The demise of retail crypto investors and the ongoing migration to the blockchain

Wind blows · Corner of mountain · Darkness returns to brightness

• VC and market makers are the main front-end barriers of exchanges

• Airdrops and Memes start the process of re-evaluation of the on-chain value system

• The project party’s more complex token economics conceals weak growth

Retail investors have been a little annoyed recently. First, RedStone had many twists and turns, and finally the retail investors failed to block it. RedStone was still listed on Binance. Then GPS pulled out the carrot and brought out the mud. Binance struck the market makers hard, showing the absolute strength of the Universe Institute.

The story is not perfect. As VC coins gradually decline, value coins become an excuse for project parties, VCs, and market makers to sell their products. During each market shock period, the three steps of foundation establishment, airdrop plan launch, and stock exchange crash are urgently completed.

Image Description: Traditional and Emerging Value Circulation

It can be predicted that Babylon, Bitlayer and other BTCFi ecosystems will repeat this process. We can review that the strange trend after the IP was listed has nothing to do with the project performance, but is positively correlated with the crazy purchasing power of Koreans, and the joint efforts of market makers, project parties and exchanges cannot be ruled out.

Because of this, Hyperliquid's route is indeed unique, with no investment, no big firms, and no interest split. It strikes a balance between the project party and early users, and all protocol income empowers its own tokens to meet the value preservation needs of people who buy tokens later.

From the performance of IP and Hyperliquid, the project party's own unity and empowerment willingness can suppress the concentration and market-crashing behavior of exchanges and VCs.

One ​​step forward and one step back, as Binance pushes market makers to the forefront, its own industry barriers are collapsing rapidly.

Self-fulfilling prophecy, the red stone's appearance

In my world, RedStone is buried 16 layers underground and needs to be mined before it can be ground.

In the entire process of gold mining, the exchange has become the final destination of the token with its absolute flow effect and liquidity. In this process, on the surface, both the exchange and the users are happy. The exchange obtains more currencies to attract users, and the users can access new assets and gain potential benefits.

On this basis, the empowerment value of platform coins such as BNB/BGB can be superimposed to further consolidate its own industry position.

However, since 2021, with the participation of large European and American Crypto VCs, the initial valuation of the entire industry has been too high. Taking the cross-chain bridge industry as an example, according to the last disclosed valuation before the above, LayerZero is valued at US$3 billion, Wormhole is valued at US$2.5 billion, Across Protocol is valued at US$200 million in 2022, and Orbiter is valued at US$200 million. The current FDV of the four projects is US$1.8 billion, US$950 million, US$230 million, and US$180 million, respectively.

Each Big Name endorsement effect added for the project is actually at the expense of the interests of retail investors.

From the VC coin storm that started in mid-2024 to He Yi's "Bestie Coin Storm" AMA in early 2025, the relationship between exchanges and VCs can no longer be maintained on the surface. VCs' own endorsements and the effects of listing help seem ridiculous under the Meme carnival. The only remaining role is to provide funds. Driven by the rate of return, token-oriented investment has in fact replaced product-oriented investment.

At this point, Crypto VCs are at a loss, Web2 VCs cannot invest in DeepSeek, and Web3 VCs cannot invest in Hyperliquid. An era has officially ended.

After the collapse of VC, exchanges only have market makers to act as a shelter for retail investors. Users rush to buy local coins on the chain, and market makers can only be responsible for the market making of a few listed tokens after the internal disk of PumpFun runs out and the external disk of DEX rushes out. Of course, the relationship between on-chain business and market makers is not explored in this article, and we focus on the exchange.

At this time, Meme coins are priced as high as VC coins for market makers and exchanges. If value coins have no value, then air coins obviously cannot be fairly priced based on air, and quick absorption and quick selling has become the common choice of all market makers.

When the entire process is rolled around by the industry, Binance's one-year fast pass is not the original sin of market makers, but Binance's fast pass is an industry crisis. As the last link of liquidity, Binance can no longer discover real long-termist tokens, and an industry crisis is born.

This time, Binance can promote RedStone with illness, and can also judge market makers justly, but after that, the industry will not change the existing model, and there will still be high-priced tokens waiting for the listing process.

Complexity and gigantism mean the end

With more and more L2s on Ethereum, all dApps will eventually become one chain.

Token economics and airdrop schemes are becoming more and more complex, from BTC as a Gas to ve(3,3) interlocking links, which have long exceeded the understanding of ordinary users.

Since Sushiswap relied on issuing token airdrops to Uniswap users to occupy the market, airdrops have become an effective means of stimulating early users to buy volume, but under Nansen's anti-witch censorship, airdrops have become a reserved program for professional hair-pulling studios and project parties to fight wits and courage. The only ones who are excluded are ordinary users.

The hair-pulling party wants tokens, the project party needs trading volume, the VC provides initial funds, the exchange needs new coins, and finally the retail investors bear everything, leaving only the endless decline and the incompetent rage of the retail investors.

Turning to Meme is just the beginning. What is really serious is that retail investors across the industry are re-evaluating their own interests. If they do not trade on Binance, but open contracts on Bybit and Hyperliquid, what are the gains and losses?

At present, the daily trading volume of on-chain contracts has reached 15% of Binance, of which Hyperliquid can account for 10% of Binance. This is not the end, but the real beginning of the on-chain process. It just so happens that DEX accounts for about 15% of CEX's trading volume, and Uniswap accounts for about 6% of Binance, highlighting Solana DeFi's latecomer.

Binance has 250 million users, Hyperliquid has only 400,000, Uniswap has 600,000 active users, and Solana has 3 million daily active users. We estimate that the on-chain user group is around 1 million, and is still in the very early stage of adoption.

But now, not only are there more and more L2s, but the token economics of dApps are also complicated, which reflects that the project party is unable to strike a balance between its own interests and those of retail investors. Without the commitment of VCs and exchanges, the project cannot be launched, but accepting the division of interests between VCs and exchanges will inevitably cede the interests of retail investors.

In the evolution of biology, whether it is Darwin's theory of evolution or the probability measurement of molecular biologists, they all point out a basic fact without exception: once a certain creature becomes extremely huge and exquisitely shaped, such as Quetzalcoatlus, it generally means entering an extinction cycle. Nowadays, it is birds that eventually occupy the sky.

Conclusion

The exchange's cleanup of market makers is essentially a cannibalization behavior under the existing competition pattern. Retail investors still have to face the encirclement and suppression of VCs and project parties. The situation will not change fundamentally. The transfer to the chain is still an ongoing historical journey. Even a strong company like Hyperliquid is still not ready for the impact of hundreds of millions of users.

The fluctuations of value and price, the game of interests and distribution, will still move against each other in each cycle, forming a bloody history of retail investors.