more frequent release cycles, linked to actual progress.

Token holder

● What should be stopped: Because of a historical lack of power, overkill and overcontrol, scaring away the best talents, exchanges and venture capitalists. Not all insiders are the same, requiring unified long-term lockups, but ignoring the differences in different roles and hindering reasonable price discovery. Persistence in the so-called magic position threshold (\"insiders cannot exceed 50%\") has created a soil for low-circulation manipulation.

● What you have the right to demand: Strong information rights and operational transparency. Currency holders should be clear about the business operations behind the tokens, regularly understand progress and challenges, and know the true situation of capital reserves and resource allocation. They have the right to ensure that value is not lost through back-door operations or alternative structures, and that the tokens should be the primary IP holder, ensuring that the value created belongs to the holder. Finally, currency holders should have reasonable control over budget allocations, especially major expenses, but should not dictate day-to-day operations.

Project party

● What should be stopped: Issue coins without a clear signal of product market fit or actual token use. Too many teams use tokens as a beautification equity with worse equity-one level lower than risk equity, but without legal protection. Issuing coins should not be just because \"all encryption projects do this\" or because the money is running out.

● What you have the right to ask: The ability to make strategic decisions, make bold bets, and operate daily operations without having to submit everything to the DAO for approval. If you are to be responsible for results, you must have the power to enforce it.

Venture Capital

● What should be stopped:不管合不合理,都逼着每个被投项目发币。不是每个加密公司都需要代币，强行发币来标记持仓或制造退出机会已经让市场充斥着低质量项目。风投该更严格，实事求是地判断哪些公司真的适合代币模式。

● 有权要求的：承担极端风险投资早期加密项目，理应获得相应回报。高风险资本在押对时就该有高回报。这意味着合理的持股比例、反映贡献和风险的公平释放计划，以及成功投资退出时不被妖魔化的权利。

就算找到了平衡之路，时机也很关键。短期前景依然严峻。

四、未来12个月：最后一波供应冲击

未来12个月很可能是上轮风投炒作周期供应过剩的最后一波。

熬过这个消化期，情况应该会好转:

● 到2026年底，上一轮的项目要么发完币，要么倒闭

● 融资成本还是很高，新项目形成受限。等着发币的风投项目储备明显变少了

● 一级市场估值回归理性，用低流通强撑高估值的压力减轻了

三年前的决策决定了今天的市场面貌。今天的决策将决定两三年后的市场走向。

但供应周期之外，整个代币模式还面临更深层的威胁。

5. Crisis of survival: The biggest long-term threat to the lemon market

is that altcoins will become the \"lemon market\"-high-quality participants will be turned away and only those who have no choice but to come.

Possible evolution paths:

● Failed projects continue to issue coins to gain liquidity or renew their lives, even if the product has no market fit at all. As long as projects are expected to be issued, whether successful or not, failed projects will continue to flood the market.

● Successful projects choose to quit when they see the tragedy. When outstanding teams see that the overall performance of tokens continues to be sluggish, they may switch to traditional equity structures. If you can be a successful equity company, why should you endure the torture of the token market? Many projects have no convincing reasons for issuing coins at all, and for most application-level projects, tokens are changing from mandatory to optional.

If this trend continues, the token market will be dominated by failed projects that have no other choice-lemons that no one wants.

Despite the risks, I remain optimistic.

6. Why tokens can still win

Despite the challenges, I still believe that the worst lemon market will not come true. Tokens provide a unique game theory mechanism that equity structures simply cannot achieve.

● Accelerate growth through ownership allocation. Tokens can realize precise allocation strategies and growth flywheel that traditional equity cannot achieve. Ethena\'s use of token-driven mechanisms to quickly guide user growth and create a sustainable protocol economy model is the best proof.

● Create passionate and loyal communities with moats. Done right, tokens can create communities with real vital interests-participants become sticky and loyal ecological advocates. Hyperliquid is an example: their community of traders has become deeply involved, creating network effects and loyalty that cannot be replicated without tokens.

Tokens can allow growth much faster than the equity model, while opening up huge space for game theory design, and if you do it right, you can unlock huge opportunities. When these mechanisms really work, they are indeed transformative.

VII. Signs of self-correction

Despite the difficulties, the market is showing signs of correction:

● First-tier exchanges have become extremely picky. The requirements for issuing and listing coins have been significantly tightened. The exchange is strengthening quality control and making stricter assessments before launching new currencies.

● Investor protection mechanisms are evolving. MetaDAO innovations, DAO ownership of IP (see Uniswap and Aave governance controversies), and other governance innovations demonstrate that the community is actively trying better architectures. [TAG

The market is learning, slowly and painfully, but surely.

Recognize Cycle Position

Crypto markets are highly cyclical and we are now at the bottom. We are digesting the negative consequences of the 2021-2022 venture capital bull market, hype cycles, over-investment and misaligned structures.

But the cycle always turns. Two years later, when the 2021-2022 batch of projects are fully absorbed, when the supply of new tokens is reduced due to funding constraints, and when better standards are tried and tested-market dynamics should improve significantly.

The key question is whether successful projects return to the token model or whether they will permanently shift to equity structures. The answer depends on whether the industry can solve the issues of interest adjustment and project screening.

8. The road to breaking the game

The altcoin market stands at a crossroads. The four-loss dilemma-exchanges, currency holders, project parties, and venture capitalists are all losing, which has created unsustainable market conditions, but this is not a dead end.

The next 12 months will be painful, with the last wave of supply coming in 2021-2022. But after the digestive period, three things may drive recovery: better standards developed through painful trial and error, interest adjustment mechanisms acceptable to all parties, and selective currency issuance-only when it truly adds value.

The answer depends on today\'s choice. When we look back at 2026 three years later, it will be the same as looking back at 2021-2022 today. What are we building?