Returning to Growth-Driven Value: How to Escape the Dilemma of Narrativism?

Overview

• The essence of the current market predicament is the excessive investment and irrational valuation in the primary market during the last cycle, which has allowed some projects that should have been eliminated to survive and appear in the secondary market at unreasonable valuations.
• In the absence of external capital inflows, the degree of internal competition in the cryptocurrency market is rising drastically, creating a pyramid-like class structure. The profits of each level come from the exploitation of those below, extracting liquidity from the market, which in turn exacerbates the distrust among the lower levels, making the internal competition increasingly severe.
• In the current era of intense competition, the elimination rate of projects and tokens will significantly increase. Factors such as technology, background, and narrative will shift from being sufficient conditions to necessary conditions. The only thing the market truly trusts is the real rise—real user growth, real revenue growth, and real adoption rate rise.

1. The overall market is in distress.

The current market predicament is not limited to certain projects; rather, the entire crypto market is facing challenges. From a macro perspective, the cycle of a "four-year certainty bull market" seems to have been broken. Since the second quarter of 2024, the market has been in an unusually low liquidity state. The rise in Bitcoin prices has not resulted in a general surge of other cryptocurrencies, which also proves that the current predicament is not confined to certain projects, but the entire market is facing challenges.

The emergence of this situation has multiple causes. On one hand, the impact of Bitcoin halving on the supply and demand curve is gradually weakening, and a larger market capitalization base also limits the room for price rise. On the other hand, changes in the global economic cycle have also affected the crypto market. Over the past decade, the global economy has generally been in an upward or stable period, providing a favorable environment for the development of cryptocurrencies. However, this trend is now changing.

2. The intensifying market environment of involution

From an industry perspective, the negative impacts of over-investment and mispricing are becoming evident. The market boom of 2020-2021 allowed some funds and projects that should have been eliminated to survive, even securing substantial financing at unreasonable valuations. This ultimately led to these projects appearing in the secondary market at unreasonable valuations in 2023-2024.

However, the current market problems are not limited to certain projects. In the absence of external funding inflows, the market has formed a pyramid-like class structure. Profits at each level come from the exploitation of the lower levels, and liquidity is drawn out of the market. This process further exacerbates the distrust among the lower levels, leading to increasing internal competition.

3. Return to rise drivers

In the current market environment, the elimination rate of projects and tokens will significantly rise. Factors such as technology, background, and narrative will shift from sufficient conditions to necessary conditions. The only thing the market trusts is true growth — real user growth, real revenue growth, and real adoption growth.

(1) Organic rise: Focus on marketing

Many projects have two misconceptions: one is that they believe technology or products are more important than the market, and the second is that they equate data 增长 with real growth. In fact, the essence of any project is a business, and the core of a business is profitability. In the current environment of liquidity scarcity, projects face only two choices: rise or elimination.

True rise should be highly integrated with product strategy, matched with operational routes, and still maintain a high proportion of user retention after eliminating unsustainable factors (such as short-term incentives). An excellent marketing director should spend most of their time on strategic observation and thinking, rather than simply executing various marketing activities.

(2) Emphasize Key Opinion Leaders (KOL) Cooperation

The role of KOLs is often underestimated or misused. Some high-quality KOLs can not only provide assistance on market and brand levels but also offer valuable advice on products, strategies, and more. However, there is currently a phenomenon of "adverse selection" in the market, where low-quality KOLs tend to be more actively involved in promotions, while some inferior projects offer better conditions.

The key to solving this problem lies in the fact that the project founders or core team members should personally engage in one-on-one communication with important KOLs. This not only helps the project gain more valuable collaborations but also allows the founders to better understand the entire industry ecosystem.

(3) Use protocol revenue as a core rise indicator

In the cryptocurrency market, people often overlook a fact: the rise stimulated by token issuance, incentives, and other means is often just a one-time event; truly sustainable growth comes from sustainable business models and revenue.

Key steps to establish a sustainable development model include: ensuring reliable sources of income, the possibility of achieving protocol surplus, and building effective governance mechanisms and economic models. This requires the joint efforts of multiple stakeholders, including core teams, investors, and communities.

(4) Establish a real economic model

Many projects face the issue that the rise in token circulation does not match business development. A true economic model should meet the following conditions:

1. Able to earn or potentially earn sustainable protocol income.
2. The token cycle matches the project growth cycle.
3. Treat incentives as investment behavior rather than consumption behavior.
4. Solve the problem of class solidification in the chip structure.

By establishing a transparent and deterministic profit distribution mechanism, extending the token unlock period, and reducing market capitalization misestimation caused by "virtual circulation rate," projects can build a healthier and more sustainable economic model.