Author: Xiaobing
Within a week, three different players in the crypto world simultaneously took a step back: Strategy sold 1,690 BTC at an average price below cost, using all proceeds to repurchase its own preferred shares trading below par value. Trump Media released its quarterly report, revealing a net loss of $238.1 million, of which $190.4 million stemmed from crypto asset impairment, with management announcing a scaling back of crypto operations. Grayscale withdrew registration applications for three spot ETFs (ADA, DOT, and HBAR) in just 190 seconds.
Looked at separately, they are just three pieces of company news. Together, they tell the same story: Crypto is experiencing a sharp retreat.
However, in this industry, retreat is never the final chapter; it's actually the prelude to the next cycle. As Brother Feng says, this is a good thing.
In One Week, Three Different Players Are Retreating
The flag-bearer loosens its grip first.
Strategy sold Bitcoin for two consecutive weeks. In the most recent week, it sold 1,690 BTC at approximately $64,262, raising $108.6 million, all used to repurchase STRZC preferred shares. Its average cost basis is around $75,385. Based on the current price of about $63,900, its total holdings of 840,000 BTC are roughly 15% underwater.
The speculator also directly admits defeat.
In the summer of 2025, with BTC near its all-time high, Trump Media purchased approximately 9,500 Bitcoins at an average price of about $108,519, with a total investment exceeding $1.1 billion. In less than a year, the fair value of its holdings has shrunk to $557.1 million, a gap close to $500 million. Revenue for the same quarter was only $1.7 million. A more direct signal is that management and Crypto.com canceled their plan to jointly list a CRO holding company. The CEO stated on the earnings call about "scaling back certain crypto and online entertainment expansions to refocus on social media," indicating crypto has shifted from strategic expansion to a side business needing damage control.
Institutions are quietly pulling back their battle lines.
On August 7th, Grayscale withdrew registration applications for three spot ETFs (Cardano, Hedera, Polkadot) in 190 seconds. The filing explicitly noted "the product has not been declared effective and no securities have been sold," indicating a voluntary withdrawal. The timing was also subtle: Cardano was just two days away from obtaining listing eligibility when Grayscale stepped back, leaving the spot for others.
The Crypto Industry Needs a Purge
Faced with a screen full of bad news, most people easily conclude "crypto is finished." By traditional industry standards, that would indeed be the case.
Traditional industries fear purges because they imply lost capacity and severe damage, with recovery relying on time to slowly heal. The crypto industry lacks this buffer—no central bank backstop, no bankruptcy reorganization. All purges are violently completed in an extremely short time through price crashes and leverage implosions. Violent, yet thorough.
The crypto market has a fundamental difference from traditional asset markets: It itself needs to periodically undergo violent purges to optimize its holder structure and create conditions for the next upswing. The prerequisite for every bull market is the previous cycle's 'heroes' being thoroughly washed out as sacrificial lambs.
The bursting of the 2018 ICO bubble cleared out thousands of worthless tokens and the speculative capital behind them, leaving behind Ethereum and DeFi infrastructure.
The 2022 collapse of FTX and TerraUSD (LUNA) sent highly leveraged lending and opaque centralized exchanges to their graves, forcing a wave of on-chain transparency and compliance, indirectly catalyzing the approval of spot BTC ETFs in 2024.
The purge happening in 2026 is targeting different players.
The previous two cycles washed out retail investors and project teams; this cycle is starting to wash out corporate-level buyers.
Strategy selling at a loss illustrates one thing: even for those who profess to "hold forever," when the capital structure has problems, they must face reality. Trump Media, carrying the Trump name, may seem imposing, but corporate allocations made without investment discipline become liabilities in a bear market.
Grayscale pruning its product line shows institutional enthusiasm for altcoins is undergoing a sifting process. Tokens outside of BTC and ETH need more than just an ETF application form to gain recognition from traditional finance.
These purges sound painful but are necessary for the industry's long-term health.
This industry's supply is coded and fixed, while demand relies entirely on incremental capital. And incremental capital cares about one thing: Is the holder structure clean? If underwater positions and leveraged positions aren't cleared out, why would new money come in to take over? Therefore, crypto needs a proper purge more than any other asset class. Only after a thorough purge can money for the next cycle flow in.
Only After a Thorough Purge Can a Bull Market Enter
The signals of this purge cycle are more subtle and complex than before.
mNAV falling below 1 means the perpetual motion machine of "issue shares to buy crypto, push up the share price with crypto price, then issue more shares" has stalled. The market is no longer paying for narratives, only for real assets. Even Strategy has started selling crypto to repurchase discounted preferred shares and bulked up its dollar reserves to $4.65 billion. The logic of capital allocation has returned: instead of blindly accumulating crypto, it's better to clean up the balance sheet first. A market that starts counting cash flow is far healthier than one that only chants "hold forever." Grayscale choosing to withdraw even as Cardano's eligibility was imminent is akin to admitting the story for marginal altcoins is over. The bubble is being squeezed to the edges, allowing core assets to solidify.
More crucial is the flow of holdings. The leveraged positions trapped at highs, the treasuries surviving on premiums, and the speculators looking to ride a concept and run—these 'weak hands' will create selling pressure at every price rebound as long as they hold the tokens. Today's underwater positions at Strategy, Trump Media's loss-cutting, and the lack of interest in altcoin ETFs are essentially about holdings moving from weak hands to strong hands. This process is painful but absolutely necessary.
The retreat washes away the foam and the weak hands. What remains is a cleaner holder structure, more pragmatic institutional participants, and stricter product standards.
Last cycle, the crypto industry built spot ETFs on the ruins of FTX. This cycle, upon the initial lessons from the corporate crypto-hoarding wave, what will it build?
The answer is still on the way, and it's something to look forward to.
