Author: @noveleader Source: castlelabs Translation: Shan Oppa, Golden Finance

The start of 2026 has not been kind to the crypto community. Most currency prices are falling; Bitcoin hit an all-time high just half a year ago and has been correcting ever since. There has been basically no good news recently. ETF funds have continued to flow out, everyone's interest in crypto has declined, many projects have closed down, and venture capital has stopped investing. The circle that was once full of opportunities seems to be slowly drying up.

Although the current situation is indeed so bad and there is no optimism at all, the industry is undergoing a major shift: tokens that have nothing to do with protocol revenue will plummet, and projects without real revenue will simply not survive. The circle that was once full of local dogs and harvesters is shifting from the "casino model" to the "investment model".

What accelerated this change was the great liquidation event in October last year, coupled with a series of macro trends - such as gold outperforming Bitcoin. This makes everyone start to wonder: is cryptocurrency still worth investing in? Does it still have the upside that attracted everyone in the first place?

This article will talk about this change and its impact on crypto assets and underlying investment logic.

From gambling to investment: crypto has completely changed

The encryption industry has gone through several stages: the early geek technology stage, where no one valued it and no one understood its uses, the extreme speculation during the ICO craze; the barbaric growth with no regard for regulation; the Luna crash, the FTX thunderstorm and other big thunders; until now: institutions have begun to officially enter the market.

For a long time, cryptocurrency has been "harvest first, do things later", and the entire circle has defaulted to gambling, not investment. The popularity of platforms like PumpFun, which allows you to send memecoins with just one click, shows that crypto has always been a gambling bubble: new users rush in, hoping to get rich overnight.

This "harvest mode" is basically divided into three categories:

• Low effort, low return: memecoin

• High effort, high return: scam project, harvest slowly

• Low effort, high return: celebrity coins, celebrity platform coins

On one side is the simplest way to harvest: memecoin. Issuing coins is simple and does not require any value or logic. There is only one logic for making money: run before others. Anyone who plays the local dog game understands this rule. Many people deserve to lose money. The market is like this. On the other side are projects that draw a large pie, market it like crazy, and then run away slowly. There is another category that is even more extreme: star coins, which cost almost zero but are the most ruthlessly harvested.

Most of the new coins issued last year were junk investments, and holders generally suffered heavy losses at the end of the year. The reasons are nothing more than rubbish token models, artificially high online valuations, poor market sentiment, etc.

Previous projects only focused on stacking technology and never pursued product market fit (PMF). The result was that the technology was great but no one used it. But in 2026, everything is changing. As institutions enter the market, the logic of “harvest first” in cryptocurrencies is falling by the wayside.

What institutions want is the underlying infrastructure that crypto has built in recent years, but they are not interested in the various air coins we issued before. They like codes and on-chain systems, and they can use them, but they won’t sell most tokens.

For example:

• The New York Stock Exchange will use blockchain for 24/7 trading

• Robin Man is testing the second-layer network on Arbitrum, tokenizing stocks and ETFs, allowing users to hold “stocks” in self-hosted wallets

• BlackRock BUIDL and Franklin Templeton Benji are all on-chain real asset (RWA) products

These things can achieve instant liquidation, which exactly solves the pain points of traditional finance for many years.

The real asset RWA will reach the trillion-dollar level in the next few years. Private credit, stocks, and short-term U.S. bonds are all growing on the chain; on platforms like Hyperliquid, leveraged trading of commodities and stocks is already possible, and the scale is still growing.

Everyone is flocking to the chain, because the blockchain is the infrastructure that can bring finance to a new level. When both institutions and ordinary retail investors use the same on-chain system, the dream of complete popularization of DeFi will come true: transparency, fast liquidation, no delays, and higher financial autonomy.

Those applications with a solid foundation will continue to live well in the new era. The leaders in the lending industry (Morpho, Aave, etc.) have experienced several rounds of sharp declines, but they are still stable and innovative and will continue to dominate. Platforms such as Hyperliquid are becoming the deepest liquidity centers on the chain, and they also support leveraged trading of stocks and commodities. As institutions become larger and larger, they need platforms that can handle them.

What really matters will be these:

• Oracle Network

• The bottom layer of cross-chain interoperability

• Layer 1/Layer 2 expansion

• Token Standard

After institutions fully enter the market, no coin will be able to make a guaranteed profit, but projects with real performance and a stable history will not disappear and will slowly be used by institutions and retail investors alike.

Income is king

There are over 17,000 tokens on CoinGecko. There are approximately 5,700 protocols on DeFillama. But only about 200, or 3.5%, made more than $100,000 in the past 30 days.

Crypto’s real investment targets are much smaller than everyone imagines. Most tokens are not worthy of being called “investment products” at all.

If we are more strict and only look at the income that can be distributed to holders (repurchase, destruction, pledge dividends, etc.): there are only about 50 protocols that have distributed more than 100,000 US dollars to holders in the past 30 days, accounting for less than 1%.

Even if the standard is raised to a monthly income of US$1 million, it is the same, because many tokens have a market value of hundreds of millions or billions, but not much money is made at all.

The low income of token holders is caused by an old problem in the industry: the interests of project parties and token holders are inconsistent. A project usually has two parties:

• Development Team (Lab)

• DAO/Token Holders

The team sold shares and issued tokens for financing in the early stage, but tokens are not equivalent to equity, do not represent company ownership, and do not naturally enjoy profit dividends. Only equity investors have rights, and ordinary token holders have complete control over the conscience of the project.

But in the past year, the trend has changed: people no longer bet on the subject matter, but began to care about whether the agreement is profitable or not. Just this one shift can take crypto to places that the harvesting model of the past years could never reach.

The article also lists the key indicators that investors must look at, and also analyzes the protocols with the highest revenue recently: Hyperliquid, PumpFun, Tron, Sky, Jupiter, Aave, Aerodrome, etc.

1) Price-to-sales ratio (P/S)

The price-to-sales ratio (P/S) is calculated by dividing a protocol's market capitalization by its annualized revenue. TheP/S ratio measures how much the market is willing to pay for each dollar of revenue generated. The premium reflected in this ratio demonstrates the importance users place on the future capabilities and growth factors of the protocol.

We compared some of the most profitable protocols and their tokens based on annualized revenue and price-to-sales ratios. We take the last 30 days of revenue and multiply it by 12 to get annualized revenue. The results are shown below.

We set the overvaluation threshold at 20 based on the price-to-sales (P/S) ratio of top U.S. listed stocks. Most protocols are valued at or below this threshold, with only Tron having a much higher price-to-sales ratio than the others. Another threshold we considered was revenue, and we took the average annualized revenue for the protocols in question, which was around $250 million. Only three protocols—Pumpdotfun, Hyperliquid, and Tron—have revenue above this threshold, and together they account for approximately 80% of the total revenue of the aforementioned protocols.

2) Token holder income

The next important factor we want to discuss is the return to token holders. This largely depends on the revenue generated by the protocol and the portion that is actually returned to token holders through buybacks, token burns, and staking rewards. Nowadays, this has become a hot metric that everyone talks about, and it is more important than actual earnings because this is how the value of the token is accumulated.

We again categorize protocols based on holder revenue over the past 30 days and multiply by 12 to arrive at an annual estimate. At a glance, you can tell that most protocols are fairly fair to holders and use most, if not all, of their revenue to increase the value of their tokens.

This is one side of the issue and reflects that token buybacks are underway and, if done at a similar pace, will add millions of dollars of value to the tokens. To better understand this value accumulation, we also compare the relative performance of these tokens following the October liquidation event to provide a clearer picture of the impact of token appreciation activity.

In the chart above, we see some outliers such as TRON, HYPE, and especially SKY which has seen a relative rise. Among these three tokens, TRON's fluctuations are not large and the trend is relatively sideways; while HYPE's trend diverged from other tokens in late January.

This suggests that buybacks alone are not enough to boost token value; other factors, such as broader market declines, unlocking schedules and cliffhangers, category narratives, and the overall sentiment of the protocol, also play a role. All these different points will be discussed in subsequent chapters. Before that, let’s compare the two most profitable protocols and their token performance: Pumpdotfun and Hyperliquid. As you can see from the chart below, HYPE performs better when both tokens have active buyback programs (annualized holder revenue for HYPE is ~$660 million vs. ~$380 million for PUMP), which is attributed to overall sentiment on the protocol and people pricing the token based on future supply shocks and unlocks.

3) Token Economics Design and Oversupply

In the cryptocurrency space, tokenomics aims to help projects raise funds from investors, incentivize users, sometimes conduct community crowdfunding, and allocate token supply to project teams. There are not many hard and fast rules for the design of token economics, and different projects will handle this process flexibly according to their own circumstances. This part of the project is critical because it determines not only the near-term supply pressure on the token, but also how the token accumulates value, the value consumption mechanism used to offset selling pressure, and how well the token aligns with the interests of its holders.

The following shows how quickly supply is unlocked for a range of fixed supply tokens. While most tokens will eventually fully unlock, the unlocking speeds vary significantly: PUMP unlocks the fastest, while HYPE unlocks the slowest. Generally speaking, a slower unlocking speed is preferable because it reduces the likelihood of a sudden surge in supply and the resulting selling pressure that the market cannot bear. For tokens like AAVE and SKY, most of the supply has already been unlocked; while for JUP, the long-term unlocking plan is not deterministic and is left to the discretion of the DAO.

It is worth noting that unlocked tokens can be further divided into investor unlocking, team unlocking and community unlocking. Community unlocks are available for staking rewards, incentives, and airdrops. This requires analysis on a coin-by-coin basis and plays an important role in understanding the sell-side dynamics of a coin.

4) Lindy Effect

“The longer something survives, the longer it continues to survive.”

This is the essence of the Lindy Effect. It applies to almost all companies, including companies on the chain, where innovation is a key factor because companies that do not innovate cannot survive in the long term.

Last year, crypto protocols generated a cumulative revenue of approximately $16 billion, with revenue highly concentrated in the hands of a few top protocols. The top ten protocols accounted for 80% of net revenue, with the top three accounting for 64% and Tether alone accounting for 44%.

In addition, not all protocols issue tokens; for example, Circle, the second-highest revenue protocol after Tether, has its shares listed on the New York Stock Exchange under the ticker CRCL. Tether, on the other hand, does not issue tokens. Even among the top ten protocols, only three have issued tokens, which shows that issuing tokens is not always the best strategy, depending on the design of the protocol.

Going back to the Lindy Effect, in most cryptocurrencies the top two protocols hold the largest market share and dominate. This is particularly common in the stablecoin space, with Tether (USDT) and Circle (USDC) accounting for 84% of the total market, followed closely by other players such as Sky (USDS) and Ethena (USDe). In some other areas, this pattern may seem less obvious, but can still be observed, such as the lending space, where the top two protocols by TVL (Aave and Morpho) account for 64% of the market share. The same model also appears in many other fields, such as prediction markets, income markets, liquidity staking, re-staking, etc.

The importance of the Lindy Effect is also related to the frequent hacker attacks at the protocol level of the cryptocurrency industry. This year alone, we’ve seen over $130 million disappear from smart contracts, with tens of billions of dollars lost over time. Over time, it becomes increasingly difficult to entrust funds to any new protocol because you cannot predict when it will be hacked. Therefore, the uptime of the contract and the existence of the protocol are crucial, as the system has stood the test of time and never failed. Even in some cases where the system fails to operate as expected, such as the recent error reported by Aave's CAPO oracle, users can receive a refund because the protocol's treasury is able to cover the cost. Additionally, the longer a system exists, the more it proves its importance during market downturns. The fact that top protocols have performed as expected during market downturns is a strong indication that anyone should adopt these tried-and-true systems.

On the other hand, innovation is equally important as market leaders are constantly innovating and improving their products. For example, Morpho is introducing many institutions to on-chain finance through its treasury architecture, allowing them to customize their own treasury to best meet their needs. Aave will also make this possible by introducing Spokes functionality in its upcoming v4 version upgrade. In addition, Aave also allows institutions to lend and borrow against tokenized RWA through its Horizon instance.

The next wave of cryptocurrencies will be comprised of institutional and agency finance; the protocols that best suit both will grow the fastest.

Crypto doomsday theory

In Citrini’s article on the“Global Intelligence Crisis of 2028,” they write:

The most effective way to continue to save money for users, especially when starting transactions between agents, is to eliminate fees. In machine-to-machine transactions, the 2-3% credit card interchange rate is a natural target for reduction.

Agents began to look for faster and cheaper payment methods than bank cards. Most agents ultimately choose to use stablecoins that pay via Solana or the Ethereum L2 layer, where settlement is almost instant and transaction costs are only a few cents.

This begins our next chapter, which goes beyond institutional adoption of cryptocurrencies and focuses on agency finance and the broader use of blockchain technology within agencies. This process has already begun, and many protocols are integrating artificial intelligence agents to streamline user processes and eliminate long-standing user experience bottlenecks for crypto products. All of these efforts can be grouped into one category that will emerge in late 2024: the combination of decentralized finance and artificial intelligence (DeFAI). It did play into, like everything else in the cryptocurrency space, ultimately evolving into a yield-first narrative, but it also highlighted how the cryptocurrency experience could be vastly improved by incorporating more artificial intelligence.

It is June 2028 and most cryptocurrency transactions are completed by agents without human intervention. The agent will look for the best returns for the user based on their risk tolerance. For non-cryptocurrency agents, blockchain is considered the best option for conducting most transactions due to its low cost, efficiency, and verifiability. Over time, block space costs have continued to decrease, and transaction costs have also dropped significantly. Cryptocurrencies are no longer complicated. All you need to do is give the AI ​​agent a tip and some funds to get the best bang for your buck. Cryptocurrencies and blockchain are finally becoming mainstream and widely used. To increase overall capital efficiency, agents move funds from low-yielding protocols or suboptimally utilized liquidity to a handful of centralized trading venues where the best yields can be found. Most public blockchains and protocols have effectively died due to lack of usage. The value of the token you invested in has dropped to its lowest point since the investment; you think you should exit in 2026. Very few tokens see price increases, even those that actually generate revenue and continue to increase in value through their earnings. The value of all other tokens is concentrated in a handful of tokens that actually work and have utility value. The total market capitalization of cryptocurrencies has grown compared to March 2026, but most tokens have not benefited from institutional adoption and the growth of agent finance. The dream of cryptocurrency is finally coming true and it is being used by the masses, but the development of the token itself is not going as smoothly as many expected.

It’s March 2026; whether or not you believe the above will become a reality, protocols with positive cash flow will be able to sustain in the long term and their tokens will thrive.

Summary

For years, cryptographic protocols have focused on technical problems but never truly pursued product market fit (PMF). This is the biggest risk that investors never price in, and the market will eventually pay for it over time. Nowadays, the vast majority of tokens have been falling for many years, the historical highs have long gone, and it is extremely clear that the industry is about to undergo changes. The buck-trend rise of some tokens in 2026 confirms the importance of revenue data and token value empowerment ideas. Investors are shifting from speculative gambling to value investing.

Bad participants in the crypto industry always make profits based on the logic of "harvest first"; while the vast majority of participants leave the market with losses and are reduced to taking over funds. This ecosystem is extremely unhealthy. As institutions enter the market in large numbers, this reality becomes more and more glaring: Institutions have little interest in existing tokens, but instead value the underlying infrastructure that the industry has built over many years and has been repeatedly tested by the market.

As institutions continue to enter the game and AI-powered encryption infrastructure continues to improve, this trend will only intensify. More and more investors will only decide whether to buy a certain token or equity asset based on quantifiable hard-core indicators.