Original from Ryan Watkins, Co-founder of Syncracy Capital
Compiled|Odaily Planet Daily Qin Xiaofeng(@QinXiaofeng 888 )
Editor's Note: Ryan Watkins, co-founder of Syncracy Capital, recently published an article titled "The Twilight Zone: A Look at the Crypto Economy in 2026 and Beyond". He mentioned that crypto assets overextended expectations in 2021, leading to a sustained rationalization of valuations since then, with quality asset valuations now becoming reasonable; the growth of the entire crypto economy is shifting from cyclical drivers to long-term trend drivers, and the industry has already spawned several application scenarios with real value beyond Bitcoin. "There is no power on earth greater than an idea whose time has come, and the emergence of the crypto economy has never seemed more unstoppable."
The following is the original content, compiled by Odaily Planet Daily, Enjoy~
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The crypto economy is in the midst of the largest transformation I have witnessed in my eight years in the industry.
Institutions are accumulating digital assets steadily, while early cypherpunk pioneers are distributing wealth and cashing out to exit. Businesses are positioning themselves for S-curve growth, while disillusioned native players are exhausted. Governments are pushing the global financial system onto a blockchain track, while day traders still fret over a few candlesticks on a chart. Emerging markets are celebrating financial democratization, while cynics born in the US lament that it's all just a big casino.
Recently, there has been much discussion about which historical period the current crypto economy most resembles.
Optimists liken it to the recovery period after the dot-com bubble burst, believing the industry's speculative era has ended, and long-term winners like Google and Amazon will emerge, climbing the S-curve. Pessimists liken it to an emerging market, like China in the 2010s, arguing that weak investor protection and a lack of patient, long-only capital that doesn't sell could lead to poor asset price performance even as the industry thrives.
Both views have merit. After all, history is the investor's best guide besides personal experience. However, analogies have their limits. We must also understand the crypto economy within its unique macroeconomic and technological context. Markets are not monolithic—they consist of many actors and narratives, interconnected yet distinct.
Here is my best assessment of where we've been and where we're going.
"The Red Queen's Race"
In British author Lewis Carroll's "Through the Looking-Glass," the Red Queen tells Alice, "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!" Evolutionary biologist L. van Valen used this in 1973 to propose the "Red Queen hypothesis," aptly describing the intense survival competition in nature: to not advance is to regress, to stagnate is to perish.
In many ways, the only thing that matters in financial markets is expectations. Exceed them, prices rise; fall short, prices fall. Over time, expectations swing like a pendulum, with long-term returns often negatively correlated to them.
In 2021, the crypto economy overextended its expectations far beyond what most realized. In some ways, this was obvious, such as DeFi blue chips trading at price-to-sales ratios of 500x, or eight smart contract platforms once valued over a hundred billion dollars. Not to mention the dazzling absurdities of the metaverse and NFTs. But the most sobering illustration is the Bitcoin-to-gold ratio chart.
Despite all our progress, Bitcoin's price relative to gold has not reached new highs since 2021; in fact, it has declined since then. Who would have thought that in Trump's "crypto capital," after the most successful ETF launch in history, amidst systematic dollar devaluation, Bitcoin as digital gold would perform worse than four years ago?
For other assets, it's been much worse. Most began this cycle with significant structural issues, compounded by the challenges of living up to extreme expectations:
- Most projects have highly cyclical revenue, predicated on continuously rising asset prices.
- Regulatory uncertainty hinders institutional and enterprise-level participation.
- Dual ownership structures create misalignment between equity insiders and public market token investors.
- Weak disclosure practices create information asymmetry between project teams and communities.
- A lack of common valuation frameworks leads to excessive volatility and no fundamental price floor.
The convergence of these issues has caused most tokens to bleed out continuously, with only a handful sniffing their 2021 highs. The psychological toll is immense, as few things in life are more disheartening than sustained effort without reward.
For speculators and opportunists who thought crypto assets were a shortcut to riches, this loss is particularly profound. Over time, this struggle has bred widespread burnout across the industry.
This is, of course, a healthy development. Minimal effort should not have persistently yielded extraordinary returns as it did in the past. The pre-2022 era, where conceptual gloss could amass fortunes, was clearly unsustainable.
Nevertheless, the silver lining is that these problems are widely understood, and prices reflect that. Today, beyond Bitcoin, few crypto-native players are willing to seriously entertain long-term fundamental narratives for any other asset. And after four grueling years, the asset class now has the necessary conditions to surprise to the upside again.
The Awakening Crypto Economy
As outlined in the previous section, the crypto economy started this cycle with many structural problems. The good news is that everyone recognizes this now, and many are becoming relics of the past.
First, beyond digital gold, several application scenarios are showing compounding growth, with more in transition. In recent years, the crypto economy has spawned:
- Peer-to-peer internet platforms enabling users to execute transactions and enforce contractual relationships without government or corporate intermediaries.
- Digital dollars that can be stored and transferred anywhere with internet access, providing billions with cheap and reliable money.
- Permissionless exchanges allowing anyone, anywhere, to trade top-tier global assets of any asset class 24/7 in a single, transparent venue.
- Novel derivatives like event contracts and perpetual swaps, providing society with valuable predictive insights and more efficient price discovery, respectively.
- Global collateral markets enabling users to access credit permissionlessly through transparent, automated infrastructure, significantly reducing counterparty risk.
- Democratized asset creation platforms enabling any individual or institution to issue publicly tradable assets at extremely low cost.
- Open financing platforms enabling anyone in the world to raise capital for their ventures, unconstrained by local economies.
- Physical infrastructure networks building more scalable and resilient infrastructure by crowdsourcing capital and distributing operations among independent operators.
This is not an exhaustive list of all valuable applications built by the industry to date. The key point is that many of these are demonstrating real value and growing continuously, regardless of crypto asset price fluctuations.
Simultaneously, as regulatory pressure eases and founders realize the cost of misalignment, the equity-token dual model is being corrected. Many existing projects are consolidating assets and revenue into a single token, while others explicitly divide: on-chain revenue belongs to token holders, off-chain revenue to equity holders. Furthermore, as third-party data providers mature, disclosure practices are improving, reducing information asymmetry and enabling more reliable analysis.
Parallel to this, consensus is forming around a long-proven, simple principle: 99.9% of assets need to generate cash flow, with value storage assets like BTC and ETH being rare exceptions. As more fundamentally driven investors enter the asset class, these frameworks will only strengthen, and rationality will gradually increase.
In fact, over a sufficiently long horizon, self-sovereign ownership of on-chain cash flows may be understood as an unlock of similar magnitude to self-sovereign digital value storage. When in history could you hold a digital bearer asset that autonomously gets paid whenever its program is called anywhere in the world?
Against this backdrop, winning blockchains are becoming the monetary and financial base layer of the internet. Day by day, the network effects of Ethereum, Solana, and Hyperliquid entrench themselves with their expanding ecosystems of assets, applications, businesses, and users. Their permissionless design and global distribution enable applications that rank among the world's fastest-growing businesses, with unparalleled capital efficiency and revenue velocity. In the long run, these platforms will likely underpin the total addressable market of the "financial super app" that virtually every leading fintech company covets a piece of.
Against this backdrop, it's unsurprising that established giants from Wall Street and Silicon Valley are moving full speed ahead with blockchain-related initiatives. Nowadays, there isn't a week without a wave of new product launches, ranging from tokenization to stablecoins. Notably, unlike previous eras of the crypto economy, these efforts are no longer experiments. They are production-grade products, mostly built on public blockchains rather than isolated, closed private systems.
As the lagging effects of regulatory changes continue to permeate the system over the coming quarters, this activity will only accelerate. With clearer rules, businesses and institutions can finally shift focus from "Is this legal?" to how blockchain can expand revenue opportunities, reduce costs, and unlock new business models.
Perhaps one of the most telling signs of the current situation is that few analysts in the industry are modeling exponential growth. To my knowledge, many peers on both the sell-side and buy-side are even hesitant to adopt annual growth rates above 20%, fearing they might appear overly optimistic.
With valuations reset after four painful years, it's crucial at this moment to ask ourselves: what if this really does go exponential? What if daring to dream big once again will finally pay off?
"The Twilight Zone"
"Light a candle, and it casts a shadow." – Ursula LeGuin.
On a cool autumn day in 2018, before the start of yet another exhausting day at the investment bank, I stopped by an old professor's office to chat about all things blockchain. After sitting down, he recounted a conversation with a skeptical stock hedge fund manager who declared crypto assets were entering a nuclear winter, "a solution still looking for a problem."
After giving me a quick primer on unsustainable sovereign debt burdens and collapsing institutional trust, he ultimately told me what he said to that skeptic: "A decade from now, the world will thank us for building this parallel system." It hasn't been a full decade since, but as crypto assets increasingly resemble an idea whose time has come, his prophecy seems prescient.
In the same spirit, and the entire point of this article: the world still undervalues what is being built here. And for all of us investors, what is most practically significant is that multi-year opportunities in leading projects are now priced too low.
This last point is crucial because while the arrival of the crypto world may be unstoppable, a particular coin you love could indeed go to zero. The flip side of crypto being unstoppable is that it attracts fiercer competition, and the pressure to deliver has never been greater. As the institutional and corporate giants I mentioned earlier enter, they will likely wash out many weaker players. This isn't to say they will win comprehensively and co-opt the technology. But it does mean only a handful of native players will become the big winners around which the world re-anchors its order.
This isn't meant to breed cynicism. In all emerging technologies, 90% of startups fail. The fact that more failures may become public in the coming years shouldn't distract you from the bigger picture.
Perhaps no single technology aligns more with the zeitgeist of our time than crypto assets. The decline of institutional trust in developed societies, unsustainable government spending in G7 nations, blatant currency debasement by the world's largest fiat issuer, deglobalization and fragmentation of the international order, and a growing desire for a new system perceived as fairer than the old—all are tailwinds. As software, driven by the latest accelerant, AI, continues to eat the world, and younger generations inherit wealth from an aging boomer cohort, the timing couldn't be better for the crypto economy to emerge from its own small bubble.
Many analysts frame the present through classic lenses, like the Gartner Hype Cycle and what Carlota Perez calls the "post-frenzy" phase, implying the period of optimal returns is past, to be followed by a more mundane utility phase. However, the truth is far more interesting.
The crypto economy is not a single market marching uniformly towards maturity, but a collection of products and businesses at different stages on their adoption curves, evolving separately. Perhaps more importantly, when a technology enters its growth phase, speculation doesn't disappear; it merely ebbs and flows with shifts in sentiment and the rhythm of innovation. Anyone telling you the speculative era is over is likely just jaded or doesn't understand history.
Being skeptical is reasonable, but don't become cynical. We are reimagining money, finance, and the governance of our most important economic institutions. This should be as fascinating and exciting as it is challenging.
From now on, your task is to figure out how best to leverage this emerging reality, not to argue in endless Twitter threads why it's all doomed.
Because behind the fog of disillusionment and uncertainty lies a once-in-a-generation opportunity for those willing to bet on the dawn of a new era, not mourn the sunset of the old one.
