Is Crypto Broken? | Roundup

Miles argues that crypto is the only major technology sector currently in a bear market while AI, robotics, and other sectors are entering bull phases, and that the industry has produced very few household names outside of Bitcoin and Ethereum. He contends that five tokens with genuine narratives and fundamental sense would do more to advance the space than new speculative money, and that the real value proposition of crypto has always been the ability to build and sell financial applications globally rather than replacing money. He frames L1 tokens as a net new asset class resembling a globally scalable financial services business, and argues the 2017 thesis that ETH and other tokens could function as money has since been disproven, a point David Hoffman also made in a published piece arguing L1 assets are increasingly valued on revenues and fees.

Zave disagrees that the current moment is clear, finding the intersection of crypto and AI confusing. He predicts AI will harm DeFi security over the next six to twelve months before things improve, making it very hard for DeFi protocols and startups to raise capital in that window. He remains long-term bullish on AI agents in crypto but sees significant near-term risk, noting that being too early from a VC standpoint is the same as being wrong.

Most funded crypto projects were valued on false priors and infrastructure projections rather than fundamental analysis. The EOS raise of 4.5 billion dollars during the 2017 ICO bubble is cited as an example of a project that went to zero despite receiving capital comparable to a historically successful IPO. Industry incentives were structured around launching tokens around sexy narratives rather than creating real value, with VC calls during fundraising dominated by questions about token launch timelines rather than business fundamentals, a dynamic AI is making worse even though the problem predated AI. Value capture has since risen up the stack toward applications, and teams with an app mindset two to three years ago are now better positioned than infrastructure-focused peers.

Stablecoins are seeing the most adoption in crypto, particularly in emerging economies lacking access to dollars, but their rise benefits chains with distribution like Tempo and Circle more than legacy L1s and reduces the need for ETH as money, putting Ethereum in a difficult position. Stablecoins are not yet widely accepted directly by merchants, and virtual cards are only a partial solution. Founders are gravitating toward already competitive spaces like prediction markets and stablecoins rather than generating new ideas, and incumbents with more resources and AI could potentially overtake crypto startups in those established spaces. DeFi emerged during the 2018 bear market as a new category, and a similar catalyst may emerge in the next twelve months, possibly AI agents using blockchain, though 2026 is predicted to be a challenging year because that next cycle catalyst has not yet been identified.

Institutional money entering crypto is shifting event culture and talent toward suits, trading, compliance, and institutional ideas rather than creative consumer applications, while retail money that previously supported crypto prices is now moving into Korean ETFs and meme stocks. Crypto is described as splitting in real time into two camps, one oriented toward institutional adoption and another toward cypherpunk ideals, though a second speaker reframes this as scaling versus new ideas rather than institutional versus ideological. Institutions are described as building more crypto startups than cypherpunk-oriented founders for the first time, while ideologues, grifters, and academics have largely been pushed out. Academic or professor-coin projects are characterized as broadly unsuccessful because domain expertise does not translate well to operating a business.

The regulatory environment is characterized as having fundamentally changed, with the president, secretary of treasury, SEC, and CFTC all stating they want to move dollars on-chain and rebuild finance on-chain. The Genius Act has not yet been implemented and is not expected until November of the current year. These political and regulatory catalysts are described as unambiguously bullish for crypto businesses, while hardcore cypherpunks may find the current direction of the industry disappointing.

Crypto's core problem is adoption, with people not meaningfully using applications built on it, and there is no strong enough reason currently to move stocks out of traditional brokerages like Fidelity into crypto wallets like Phantom. Privacy is identified as a potentially viable and growing market segment, with Zcash noted as rallying for the first time after more than ten years of existence. Quantum computing is expected to arrive this cycle and is flagged as having significant implications for cryptography. Despite current difficulties, the view is that crypto is very bullish on a three-to-four-year timeframe, making current low valuations interesting for VC investment, and new categories beyond prediction markets, stablecoins, and exchanges are expected to emerge during the current cycle.