Venture capitalists' actions are allegedly jeopardizing the long-term growth of the cryptocurrency sector.
Here's a fresh take on the crypto market recovery:
Crypto Market Recovering, but challenges persist
The crypto world is seeing a revival with the total market cap breeching the $3 trillion mark. This surge suggests growing optimism among investors, yet it contrasts starkly with the unfortunate reality that a significant number of tokens launched this year have ended up in the crypto graveyard due to a lack of sustainable growth strategies.
Venture Capitalists in the Crosshairs
The traditional Venture Capitalists appear to be a stumbling block in the crypto space, as they tend to invest in new and promising crypto products merely for quick profit gains. While this behavior may seem innocuous at first, it comparatively impacts the industry's long-term sustainability.
David Phelps of JokerRace sheds light on VC practices in the crypto world:
"Typically, VC funds flow from the top for several years while companies work to secure long-term funding...However, this model has yet to be replicated in crypto. Regionalities have taken VC funds, minted tokens, and utilized them to artificially inflate token prices," Phelps tweeted.
The deteriorating market conditions have forced VCs to retreat, and the ripple effects are being felt by crypto projects across the board. A recent Coingecko report reveals that more than 1.82 million cryptocurrencies failed in 2025 alone, while approximately 1.93 million were successfully listed. This staggering increase from 2024, when only 1.38 million tokens failed, is genuinely concerning, given that it's only halfway through the year.
The spike in failures points to a shift in focus within the industry. Initially envisioned as a financial revolution, the vision is now noticeably skewed towards chasing quick profits, which is compromising the root purpose of cryptocurrencies.
In an interview with BeInCrypto, Hank Huang, the CEO of Kronos Research, shared insights on how crypto projects can set themselves apart from scams and make a stronger stance:
"Starting small with a modest market cap captures the attention of investors, demonstrating that the market cap isn't artificially inflated. By focusing on achievable yet fascinating milestones, establishing strategic partnerships, and providing a clear roadmap, confidence is built. With the DAO model in place, the community is empowered to make crucial decisions, whether it's between product development or prioritizing a utility use case. This environment fosters genuine engagement and foreshadows the creation of long-term value through collective input and collaboration," Huang noted.
Navigating the Challenges
One of the primary reasons for token and project failures is a lack of focus on revenue. Many VC-driven projects rely on free money, providing free services until the funds dry up. This fosters an environment where investors are reluctant to pay for comparable services, even if the alternatives are more sustainable.
The question then arises: How can crypto companies transform their business models to be grounded in actual value and user-driven revenue rather than relying on token price manipulation and VC-driven hype? According to Huang, the key lies with the companies themselves:
"Crypto projects must start small, avoiding the inflated valuations fueled by short-term hype. The emphasis should shift from token price incentives to genuine revenue models like fees, services, or user-driven growth. With a definite, achievable roadmap, projects can grow slowly but steadily, avoiding overpromising and underdelivering and instead creating sustainable value for the long term," Huang told BeInCrypto.
Ultimately, it's a critical juncture for the crypto market to realign with its original goal: fostering financial freedom. This realignment is essential to prevent the crypto market from plummeting into a full-blown disaster.
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Enrichment Insights:
- Blockchain can be utilized to create transparent supply chains and track products from raw materials to end-consumers, benefiting industries like fair-trade coffee and sustainable textiles.
- Circular economy models can be implemented using blockchain to track product lifecycle and recycling processes, promoting trust and accountability.
- Energy-efficient consensus mechanisms like Proof of Stake (PoS) and Proof of Space are more advantageous compared to traditional Proof of Work (PoW) in terms of energy efficiency.
- Green cryptocurrencies can be tokenized, facilitating seamless trading and investment in green initiatives.
- Decentralized finance (DeFi) platforms and non-fungible token (NFT) marketplaces offer real-world use cases for tokens, providing tangible value to users.
- By investing in regulatory compliance and focusing on marketing real-world benefits, crypto companies can avoid legal problems and build trust with investors.
- Strong community engagement fosters user participation and encourages innovation, driving growth.
- Thecrypto market's recovery, despite the challenges, has reportedly surpassed the $3 trillion market cap, indicating growing optimism among investors.
- A significant number of tokens launched this year have faced failure due to a lack of sustainable growth strategies, contrasting with the market's upswing.
- Venture Capitalists (VCs) are evidently a hurdle in the crypto space, as they tend to invest in crypto products for quick profits, impacting the industry's long-term sustainability.
- David Phelps, from JokerRace, mentioned that regional VCs have artificially inflated token prices by minting tokens and funneling funds.
- Recently, more than 1.82 million cryptocurrencies failed in 2025 alone, compared to only 1.38 million in 2024, showcasing concern since it's just halfway through the year.
- Hank Huang, the CEO of Kronos Research, suggested that crypto projects focusing on achievable milestones, strategic partnerships, and a clear roadmap can build confidence in the market.
- To avoid relying on token price manipulation and VC-driven hype, crypto companies should start small and emphasize genuine revenue models like fees, services, or user-driven growth.
- decentralized autonomous organizations (DAOs) can enable community empowerment, making crucial decisions about product development or prioritizing utility use cases, fostering sustainable growth and long-term value.
