Crypto dreams shattered? Why are more and more people quietly leaving the scene?

Author: Travis Kling, Founder of Ikigai

Compiled by: Shenchao TechFlow

After experiencing a rather terrible summer in the cryptocurrency space, I am releasing the third part of a series of articles, with previous pieces including: "There are no excuses to show that these things work or will work in the future" and "Financial Nihilism: The Zeitgeist of Young America." This is a roughly 10-minute read titled "The Universal Quiet Exit."

I have been focused on the cryptocurrency field for seven years and have been operating Ikigai for over six years. I have a fairly extensive network in the cryptocurrency circles in the U.S. and regularly communicate with dozens of industry insiders.

I have recently observed or heard about an attitude or stance so frequently that it has become a trend. Cryptocurrency is experiencing a widespread phenomenon of "quiet exit."

To provide some background, if you are not very familiar with the term "quiet exit," it is a relatively new concept------

The reason people frequently come to me to discuss the attitude of "quiet exit" is partly due to my previous writings, "There are no excuses to show what these things can do or will do in the future" and "Financial Nihilism," which are two articles.

These two articles are among the most popular long-form pieces I have written. I still get mentioned on Twitter about them. Last week, I attended a cryptocurrency conference where at least six people mentioned these articles to me in person, indicating they have indeed resonated widely.

The widespread trend of "quiet exit" is a continuation of the viewpoints expressed in these articles, which accurately capture and predict the current state of the cryptocurrency field.

I have observed and heard that a considerable portion of the cryptocurrency community is noticeably less engaged than in previous years. The reason for their reduced involvement is that they have lost confidence in the potential of crypto projects to solve real-world problems and achieve widespread adoption. From 2017 (the year I entered this field) to 2022, this dream was repeatedly promoted and widely accepted------"Cryptocurrency will solve real problems and thus achieve widespread adoption." Many billions of dollars in venture capital were raised based on this premise.

In the process, there were phenomena that led people to believe that cryptocurrency was moving in a certain direction: Decentralized Finance (DeFi) was one, NFTs were another, the popularity of stablecoins was also one, and Axie Infinity was among them. Additionally, Bitcoin's adoption rate and price were rising, supported by figures like Paul Tudor Jones, Saylor, and Elon, which made people optimistic about cryptocurrency because Bitcoin was performing very well.

All these factors, along with some smaller hot topics (like Decentralized Autonomous Organizations (DAOs) and the Metaverse), kept people generally optimistic and attracted many newcomers to the cryptocurrency space, whether as investors or full-time employees. Sometimes, this optimism would evolve into fervor, but even at the height of enthusiasm, most people understood that many things were unstable, overvalued, and lacked product-market fit. These concerns have always existed. And during bear markets, when optimism turns to pessimism, these concerns are amplified, but even in the worst bear markets (like late 2018 and the second half of 2019), people still maintained a strong optimistic attitude towards various projects and held broad hopes for the potential of the technology.

I believe the sentiment we are currently facing is different (many people seem to agree with this). As the truth is revealed, many things appear meaningless and absurdly overvalued, and the potential of existing projects is increasingly doubted.

The activity of exchanging points for airdrops is an awkward and unwise failed attempt to drive user adoption. The frenzy around Memecoins is another layer of awkwardness and unwise behavior. For many cryptocurrency participants who have gone through multiple cycles, there is a growing realization that we have arrived at this point with very little actual achievement. This realization is a huge shock for those of us who have invested a lot of time and energy in this field over the years.

Suddenly, you might feel that most of your life's efforts have been in vain. You are dissatisfied with the current state of cryptocurrency and its future direction.

To rationalize this recognition, many people experience cognitive dissonance, but this realization ultimately sinks in. This has led many to completely leave the field, with people withdrawing from the cryptocurrency circles. However, there remains a portion of people who choose to stay, albeit their motivation, enthusiasm, and belief have significantly weakened. Many stay primarily because they find it hard to imagine doing anything else or investing their funds elsewhere. Would you go look for a regular job at a company? That sounds like a disaster.

Additionally, there is a viewpoint of "voting with your wallet." Even though many are severely disappointed with cryptocurrency realizing its potential, they still remain in the field because, compared to other investment options, the returns after "time adjustment and risk adjustment" are still considered more attractive. This seems contradictory, but it is the reality------

"I believe that in most years, Bitcoin (BTC) will outperform all other asset classes, even though there will occasionally be years of poor performance. At the same time, I think that in those bullish years, there will be some selected altcoins that will significantly outperform BTC. It could be a few or it could be many, but there will always be some. If I can identify these opportunities, I can easily achieve multiple returns. Therefore, I feel it is worth continuing to pay attention to this field…"

Imagine you are 30 years old with about $2 million in liquid net worth, wealth that has been accumulated through cryptocurrency investments over the past five years. While this is a substantial amount, it may not be enough for you to retire. You need to turn that $2 million into $5 million or even $10 million to truly settle down. And you are still young and not ready to retire.

You entered the cryptocurrency field in 2017 because it was filled with excitement, innovation, and potential. While you have personally performed well financially, you feel disappointed by the limited actual achievements of the field and are not as optimistic about the future of cryptocurrency as you once were… but you haven't exited. Because you don't know where else to spend your time? Trading stocks instead of investing in altcoins? That doesn't sound very reasonable. The stock market is more competitive, more efficient, but offers lower returns. So, you choose to continue watching the market, hoping to seize an opportunity to triple your net worth within a year… this situation is quite common.

Despite more and more people questioning "whether these things are useful or will be useful in the future," this view remains widespread. Cryptocurrency enthusiasts are unclear about what will drive the next big rally. There is no DeFi summer, nor is there a NFT craze. The gaming sector is currently almost lifeless. The Metaverse has proven to be a complete joke. Decentralized social media has stagnated. People are trying to get excited about the combination of cryptocurrency and AI, but I (like many others) believe this excitement may be misplaced (at least for now).

DePIN is making progress and developing rapidly, which is exciting------it may be the most noteworthy part of the current altcoin space. Therefore, this is an area where people hope to drive future price increases through real-world applications. However, such areas are few and far between in cryptocurrency.

Another aspect is the criticized venture capital investment environment in cryptocurrency. Simply put, the crypto market continues to reward venture capitalists who invested early in token projects, even if these projects have made almost no significant progress in their intended use, allowing VCs to sell at huge profits to retail investors.

Token projects can: create a chain reaction of points to airdrops; artificially inflate market caps; hire market makers and pay high fees to ensure they profit regardless; list tokens on major exchanges; and then sell off in large quantities, causing their value to plummet. Even if a token's price drops 85% after listing, early VCs can still earn multiples of their investment. This is a significant feature of the current altcoin market structure. The crypto market allows VCs to recoup funds and raise new capital through these investments that have never really made an impact. This is a classic case of misaligned incentives. It is hard to blame VCs------people always act according to incentives. And so far, the market's attitude has been: "Please, VCs, list more low-quality projects on major centralized exchanges (CEX) at ridiculous fully diluted valuations (FDV), and then sell them to us." Unless the market as a whole stops providing such opportunities, it is hard to expect VCs to change their practices. They have made enough money this way to buy private jets.

There is a saying in the cryptocurrency world, popularized by a friend of mine: "Do you want to do the right thing, or do you want to make money?" This phrase has become a slogan for many cryptocurrency practitioners. I understand that it emphasizes profit above all, especially over the desire to prove yourself "right." But I want to propose a counterpoint------"If you make enough mistakes while making money, you may ultimately lose the opportunity to continue making mistakes and earning money." We are currently witnessing some of these situations.

All of this can explain why there is a widespread phenomenon of "quiet exit" in the cryptocurrency field. Returning to the traditional definition of "quiet exit" from the New Yorker article------a "quiet exit" in the workplace undermines company culture. This is something an ambitious CEO fears the most. When employees see others not working hard and not believing in the company's mission, they naturally develop thoughts of not wanting to work and not believing in the mission. We are mimicking creatures. Enthusiasm is contagious, and a lack of enthusiasm is equally contagious. That is why "quiet exit" can trigger more "quiet exits."

So far, in this cycle, we haven't even come close to attracting as many new users as in previous cycles (excluding new ETF investors). Cryptocurrency is not a priority for the best and brightest young people in America. Since the damage done in 2022, this industry still faces many embarrassments, and we have taken almost no adequate measures to repair our reputation in attracting top talent. Imagine if you were considering joining a company where "quiet exit" is prevalent; would that be an opportunity you want to seize?

So, what does this mean?

I am well aware that such posts are often seen by traders as "bottom signals." Historically, in the cryptocurrency field, buying when market sentiment is most pessimistic and selling when sentiment is most optimistic often yields astonishing returns. And this widespread phenomenon of "quiet exit" is undoubtedly a pessimistic signal, so typically, in such cases, people tend to buy heavily. I understand this.

Another rebuttal to the points I raise here is, "We're still in the early stages, bro." Stop saying that. It is actually not early anymore. Bitcoin's market cap has now reached a trillion dollars, and almost half of Wall Street holds it. The market cap of the rest of the cryptocurrencies has also reached a trillion dollars. Tether holds more U.S. Treasury bonds than Germany. Over the past four years, more than $20 billion in venture capital has flowed into this field. We are no longer in the early stages.

Stop comparing it to the "internet of the late '90s" and look at what happened then. This is not the internet of the late '90s. Bitcoin and stablecoins have found their market positioning, while other cryptocurrencies seem lost at sea. They are at best searching for solutions to problems, and at worst, they are ruthless and cruel scams.

Nonetheless, I believe there can still be optimism regarding altcoins. In my view, the most anticipated scenario is that Trump wins in November, leading to a de facto regulatory framework that allows the structure of altcoins to be redesigned with characteristics similar to securities, thus achieving attractive value growth.

For years, we have been discussing the concept of value creation and value accumulation, and the bridge connecting the two is the token structure. Under Trump's policies, it may eliminate those governance tokens that have no value and introduce pseudo-securities with yields and burn mechanisms------thanks to the U.S. regulatory framework allowing such innovations. In such an environment, you can imagine that two years from now, the altcoin market will become more real.

This is a development direction worth closely monitoring.