Author: Dean Eigenmann
Compiled by: Saoirse, Foresight News
Editor's Note: Using the wild speculation history of the US stock market in the 1920s as a reference, the author of this article proposes that the crypto industry is approaching its 'Graham moment'. The article points out that while crypto possesses the inherent transparency advantage of being on-chain, it has long been constrained by regulation, with tokens lacking legal profit rights. With the enactment of the US "GENIUS Act" and the progress of the "CLARITY Act", the industry is expected to establish clear ownership rules, shifting investment logic from narrative-driven hype to fundamental value analysis. Simultaneously, the author objectively notes the uncertainty of legislation, indicating that the industry still needs to improve a decentralized and actionable ownership system. This provides a highly valuable long-term perspective for the current development of the crypto market.
Imagine an ordinary person considering entering the stock market in 1925. The market before them resembled a horse race betting pool more than an investment venue. They might place bets at a 'bucket shop': these institutions only accepted orders betting on stock price movements, never actually purchasing the corresponding stocks, essentially gambling houses disguised as brokerages. Even if they opened an account with a legitimate broker, trading was mostly done with minimal margin. A week of unfavorable market movement could wipe out their principal entirely — and indeed, that was the fate of millions of investors a few years later. Stock price manipulation was almost an open practice: syndicates would quietly accumulate shares of a particular stock, trading them amongst themselves to create false volume and upward price momentum, luring retail investors to follow the trend. Then, they would dump all their shares onto the chasing retail investors. This wasn't an underground black market operation; it was the prevailing norm of the market. Many celebrated financial tycoons of the time made fortunes precisely through such means.
Behind this whole chaotic scene lay institutional gaps unimaginable today: there were almost no laws forcing companies to disclose operational information to the public. A company could publicly issue stocks without informing investors about its profits, debts, or who the ultimate beneficiaries were. Standardized, audited financial statements, now indispensable for any valuation model, were not mandatory at all. Even meticulous investors could find no credible data for analysis.
This was the era's most fundamental flaw — not the obvious market manipulation, but the soil that allowed manipulation to flourish. Speculation focuses on where retail money will flow; investment focuses on the true intrinsic value of an asset. But in the 1920s, investors simply couldn't answer the second question. Corporate operational information either didn't exist or was entirely untrustworthy. The only game in town was watching the ticker tape, predicting the flow of retail funds. Sophisticated major capital knew this well, which is why they primarily allocated to bonds: bonds offered stable, predictable returns; stocks were merely gamblers' toys.
The 1929 US stock market crash, this catastrophe, unusually spurred long-term regulatory reforms. The Pecora hearings brought Wall Street's shady dealings to light: syndicate manipulation, insider profiteering, bankers secretly lining their pockets — all exposed. Public outrage eventually crystallized into written law. The Securities Acts of 1933 and 1934 mandated companies to continuously disclose standardized, audited financial data; the 1934 Act also established the U.S. Securities and Exchange Commission (SEC) to oversee compliance. From then on, corporate financial data had to be true and fair, with regulators holding subpoena power to verify accounts. That same year, Benjamin Graham and David Dodd co-authored "Security Analysis." This theory, common knowledge today, was almost heretical at the time: a stock represents partial ownership of a real business; its value can be calculated through earnings and assets; it's only worth buying when the price is far below its intrinsic value. Graham provided investors with a valuation methodology, and the new laws provided credible data support. Both were indispensable: even the most sophisticated valuation framework was meaningless if based on false data; even the most complete and truthful financial reports, in the hands of those who didn't understand valuation, couldn't realize their value. Fundamental investing was born and later became the core logic of professional stock investing.
A purely speculative market can only transform into a market with long-term investment value when two conditions are simultaneously met: first, a mature asset valuation methodology; second, a sound legal system that can verify the true underlying situation of assets and legally enforce investors' profit rights.
The Crypto Market is Replicating the Early US Stock Market's Predicament
The current crypto market bears a striking resemblance to that early US stock market: the industry is entirely driven by narratives, dominated by retail investors, with market sentiment swayed by community sentiment, price movements, and faith in individual tokens. The market is flooded with wash trading; projects launch tokens only to dump them on their own community fans; various meme coins are essentially Ponzi schemes wrapped in cartoon imagery, not even bothering with the pretense of being a serious project. Aside from more polished interfaces, today's crypto market is no different from the Wild West Wall Street of 1928, and the industry ethos is arguably even more chaotic.
But there is one more crucial point of distinction: the crypto industry has naturally solved the information transparency problem that took US regulators decades to tackle. The core goal of early regulatory legislation was to force unwilling companies to disclose true operational data; in contrast, all data in the crypto industry is fully transparent on-chain. Protocol revenue is verifiable in real-time, treasury wallet funds are clear at a glance, transaction volume, fees, user activity, and fund flows are all recorded on a public ledger. There's no need, as in the stock market, to passively trust corporate quarterly reports. The information transparency the SEC spent decades building for the stock market is simply the default, foundational property in crypto.
Even with complete, publicly available data, crypto asset valuation remains extremely challenging. This contradiction has persisted for years: on-chain raw data is far richer than what listed companies disclose, yet there is no reliable pricing logic. The root cause is: data does not equal a claim to profits. An protocol generating hundreds of millions in fees annually does not mean its token holders get a share of those profits. Most tokens, from their very design, stripped away profit rights.
The US court uses the Howey Test to determine if an asset is a security. The core criteria are: investing money in a common enterprise with an expectation of profits derived from the efforts of others. By definition alone, almost any asset with investment value qualifies. If a token grants holders dividend rights, stable profit expectations, or project ownership — these very features that give a token valuation potential — they are precisely what would classify it as a security, carrying immense regulatory risk. The stronger the project's fundamentals, paradoxically, the higher the legal risk. Therefore, development teams deliberately remove economic profit rights, retaining only governance voting rights to avoid regulatory scrutiny.
The crypto market possesses ultimate transparency in data, yet has completely lost profit ownership. Everyone can see protocols continuously generating revenue, but no one has the right to share in the profits. This is the bottleneck that has trapped the industry for years: there is a longstanding demand for creating revenue-generating tokens, yet it is severely restricted by the existing legal framework. Once regulatory rules are adjusted, this shackle will be broken.
The Industry Turning Point is Approaching
Precisely for this reason, 2026 is set to become the critical year determining the industry's direction, not some vague future. Regulatory frameworks are rapidly materializing: The "GENIUS Act", signed into law in 2025, established the first federal-level regulatory framework for payment stablecoins in the US: requiring full-reserve backing, mandatory disclosure, licensing for issuers, and explicitly stating that fully asset-backed dollar stablecoins are not securities offerings. This completely resolves the regulatory ambiguity surrounding the cryptocurrency payment layer.
More crucially, the "CLARITY Act", which standardizes market structure, is, as of this writing, in the final legislative stages: it has passed the House of Representatives, and the Senate Banking Committee voted with bipartisan support to advance it. This bill addresses the core pain point of the crypto industry for a decade: delineating the authority of two major regulatory agencies. Investment contract-type digital assets fall under SEC jurisdiction, while digital commodities and native network tokens fall under CFTC jurisdiction. Projects can determine which regulatory framework applies to them before launch.
The core value of this legislation is not in creating transparency — the crypto industry already has fully public data — but in defining clear legal asset classifications, clarifying the legal economic profit rights of tokens, and breaking the impasse of "tokens having only usage/traffic, no profit rights." In the future, development teams can compliantly design tokens with profit-sharing functions without enduring the persistent regulatory uncertainty of the past decade. Investors can also hold digital assets with legally enforceable profit rights and calculable value. Once investors can fully access a protocol's cash flow and reasonably expect profits to be distributed to token holders, many investment questions that previously seemed nonsensical in crypto will become logical:
- How sustainable is the protocol's revenue?
- Is the project's network effect genuinely robust?
- What valuation multiple should be given to the corresponding earnings?
- Does the current price already reflect future growth expectations?
These aren't crypto-specific questions; they are standard investment analysis questions from traditional finance.
Objectively, there is significant uncertainty surrounding the bill's passage. Confronting risks is essential to objectively understand the industry logic: The bill is not yet finalized and may even ultimately fail to pass. It passed the House in 2025, but the Senate has historically been a graveyard for crypto legislation. The bill requires 60 votes for cloture, and the majority party holds only about 53 Senate seats, necessitating support from some Democratic senators. Key Democratic senators have explicitly stated they will not support the bill unless supplemented with ethics clauses constraining presidential conflicts of interest regarding crypto assets. Such clauses have yet to be finalized. The versions from the Senate and House committees need to be reconciled and merged with the original House text. The entire process must be completed before the Senate's summer recess and before midterm elections consume the legislative agenda, all while competing for floor time with multiple higher-priority bills like housing and intelligence authorization acts. Objective industry estimates place the probability of passage between 50/50 to two-thirds. No industry insider considers it a sure thing.
Missing this legislative window carries a cost far exceeding that of an ordinary bill's delay: it's not a simple postponement of a few months, but a complete restart of the entire legislative process. A new Congress may not prioritize crypto regulation, plunging the industry back into the regulatory gray area of the Howey Test: designing token profit rights would be inviting trouble, and teams would continue stripping away economic rights. Many deeply involved in the legislative process warn that if this bill fails, comprehensive market structure legislation could be delayed until the end of this decade. The regulatory shackles won't magically disappear; they will continue to suppress industry development. Even if the bill ultimately passes, the benefits won't materialize instantly: regulators will need 1 to 3 years to implement supporting rules, giving the law practical enforceability. Much like the 1934 US securities reform, it took years to form a mature system trusted by investors. Therefore, the core of the optimistic logic is not "the reform is complete," but "the reform is imminent and has a clear landing timeline."
Deeper Industry Challenges
A public company is not just a cash flow vehicle; it is a complete legal structure: ownership, fiduciary duties, and enforceable governance mechanisms, all guaranteed by the court system. Buying a stock means fully plugging into this institutional system, not just obtaining profit-sharing rights. Most crypto protocols still lack equivalent supporting mechanisms. Some protocols can generate stable cash flows, but token holder rights are weakly protected, with holders often unclear about recourse avenues. Legalizing profit rights is just the simple first step; building a complete system that can practically protect holder rights when risks materialize is a lengthy, underappreciated long-term effort. The vast majority of related development in the industry has yet to begin.
However, this does not overturn the article's core thesis; instead, it points to the key development sector for the industry in the coming decade. Today, no one questions whether crypto protocols can create economic value — many projects are already consistently generating profits. The real unresolved core proposition is: can we build an ownership system that simultaneously balances decentralization, genuine economic returns, and legal enforceability? This is extremely difficult. Teams that successfully achieve this in the future will be seen as the first truly legitimate 'enterprises' within this asset class. This is not the ceiling for industry development, but rather the core piece missing from the value investing logic outlined here.
Practical Impact on Investors
All the changes described above will directly alter the investment logic of the crypto market. Selecting tokens will increasingly resemble traditional stock picking. In the future, the core investment edge will no longer be predicting market narratives or front-running sector rotations, but rather the tedious but solid work of fundamental research: analyzing protocol revenue structures, judging whether fee income can withstand market downturns, distinguishing genuine user demand from subsidized artificial growth, calculating reasonable prices based on actual distributable cash flow from tokens, and meticulously studying token contracts to clarify all holder rights. This last point is a new analytical dimension and a key factor differentiating professional capital from ordinary retail in generating returns.
Not all tokens will evolve into stock-like assets. Bitcoin will never generate cash flow; it is a scarce digital value carrier, positioned closer to digital gold, serving as a hedge in traditional portfolios akin to gold or bonds. The value investing transformation described in this article applies only to application-layer protocol tokens that can consistently generate fees and possess operating profits — these are the assets suitable for fundamental valuation analysis.
Dawn is Upon Us
Throughout the development of the crypto industry, the core question debated early on was: Can tokens actually create value? Today, the industry's focus has shifted: Who has the right to distribute the value created? A hundred years ago, it was solving this second question that transformed stocks from gamblers' speculative tools into a legitimate investment class. Now, the crypto industry is finally getting the opportunity to legally and compliantly answer this core question.
Benjamin Graham stood out not by gaming the market against speculators, but by providing a complete valuation framework at a time when regulatory systems were being perfected, and value analysis methodologies could be implemented. Now, the institutional environment for the crypto industry is gradually taking shape. The investors who will be recognized as industry pioneers a decade from now are precisely those who today are deeply cultivating fundamental analysis tools and no longer merely chasing short-term price movements.
