Abandon illusions and prepare for the most agonizing moment in the crypto market.

Author: Santiago Roel Santos

Compiled by: Tim, PANews

Price and adoption paradox

Encryption adoption will continue, but market prices may not recover for a long time.

The contradiction between accelerated adoption and lagging market prices is not a flaw, but a necessary characteristic of the current stage of the crypto market's evolution.

If you view the crypto market from a ten-year perspective, its prospects are very attractive. However, maintaining this long-term perspective is psychologically challenging. You should be prepared to watch adoption expand while prices stagnate or slowly decline; and be prepared to witness others profiting in other areas (artificial intelligence, stocks, or the next hot trend) while crypto seems to be forgotten.

This feels incredibly unfair, and the process will be agonizing. But price lag is inevitable. Fundamentally, many of these crypto assets shouldn't have enjoyed their previous valuations.

The market doesn't care about actual adoption until prices collapse and it starts to care again.

Widespread adoption fuels a bubble

In the early stages of widespread adoption, the market may actually create a bubble. This is a painful process of value discovery. When real demand can no longer support inflated valuations, the market will recalibrate, which is precisely the necessary path for long-term healthy development.

When crypto infrastructure achieves widespread adoption, it becomes clear that external investment far exceeds actual demand. Widespread adoption will serve as a stress test for business models rather than a validation of value. Some projects will perish in obscurity, while others will survive, but their valuations will be far below the visions painted at their peak.

Cryptocurrencies are gradually fading from the spotlight, becoming just another face in the crowd. This shift from excitement to mundaneity is a necessary step in the journey from hype to maturity.

This is a good thing.

This isn't the first time such a scenario has unfolded. During the dot-com bubble burst, the Nasdaq index plummeted by approximately 78%, while the number of internet users tripled and broadband infrastructure was deployed across the board. It took the market years to recover, and now the internet has quietly reshaped the world; while investors are still licking their wounds, software has already "swallowed" the entire world.

Infrastructure technology will not reward short-sighted investors.

When infrastructure wins, who will be the real winner?

The shift in market phases will make many participants uncomfortable. Builders who have poured years of effort into maintaining open-source codebases will witness other companies copying their work and reaping most of the economic benefits; native crypto venture capital firms that invested in infrastructure early on will see traditional venture capital firms gain more value; and retail investors who buy tokens instead of equity may feel marginalized, as companies benefit from the ecosystem network but fail to return the corresponding value to token holders.

Some are structural problems, while others are self-inflicted predicaments.

The market is adjusting itself. Open networks will develop rapidly, system incentives will change, and value capture mechanisms will improve, but not all models will survive to the day when they can benefit from them.

Encryption adoption is quietly progressing, but the market hasn't truly taken it seriously yet. It could take years for the market to re-establish a value correlation and recognize that encryption technology is a core operating system, rather than just a speculative asset.

Price cycles and application cycles are two different things.

Price cycles are driven by market psychology and liquidity.

Application cycles are driven by practical value and infrastructure.

The two are related, but not synchronized. Historically, price has often led application, which was common in early technological revolutions. Today, application is beginning to dominate, while price is lagging behind.

Currently, marginal buyers of crypto assets are elsewhere, chasing the AI wave. This phenomenon may continue or it may reverse, beyond our control.

But what we can see is that a world without stablecoins, transparent funding channels, and 24/7 global real-time settlement is becoming increasingly unimaginable.

The most profound lesson the cycle teaches us is that we must accept that the time when applications and prices are out of sync can be far longer than expected, and if we want sustained compound interest, we need to remain rational when we lose patience.

This is not a manifesto advocating for HODL.

Many crypto projects will never recover. Some were flawed from the outset, some lacked a moat, and some have been completely abandoned. New winners will inevitably emerge; there will be fallen stars, but also a few true comebacks.

Callbacks are healthy

We are entering a different regulatory and economic environment. This creates opportunities to address long-standing issues: weak product revenue, inadequate asset disclosure, mismatched equity and token structures, and opaque team incentives.

If the crypto industry truly wants to become what it aspires to be, it must first demonstrate the qualities it should possess.

I believe anything is possible. My strongest belief is that within the next 15 years, most businesses will adopt crypto to remain competitive. By then, the total market capitalization of cryptocurrencies will exceed ten trillion dollars. Stablecoins, tokenization, user base, and on-chain activity will grow exponentially. Simultaneously, valuation standards will be redefined, existing giants may decline, and unsustainable business models will eventually be eliminated.

This is healthy, and it is necessary.

Cryptocurrencies will eventually disappear. The more a company makes cryptocurrency the core of its products, the more fragile its business model tends to be. True, lasting winners will embed it deeply into their business processes, payment systems, and balance sheets. Users shouldn't be aware of the existence of crypto technology, but rather experience firsthand the faster settlements, lower costs, and fewer intermediaries it brings.

Cryptocurrencies should be pure and “boring”.

When capital tightens, the era of rampant airdrops, subsidy-driven demand, unreasonable incentives, and excessive financialization will come to an end; this is simply another inevitable historical cycle.

My basic assessment is simple: crypto applications will see accelerated adoption, prices will readjust, and valuations will return to rationality. Crypto is a long-term trend, but this absolutely does not mean that the tokens you hold will necessarily appreciate.

Who has captured the value of encryption technology?

The primary benefit of foundational technologies is to consumers by lowering prices and improving the experience. Secondary beneficiaries are companies that upgrade their systems to take advantage of cheaper, faster, and more programmable infrastructure.

This theoretical framework raises some uncomfortable but necessary questions:

• Visa or Circle?
• Stripe or Ethereum?
• Robinhood or Coinbase?
• Is it a Layer 1 protocol or a user aggregator?
• A basket of Layer 1 protocols or DeFi?
• A basket of Layer 1 protocols or DePIN?
• DeFi or traditional finance and stocks?
• DePIN or infrastructure stocks?

This isn't a simple either/or choice; a diversified investment strategy is also viable. The issue lies in relative value and relative performance: who will capture the residual value created by blockchain?

I favor traditional and hybrid companies that access open settlement channels to reduce costs and increase profit margins. History shows that they often benefit more than the infrastructure itself.

However, it must be emphasized that there are exceptions to every theoretical framework.

What I believe, and what I don't believe

I truly believe that networks with genuine demand will eventually be monetized, as the internet has proven. Facebook, too, went through many years before commercializing.

I'm confident that some Layer 1 value will be validated as it develops, eventually justifying its valuation. However, I also believe that most will struggle to acquire users and find sufficient value to support their claims.

I believe the gap between winners and losers will widen further, and distribution, market entry strategy, customer relations, and unit economics will become far more important than first-mover advantage.

A common misconception in the crypto space is that early technological advantages are overestimated while other factors needed for subsequent development are underestimated.

Back to reality

I'm not particularly optimistic about price action over the next few years. Adoption will continue to rise, but prices could fall further, potentially exacerbated by broader stock mean reversion and a cooling AI hype cycle.

However, patience is a major advantage.

• I am optimistic about the encryption-as-a-service model.
• I am optimistic about companies that enable encryption.
• I am bearish on excessive financialization.
• I am bearish on the economic benefits of failed units.
• I am bearish on the over-construction of infrastructure.

Protecting your principal becomes paramount. Cash is undervalued: not for its returns, but for the psychological immunity it provides. It allows you to act decisively when others are unable to.

The market has entered a fast-paced and increasingly impatient era. Today, having a longer time horizon than most participants is a real advantage. Professional managers must frequently adjust their portfolios to prove their worth. Faced with increasing life pressures, retail investors are increasingly chasing short-term trends. Institutional investors, too, will inevitably declare cryptocurrency dead once again.

Gradually, more traditional companies will adopt encryption technology, and more balance sheets will be connected to the blockchain.

One day, when we look back on this period, everything will seem so clear. The signals were everywhere, but unwavering conviction often only seems effortless after prices have risen.

Before that: wait for the pain to arrive.

We're waiting for sellers to sell at a loss, waiting for faith to crumble, but we haven't reached that stage yet.

Don't rush into action. Markets will continue to fluctuate, and life goes on. Spend more time with the people you care about. Don't let your investment portfolio become your entire life.

The crypto world will operate silently, whether the market is in the shadows or brightly lit.

Good luck to everyone.