Why is the current level of difficulty in operating within the crypto market considered extremely challenging?

More than 90% of crypto assets are fundamentally driven by speculation, but pure speculation is not a perpetual motion machine. When market participants lose interest or are unable to sustain profits, speculative demand will diminish.

Author: @0xkyle

Compiled by: AididiaoJP, Foresight News

As a trader, the core objective has always been to seek investment opportunities with high conviction and asymmetric return potential. I am passionate about uncovering such high-risk-to-reward trades, like Solana at $20, Node Monkes at 0.1 BTC (which later surged to 0.9 BTC), Zerebro at a $20 million market cap, and so on.

However, such asymmetric opportunities are increasingly scarce today. There are many reasons, all of which together form a large and complex issue.

Take this chart as an example, illustrating Zerebro’s journey from a $20 million market cap to a peak of $700 million, delivering 30x returns; however, it also plummeted by 99% from its peak, nearly returning to its starting point.

This brings up the first issue: it is widely acknowledged in this industry that most tokens will eventually need to be sold. This creates a vicious cycle that hinders the emergence of assets capable of long-term value appreciation. Over 90% of crypto-assets are fundamentally driven by speculation, but pure speculation is not a perpetual motion machine—when market participants lose interest or fail to sustain profits, speculative demand will inevitably wane. A tweet by user @0xaporia succinctly captures this insight:

The second issue lies in the structural flaws of the cryptocurrency market. The flash crash event on October 10 fully exposed this vulnerability: major exchanges caused significant losses for a vast number of users, with over $40 billion in open interest evaporating instantly. This served as a harsh financial lesson for all participants: if something can go wrong, it will. Such risks deter institutional and large-scale capital from entering the space—if there is a risk of total loss, why take the risk?

The third and fourth issues have persisted for a long time: the first being the overwhelming number of new tokens issued daily, and the second being the excessively high initial valuations of these tokens. Each new project is diluting the overall market liquidity, while high-valuation offerings compress profit margins for public market investors. Of course, one could choose to short, but if the entire industry relies on shorting for profitability, it is certainly not sustainable in the long run.

There are other issues that remain unaddressed, but the above points are the most noteworthy. Returning to the main topic of this article: why is it so difficult to find asymmetric opportunities in the current cryptocurrency market?

• High-quality projects come with excessive issuance valuations, where prices already fully, or even overly, reflect expectations.
• The sheer volume of token issuance dilutes value; today, a perfect L1 emerges, and tomorrow, a second one appears, raising doubts about whether they all live up to their claims.
• The industry evolves at such a rapid pace that it becomes challenging to establish long-term investment conviction; leading projects may lose their edge within a year.
• Structural issues in the market hinder capital inflows; investors demand higher returns to compensate for the risk of total loss. If actual returns fall short, the investment rationale collapses.

Most fatally, the essence of many tokens is merely a fundraising tool. Selling tokens raises operational funds, but the real value concentrates on the equity side. These tokens, lacking value accumulation and not representing company equity, are essentially speculative instruments akin to a game of hot potato rather than genuine investments.

None of these perspectives are novel. Why do I reiterate them? Because despite being widely acknowledged, no one changes their investment approach. People continue to chase new narratives and hype new trends, repeating ineffective strategies. This aligns precisely with the definition of insanity: repeating the same actions yet expecting different outcomes.

I am always in pursuit of the next asymmetric opportunity. Following conventional approaches yields only mediocre returns. I believe the next asymmetric opportunity in crypto lies in:

• Mining rewards.
• Equity investments in blockchain enterprises
• Exchange platform tokens
• Seeking severely undervalued investment targets, which do exist but are rare