The People are Tired (of losing)
Original author: Francesco Web3, head of Castle Labs
Original translation: zhouzhou, BlockBeats
Editors note: This article explores the changes in the crypto market, especially the fatigue of retail users. It is not difficult to find the shift from a venture capital-dominated market to a meme coin boom starting in early 2024. Although meme coins once provided a fairer opportunity for retail, they eventually became too speculative, leading to a deterioration in market conditions. Retail users are tired of losing money, and the market has become fast and competitive, emphasizing the importance of finding a new balance point and calling for more attention to projects with real applications and fair issuance mechanisms.
The following is the original content (for easier reading and understanding, the original content has been reorganized):
As Kaitoai highlights, mentions of the word “fed up” increased on crypto Twitter in the last two weeks of January 2025.
This cycle is different from the others, more challenging, and even surprising to traders who have been through two or three cycles. The market is changing: narratives are changing faster, attention is the scarcest currency. Last but not least, increasing regulatory scrutiny and political involvement in the crypto space has brought new variables.
Why do people feel tired?
Retail investors have missed opportunities for too long, and every time it seems that the goal is within reach, the market changes faster than the last time. In the 2021 cycle, we saw venture investors get exponential returns compared to retail investors who did not have private investment opportunities.
This all continues until around 2023, when some projects like TIA and DYM are launched, marking the end of retail investors’ disillusionment with these risky capital extraction techniques.
What is the most rational consequence of this? A movement seeking to change the grip of power.
The long-known Meme Coin narrative has gained more and more traction as venture capitalists no longer have private chips to sell to ignorant buyers in the market. This is good for retail investors, who have managed to find a level playing field. Until the narrative is over-hyped and saturated, and users attention spans are further shortened. Lets see how the market landscape has evolved and where we might be heading to try to explain why people are tired.
Phase 1 (early 2024) - From VC coins to meme coins
It almost seems like a long time ago, before the AI craze and the meme coin craze, there was a time when airdrops were the mainstream play for retail investors. This play was started by Arbitrum and other Layer 2 airdrops. Retail users saw the possibility of airdrops by trying new protocols and chains, and airdrops became a business, with airdrop-as-a-service companies and so on.
However, the dream turned into a nightmare, and when these coins started launching and disclosing their token economics, users were sorely disappointed: all that effort, and in the end, almost nothing was airdropped? One of the most controversial launches was Scroll, a ZK-EVM L2.
After more than a year of ecosystem promotion, Scroll’s airdrop was a huge disappointment, with questionable 5.5% of the SCR supply being allocated to Binance rather than the community.
Additionally, most of these tokens have very low circulation (circulating supply/total supply) and a large share is allocated to VCs. Another topic of discussion is TIA and DYM. At one point, the narrative of these tokens on crypto Twitter revolved around staking them in exchange for the expectation of airdrops to future ecosystem projects.
You guessed it right: these airdrops never happened, and the token’s price action has only been down (chart for DYM below).
Here is an overview of the different rounds and investor unlocks for TIA:
In the first unlock, more than 97.5% of the TIA circulating supply was unlocked, worth more than $1.88, and the daily TIA unlocking volume reached $10 million.
Eventually, retail investors grew tired of these types of tokens, which meant that most tokens only went down in price, eventually falling below their last funding valuation.
This is evident when we look at the dashboard provided below:
This dashboard considers the investment returns of the best performers for each VC in the data sample.
Venture capital returns in the last cycle:
The return of venture capital in this period:
The end of the venture capital era was so obvious that even Hayes accurately pointed it out in his December 2024 article, and at the end of the dark tunnel, retail investors saw a light of hope: meme coins.
Tired of VC-led machinations, retail investors are finally able to enter the permissionless markets that blockchain was supposed to open up.
This has to be the way of the future, right?
Phase 2 - meme coin craze
After the venture capital era ended, users had to find new ways to play, and they found this through muststopmurad and his meme coin super cycle.
For retail investors, meme coins seem like the closest thing to having an equal chance in the market — until they aren’t anymore.
Prices are rising, Trump is elected, and we’re going to the moon.
But suddenly, the liquidity plug is pulled, the markets attention turns elsewhere, and all your meme coins collapse in the market correction.
At the same time, all the insiders who had the opportunity to invest early also had the opportunity to sell their chips. Perhaps retail investors will end up experiencing even worse than they experienced in the VC coins.
What is left now? Even more risk-taking, further shortening attention spans, further fragmentation of liquidity, while trying to make sense of past mistakes through more gambles disguised as “trading”.
Pumpfun is just a symptom of the direction the market is heading.
jediBlocmates highlights the net negative problem in this ecosystem.
Among the reasons cited, the Pump.Fun team has been constantly transferring large amounts of fees away. In the last month alone, they have transferred more than 880,877 SOL to Kraken, totaling to 211,410,480.
The impact of the meme coin and Pump.Fun crazes is evident in the changes they brought to the market: narratives shift rapidly, the environment becomes like player-vs-player, and people no longer believe in anything.
Stage 3 - Market PTSD: People are exhausted
After losing out to venture capitalists, users now carry the scars of the Pump.Fun arena, hoping that their next 100x gain will make up for the previous losses. The market has now changed forever, and the new gameplay is a reflection of this change.
Market rotations are shorter and faster, where in previous cycles you could hold open positions while you slept and hold tokens for weeks, today you can only hold them for a few days or hours at best. New projects suck up all liquidity: attention is scarce and everyone is playing the same game.
The growing influence of politics and regulation: This was particularly evident with the launch of TRUMP, highlighting the unprecedented and outsized impact that external events can have on markets.
Unfortunately, once again, retail investors have lost their way in this game, and many tokens have become like the capital extraction mechanisms they are already very familiar with. Bucking this trend, the launch of Hyperliquidx has brought attention to community-led airdrops and launches. With over 31% of the airdrop allocated to the community and the token price up more than 7x since launch, Hyperliquid has proven that a fair launch can be achieved.
Nevertheless, it must be taken into account that not every project can replicate this model, because in order to run a project like Hyperliquid for a long time, the team has incurred huge expenses of tens of millions.
Importantly, the launch of Hyperliquid has brought a paradigm shift in the industry. Coupled with the release of Kaito, the way projects approach launch strategies has also changed.
Where does this leave us?
The phases considered highlight two extremes:
1. Too much power in the hands of venture capitalists: Retail investors are unable to participate in private rounds and can only serve as exit liquidity.
2. Unlimited meme coin acquisition leads to a player-to-player market, making overall market conditions worse.
Both have the same consequences: dissatisfaction among retail investors and the need to find balance and stability.
We leave you with some possible ideas for what the future might look like: a return to practicality, less focus on meme coins, and more focus on practical projects.
Focus less on value extraction and more on value creation, avoiding zero-sum games. Return to fair distribution, inspired by Hyperliquid.
A new shift in the way protocols are marketed and tokens are released, leveraging tools like Kaito for marketing, growth activities, and valuing the influence of social graphs and communities.
While we all know that price is the best marketing tool and has always been an important factor in attracting smart talent and liquidity, it would be a pity to still focus on value extraction when a supportive regulatory environment is on the horizon.
The growth cycle of emerging markets is often filled with roller coaster ups and downs, but it is critical to have an end goal and a path that is feasible for most people: building something of real value.
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