Transformation of the crypto market under the wave of on-chain migration

In the exchange ecosystem, venture capital institutions and market makers have always been the main front-line barriers. Recently, the rise of airdrops and Meme tokens has initiated a reassessment process of the on-chain value system. At the same time, project teams are also designing more complex token economics models, attempting to mask the current situation of sluggish growth.

Retail investors have encountered several setbacks recently. A certain red stone project went through ups and downs during its launch process, and in the end, retail investors failed to successfully thwart its listing on a certain large trading platform. Subsequently, a certain GPS project triggered a chain reaction, leading a trading platform to take strong measures against market makers, showcasing its absolute power in the industry.

Amid the trend of decline in tokens supported by venture capital, some so-called value coins have become tools for project parties, venture capitalists, and market makers to offload their assets. These projects often complete three urgent steps during market fluctuations: establish a foundation, launch an airdrop plan, and go live on a trading platform for selling off.

It can be anticipated that some BTC financial ecosystem projects will also go through a similar process. Looking back at the abnormal trends following the launch of a certain IP project, we find that its correlation with the actual performance of the project is not high, but it is positively correlated with the frenzied purchasing power of investors in specific regions. This may be driven by the joint efforts of market makers, project parties, and trading platforms.

In contrast, a certain infinite liquidity project has taken a unique approach: it does not introduce external investment or rely on large exchanges, striving to seek a balance between the project party and early users. The project uses all protocol revenue to enhance the value of its own token to meet the value preservation needs of later buyers.

From the performance of certain IP projects and projects with unlimited liquidity, the unity and willingness to empower from the project team can to some extent resist the concentrated chips and selling behavior of exchanges and venture capital.

As a major trading platform brings market makers to the forefront, its own industry barriers are rapidly collapsing. This back-and-forth situation marks a profound transformation in the ecology of the crypto market.

In the current market environment, exchanges have become the ultimate destination for tokens due to their absolute traffic advantage and liquidity. On the surface, this appears to be a win-win situation for both exchanges and users: exchanges attract users by listing more cryptocurrencies, while users have the opportunity to access new assets and seek potential gains.

However, since 2021, the initial valuations of the entire industry have been severely inflated with the involvement of large crypto investment institutions. Taking the cross-chain bridge industry as an example, the valuations of several projects far exceed their current fully diluted valuation (FDV). Behind this high valuation is, in fact, at the expense of retail investors' interests.

Starting from the mid-2024 venture capital-supported token turmoil to the early 2025 controversy involving executives of a trading platform related to disputed tokens, the relationship between exchanges and venture capital has seemingly become difficult to maintain. Against the backdrop of the Meme token frenzy, the endorsement and listing support from venture capital appear to be weak and ineffective, with their only remaining role seemingly being to provide funding. Driven by the pursuit of high returns, investments in tokens have effectively replaced investments in products.

This marks the official end of an era. Crypto venture capital is in trouble, struggling to invest in emerging artificial intelligence projects, and unable to enter certain independent crypto projects. After the decline of venture capital influence, exchanges can only rely on market makers as a buffer when facing retail investors. Users trade niche tokens on-chain, while market makers are responsible for handling the market-making work of a few listed tokens.

For market makers and exchanges, the current Meme tokens face the same overvaluation issues as the previously venture capital-backed tokens. When valuable coins lose their value, it is clearly more difficult to price air coins reasonably. Quick buy and quick sell have become the common choice for most market makers.

This model has been repeatedly applied in the industry, leading certain projects to be listed on large exchanges within a short period of time. This should not be seen as the fault of market makers, but rather a crisis faced by the entire industry. As the last link in liquidity, large exchanges have found it difficult to discover tokens that truly hold long-term value.

Although a certain large trading platform has taken a tough stance on specific projects this time and penalized market makers, this does not fundamentally change the existing model of the industry. There will still be overvalued tokens waiting to be listed.

The number of layer two networks on Ethereum is increasing, and all decentralized applications may eventually evolve into independent blockchains. At the same time, token economics and airdrop schemes are becoming increasingly complex, ranging from using Bitcoin as fuel fees to intricate locking mechanisms, and these concepts have surpassed the understanding of ordinary users.

Since a certain decentralized exchange has occupied the market by distributing token airdrops to the users of its competitors, airdrops have become an effective means to stimulate early users. However, under the scrutiny of professional data analysis platforms' anti-witch-hunt reviews, airdrops have turned into a game of strategy between professional arbitrageurs and project parties, while ordinary users are instead excluded.

Arbitrageurs want tokens, project teams need trading volume, venture capital provides initial funding, exchanges need new tokens, and in the end, retail investors bear all the risks, leaving only a constantly declining market and the powerless complaints of retail investors.

Shifting to Meme tokens is just the beginning; more seriously, retail investors across the entire industry are reassessing their own gains and losses. If trading is not done on traditional exchanges and instead contracts are traded on emerging platforms, what differences in returns can be expected?

Currently, the daily trading volume of on-chain contracts has reached about 15% of a certain large trading platform, with a certain unlimited liquidity platform accounting for 10%. This is not the end, but the true beginning of the on-chain process. The trading volume ratio of decentralized exchanges to centralized exchanges is also around 15%, with a certain leading DEX accounting for about 6% of a certain large CEX, highlighting the rise of a certain high-performance public chain DeFi ecosystem.

In terms of user numbers, a large trading platform has 250 million users, while a certain infinite liquidity platform has only 400,000, a leading DEX has 600,000 active users, and a high-performance public chain has 3 million daily active users. Overall, it is estimated that the on-chain user base is around 1 million, still in the very early adoption stage.

However, not only are there more and more layer two networks, but the token economics of decentralized applications are also becoming increasingly complex. This reflects the difficulties faced by project teams in balancing their own interests with those of retail investors. Without the support of venture capital and exchanges, projects find it difficult to launch; but accepting their profit distribution inevitably sacrifices the interests of retail investors.

From the perspective of biological evolution, when a certain species becomes enormous and structurally complex, it often signifies an impending extinction. Nowadays, the ones that ultimately dominate the skies are relatively small birds, rather than the massive pterosaurs.

The exchange's clearing of market makers is essentially a redistribution of interests under the existing competitive landscape. Retail investors still face pressure from venture capital and project parties, and the situation will not fundamentally improve. The migration to on-chain is still ongoing, and even projects like certain unlimited liquidity platforms have not yet adequately prepared for the impact of hundreds of millions of users.

In each market cycle, the fluctuations of value and price, as well as the game of interests and distribution, will continue to unfold, shaping the rise and fall of retail investors in the crypto market.