Going to Zero was Big Business

The Token Hospice Complex has been big business for years. VCs and retail funded projects. Market makers provided liquidity. Exchanges extracted fees. Insiders sold on outsiders. Huge businesses were built on slowly walking dead crypto projects to their end state of zero. Going to zero quickly is not very profitable. The goal is to make projects as comfortable as possible, inject them with hopium, and slowly walk them to their plot in the crypto cemetery. It starts with geriatric care, then to hospice and ultimately ends with almost all tokens buried 6+ pages deep on coinmarketcap.

This was not built by accident. It was all intentional. We distributed tokens to more wallets through airdrops to create more accounts for centralized exchanges. We supported fake prices for illiquid assets through financial engineered market making. This created the hope for more retail folks to get wealthy. It created paper returns for VCs to raise more capital. It gave you a screenshot to share with friends to convince them to come along for the ride.

And now the music has finally stopped. And we should make sure we bury the music sheets deep in the ground. We are frankly lucky that despite all of the industry behavior, we have somehow and someway convinced the largest institutions in the world that this technological transformation is inevitable. A handful of companies truly get credit for making that a reality.

The VC money will be dwarfed by the institutional capital coming in. It took about $50b of VC capital deployment to identify about 50 companies worth investing in at scale. The industry is small. In its infancy. And with roughly $3 trillion of assets onchain, we currently have transformed less than 1% of the financial system. And even at the ripe age of 1%, a few of the fat protocols have already emerged.

Over the past two years I have been writing consistently about two major trends happening simultaneously which will dominate crypto for the next decade.

1. The fundamental-driven thesis for crypto

2. The institutional era of crypto

Institutions want real businesses, real revenue, and established moats. We are seeing the birth and dominance of crypto fundamentals. We are getting true price discovery for assets based on revenue track record, operational efficiency, durability of the business, and ultimately value capture for investors.

This week, the biggest new buyers of protocol tokens were @BlackRock buying UNI tokens and @apolloglobal buying Morpho tokens. The institutions are finally here to buy. But the number of assets that they are taking seriously will be limited, perhaps even more limited than the class of graduates from the VC era. The VC funding is not over but the VC era is. We just saw @dragonfly_xyz raise a great new fund size. New companies that are born in this era will be far more serious and have a much better ratio of long term winners compared to prior cycles. They will also be much more likely to target institutions vs. developers or retail.

Because of this, we will see a new wave of VCs that focus on financial product development and distribution platforms. This is fundamentally different from the fintech investing that happened over the last 15+ years, which rarely innovated on the actual financial product side, but primarily focused on delivering better user experiences at more affordable prices to attract younger demographics. With onchain primitives, you can fundamentally rebuild almost every financial product that has market share today, removing counterparty risks, providing better transparency and risk management, and enabling global distribution. Today there are really only two funds at scale that have publicly stated this thesis to the market, Dragonfly and @hiFramework, and I expect both of them to have outstanding results over the coming decade because of it.

I am personally the most excited for this cycle. I don't have to get bothered or distracted by a bunch of narrative garbage. I don't have to learn about some new thing that has no intrinsic value but is somehow dominating conversations at every event. Get-rich-quick markets attract bad market participants and create a lot of noise. This market is not for the weak and the short termers. But the teams and people that are finding success now are better and more resilient than any we've ever had in this industry.

If you think in decades, if you care about compounding growth, if you care about building real markets and products, you are entering the golden age of crypto. Your end buyer is the most educated you have ever sold to, the most sophisticated at underwriting, but holds a prize far greater than anything recognized in crypto to date.

While we sunset a huge amount of the crypto industry and escort those tokens to their graves, it won't be flowers that bloom on top, it will be forests of hardwood trees that will stand up finance for the next 100 years.