Will 99% of tokens go to zero?

Author: Noveleader

Compiled by: Ken, Chaincatcher

Back in 2021, you had just started investing in cryptocurrency and became a fan of the industry, obsessed with how it worked, and believing that with the right moves, anyone could get rich. You witnessed many stories of wealth, saw the birth of numerous millionaires, and even thought that directly investing in Bitcoin was a good strategy. The data you saw showed that Bitcoin was one of the fastest-growing assets, with its market cap reaching the $1 trillion milestone at a pace far exceeding any company.

Fast forward to today, you are sitting at a family dinner, and everyone is discussing their portfolios, talking about the S&P 500's long-term performance, and feeling satisfied with their investments. You pull out your phone and see that your portfolio has shrunk by 60% from its all-time high; you sigh and silently take another bite of your food.

Your cousin laughs and asks you, "Hey, you've been investing in cryptocurrency, right? How's your portfolio doing?" He adds, "I'm so glad I stayed away from it and didn't throw my money in."

You are at a loss for words because you can't find a rebuttal. You could mention that the New York Stock Exchange is planning to go on-chain to introduce 24/7 trading, that BlackRock is tokenizing short-term government bonds, that Robinhood just launched its L2 testnet, and that more institutions are adopting crypto technology. But you hesitate because you know you are facing significant losses, and these factors seem to be of no help.

You feel confused because the price of Bitcoin has retraced to the level when you first invested. Moreover, you didn't just invest in Bitcoin; that was only a small part of your portfolio. Along the way, you discovered many other cryptocurrencies that you thought had huge upside potential—perhaps one of the over 17,000 tokens listed on CoinGecko, or one of the millions of tokens issued on platforms like Pumpfun in the past couple of years.

Over the years, too many tokens have been created, and for the healthy development of the industry, 99% of them need to go to zero.

This is evident in the following fact: the top five tokens account for 84.4% of the entire crypto market's market cap, which makes you ponder how to deal with the remaining tokens and whether they still hold any value. The rest of the market (15.6% or $330 billion) accommodates thousands of other tokens.

To illustrate this more intuitively, the concentration in the crypto market is much higher compared to traditional finance. In the U.S. stock market, the seven tech giants account for 31% of the market cap, while the top 500 companies (the S&P 500) account for 84.7%. Traditional finance has a hundred times more companies than cryptocurrency, yet only reaches the same market cap share as the top five crypto assets.

If the crypto industry wants to achieve a similar representative distribution, one of the following scenarios needs to occur:

1. The top tokens depreciate while the lower-ranked tokens appreciate.

2. There is a massive external liquidity push or widespread adoption.

3. The lower-ranked tokens lose value, replaced by the top tokens.

For a healthy system, the first scenario is more favorable for value distribution, but it is unlikely to happen because most assets are correlated with Bitcoin, which also means that the major assets are losing trust, which is not ideal.

Certain tokens, such as HYPE, have gained significant market share over time due to their strong market acceptance and product-market fit, aligning with the second scenario. Hyperliquid is clearly one of the few winners from last year; they indeed have excellent token and product consistency because they reinvest most of the fees generated by the platform into token buybacks.

Continuing to explore the second scenario, attracting value from external entities (or institutions), the crypto industry has performed reasonably well in terms of digital asset trusts/funds, at least in terms of accumulation, although their prices have also dropped significantly now. For Bitcoin, digital asset trusts have accumulated 997,257 BTC (5% of the circulating supply); for Ethereum, this number is 6.16 million ETH (5.1% of the circulating supply). Additionally, there is reason to believe they have captured a significant portion of the circulating supply of major assets, so any further intervention would lead to excessive control concentrated in the hands of a few entities.

The third and final scenario is something that must happen quickly for the following reasons.

Tokens are unlocking every month, and there will be a massive supply unlocking over the next few years. Just this year alone, token unlocks will add $8.51 billion in value to the market, and over the next five years, this number will reach $17.12 billion. However, it is still unclear whether there is enough demand to absorb these supply unlocks and the selling pressure they bring.

For most tokens, coupled with factors like distorted token economics, this will lead them to continue heading towards zero.

To increase demand, these projects need to succeed commercially. However, many crypto businesses end in failure. For a trillion-dollar industry, among the over 5,600 protocols listed on DeFiLlama, only 76 generated over $1 million in revenue in the past 30 days, accounting for just 1.3%.

Interestingly, even when lowering this threshold to protocols generating over $100,000 in revenue in the past 30 days, only 237 protocols meet the criteria.

Moreover, when you observe revenue concentration, you will find that the top 10 protocols in 2025 account for 80% of the revenue, with the top 3 accounting for 64%. Tether alone accounts for 44% of the total revenue in the crypto industry. Surprisingly, among these 10 protocols, only 3 have issued tokens (Hyperliquid, Pumpfun, Jupiter), and reviewing their relative performance, only HYPE has performed well.

This also points out one thing: issuing tokens is not always the best choice.

In 2025, around 118 major tokens were issued, of which 84.7% fell below their valuation at the time of the token generation event. These numbers look very bad and are often disappointing, leading us to question whether investing in new tokens is worthwhile. These tokens were issued at bubble-like valuations, and the price trends throughout the year have been concerning, remaining in a downward state even now, as the broader market environment has also not performed well.

10/10 (The Day That Changed Everything)

The occurrence of the "October liquidation event" was due to macro pressures revealing design flaws. It exposed the weak designs of many things in the crypto space, whether it was centralized exchanges like Binance—liquidating positions worth millions due to price errors of assets like USDe, BNSOL, and wBETH—or lending protocols like Silo and Morpho, which accumulated bad debts in the Stream Finance blowup that occurred weeks later.

Since then, asset prices have not recovered, and the $19 billion cascade effect of liquidations still affects us. The total locked value in decentralized finance has decreased by 44% since that event (from $165 billion to $94 billion). Protocol revenues have declined, and the bear market has officially begun.

Consistency Issues

When you let go of the steering wheel for a moment while driving, does the car veer off course? If so, it indicates a consistency issue between your steering wheel and tires. Similarly, in the crypto space, this consistency issue often arises between protocols and the tokens they issue. Last December, when Circle acquired Interop Labs (the team behind the Axelar interoperability stack), the AXL token was not included in the transaction, and the token price plummeted immediately after the announcement. This is inconsistency.

So, why does this inconsistency occur? A project typically involves two entities: the lab and the decentralized autonomous organization (DAO)/token holders. The lab is the "team" in token economics; they are the initial developers of the project who raise funds for growth by selling a portion of the company’s equity and granting tokens to early investors. In some cases, venture capital firms may even receive terms more favorable than anyone expected, such as "refund rights."

Tokens are not legal representatives of the enterprise, nor do they provide any actual rights to the company's profits like equity does. Investors hold these rights through the equity they own when they receive tokens. So they are in a more advantageous position, but what about the token holders? In aligning the product with the token, they are entirely subject to the project team.

This is a concern for a very small number of protocols. They often demonstrate this consistency through token buybacks. Hyperliquid strengthens this consistency through buybacks. Some may argue that they should use the collected fees to promote protocol growth more, such as incentives and strengthening insurance funds, and they are not wrong. These things should indeed be done, but building a moat around a good token is the best marketing strategy. Making your users rich is the best thing a product can do, and that’s exactly what Hyperliquid achieved through its first airdrop.

Aave, as the largest decentralized finance protocol, uses its revenue for buybacks while also facing similar debates about better uses of funds and directing them towards growth (I understand the current inconsistencies and hope that the DAO and the lab can resolve this issue for the benefit of the AAVE token). Last year, Uniswap fully aligned the interests of its token and token holders after its token had existed for over five years.

These protocols are genuinely safeguarding the interests of holders. Clearly, there are other examples, but even so, the number is still less than our needs. These are tokens worth appreciating. Everything else should decline, and people should rotate into those protocols that generate revenue and are most aligned with their tokens, which are conducting buybacks, achieving organic growth, and trying new methods to attract more users.

So, am I saying these tokens are the best investment choice? Probably not. I do not provide any financial advice; I am just telling you what to look for when investing in any protocol. Ultimately, whether it rises or falls depends on the token unlocks spread over several years (token economics), the incentives they distribute (which can lead to token dilution), and other expenditures. Therefore, even with buyback plans, selling pressure may still be greater.

Conclusion

The crypto industry is currently in a reshuffling phase, speculative tokens will stop receiving inflows, while real tokens with underlying businesses supporting their growth will stand out. Not many people realize this and see the opportunity, but protocols with real revenue are the ultimate key.

They are already growing, already forming trends, and even if not today, they will soon become popular.

The era of non-cash flow generating tokens is over, as evidenced by countless failed issuances last year. This is why the issuance of MegaETH based on key performance indicators makes sense: it first attempts to determine the demand for the chain and its products, run some revenue data, and then issue tokens. Another interesting model they adopted is collaborating with Ethena to launch USDm to prevent the value generated by stablecoins from flowing out of the ecosystem and using it for token buybacks. Time will tell whether their model is successful, but it is a great starting point for rethinking how tokens are issued today.

So, I firmly believe that the crypto industry is evolving, and most crypto assets should go to zero, with only a few exceptions.