Waterdrip Capital CEO's In-Depth Review: What is the Crypto Industry Losing?

Author: Jademont Zheng, Co-founder and CEO of Waterdrip Capital

The current state of the crypto industry is something that most people could not have anticipated a few years ago.

Web3 token projects are dying in large numbers.

Almost no founder of a token project has escaped experiences of rights protection, lawsuits, or community liquidation. It is undeniable that some founders genuinely wanted to create good products and ecosystems, but when an avalanche occurs, very few can remain unscathed.

Leading centralized exchanges (CEX) are gradually losing their influence in the industry.

Even though trading volumes are hitting new highs, they are increasingly resembling traditional brokerage firms, responsible for trading but no longer holding the power of asset issuance and pricing. Compared to capital market infrastructures like Nasdaq, the gap is actually widening.

Investment institutions in the primary market are collectively withdrawing.

It’s not that there is a lack of funds, but rather a lack of exit mechanisms. Some institutions tacitly allow project parties to manipulate token prices, completing value transfers together with the projects; others simply leave the industry. Without long-term returns or emotional value, it’s better to invest in other sectors.

In an avalanche, no snowflake is completely innocent; however, the responsibilities borne by each snowflake are not the same.

In my view, a few snowflakes carry particularly heavy burdens.

First, FTX and Luna.

They collapsed in succession at the peak of the industry, destroying traditional capital's trust in the entire sector and causing a significant amount of institutional funds to remain hesitant to this day.

Second, leading CEX.

At the industry's most glorious time, they should have taken on the responsibility of being leaders: establishing higher listing standards, helping the market filter quality projects, advocating for long-termism, and forming a healthy industry culture.

But the reality is quite the opposite. Short-term interests have overshadowed everything, and the mass production of worthless tokens and quick liquidity harvesting has become the mainstream approach. Platforms earned listing fees and trading volumes but also overdrawn the entire industry's credibility. When the tide goes out, there are no winners; everyone is in the same boat.

Third, the Ethereum Foundation.

I have always believed that the shift from PoW to PoS is a severely overrated decision. It indeed reduces energy consumption, but the cost savings are almost negligible compared to the development opportunities lost as a result.

If Ethereum had continued to evolve along the PoW path and pushed for the development of computational power infrastructure, it could have grown into the world's largest blockchain-based AI computing network, occupying a more significant strategic position in the AI era. The shift to PoS, however, prematurely ended that possibility.

So, does this industry still have a chance?

Of course it does.

However, compared to the aforementioned factors that determine the industry's direction, there are not many variables left that can truly reverse the trend.

I believe that the two things that could potentially reopen a new round of prosperity in the future are:

First, the United States incorporating BTC into its national strategic reserves and continuing to make actual purchases, thereby rebuilding global capital's confidence in crypto assets;

Second, the emergence of a truly super application on-chain that has hundreds of millions of users and can create real value, allowing blockchain to prove once again that it can not only issue assets but also create demand.

Aside from that, other favorable factors seem more like cyclical rebounds rather than the dawn of a new era.