The Twighlight Zone: On the Cryptoeconomy in 2026 & Beyond

Key Takeaways

• The asset class pulled forward expectations too far in 2021; since then valuations have been rationalizing and are now reasonable for quality assets

• As the U.S. regulatory environment eases, alignment and value capture issues for tokens are finally turning a corner, making tokens more investible

• Growth across the cryptoeconomy is transitioning from cyclical to secular, with the industry having produced a handful of valuable use cases beyond Bitcoin

• Winning blockchains are solidifying themselves as standards for both startups and enterprises, and are home to some of the fastest growing businesses in the world

• With sentiment in the gutter following a 4-year bear market in altcoins, the multi-year opportunity is mispriced for top projects, with few analysts modeling exponential growth

• While top projects may thrive in the next era of the cryptoeconomy, rising expectations to deliver and growing competition from enterprises will wash out weaker players

• Few forces are as powerful as an idea whose time has come, and the cryptoeconomy has never felt more inevitable

The cryptoeconomy is in the midst of the largest transition period I’ve seen in my eight years since joining the industry. Institutions are accumulating coins while pioneering cypherpunks diversify their wealth. Enterprises are positioning for S-curve growth while disenchanted natives burn out. Governments are steering a global financial transition onto blockchain rails while day traders worry about lines on charts. Emerging markets are celebrating the democratization of finance while U.S.-born cynics lament how it's all a casino.

Much has been written lately about what historical period today’s cryptoeconomy reminds people of most. Optimists have analogized it to the post dotcom bubble internet, suggesting that the industry’s speculative era is behind us and secular winners like Google and Amazon will emerge to ascend the S-curve. Pessimists have analogized it to emerging markets, like China in the 2010s, suggesting weak investor protections and a shortage of patient long-only capital could cause asset prices to underperform even as the industry booms.

There’s elements of truth in both perspectives. History, after all, is an investor's best guide next to experience. Nevertheless, analogies can only take you so far. We also need to understand the cryptoeconomy within its own macroeconomic and technological context. Markets are not monolithic entities — they consist of many characters and stories, all interconnected, but distinct.

What follows is my best assessment of where we’ve been and where we’re going.

Full essay also available on our website*.***

The Red Queen’s Cycle

“Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!" – Lewis Carroll

In many ways, expectations are all that matters in financial markets. Surpass them and prices go up. Fail to and prices go down. Over time expectations move in a pendulum, with forward returns tending to be inversely correlated.

In 2021 the cryptoeconomy pulled forward expectations far greater than most people appreciated. In some ways it was obvious, like DeFi blue-chips trading at 500x price-to-sales multiples, or the fact that there were 8 smart contract platforms that eclipsed $100B valuations. Not to mention all the metaverse and NFT nonsense. But the chart that speaks to this in the most sobering way is the Bitcoin / Gold ratio.

For all the progress we’ve made, Bitcoin hasn’t made new highs versus Gold since 2021, and is actually *down *since then. Who would’ve thought that in Trump’s “crypto capital” of the world, after the most successful ETF launch in history, as the dollar is being systematically debased, Bitcoin would be less successful as digital gold than it was four years ago?

For everything else, it's been much worse. Most of these projects entered this cycle with a number of structural issues that compounded the challenges of dealing with extreme expectations:

• Revenue for most projects was cyclical and predicated on ever-increasing asset prices

• Regulatory uncertainty impeded institutional and enterprise participation

• Dual ownership structures produced incentive misalignment between equity insiders and public token investors

• Poor disclosure practices created information asymmetry between project teams and communities

• Lack of shared valuation frameworks produced excessive volatility and no fundamental price floors

The combination of these issues led most tokens to bleed out, with only a handful even sniffing their 2021 highs. The impact on psychology has been immense, as few things are more demoralizing in life than sustained effort without reward.

The disappointment has been especially acute for all the speculators and opportunists that thought crypto was the lowest-effort way to get rich. Over time this struggle has produced widespread burnout across the industry.

This is a healthy development of course. Weak efforts should not consistently lead to extraordinary results as they have in the past, and the pre-2022 era when vaporware could generate vast fortunes was obviously unsustainable.

Nevertheless, the silver lining in all this is that the above issues are already widely understood and prices reflect as such. Today, few crypto natives are willing to even entertain long-term fundamentals theses on anything but Bitcoin anymore. And after four-years of pain, the asset class now has the requisite conditions to begin surprising to the upside again.

The Enlightened Cryptoeconomy

As mentioned in the prior section the cryptoeconomy entered this cycle with a number of structural issues. The good thing is everybody now understands this, and many of these issues are already becoming relics of the past.

To start, beyond digital gold there are a number of use cases that are demonstrating compounding growth, with many more in the process of transitioning. In the past few years the cryptoeconomy has produced:

• Peer-to-peer internet platforms that enable users to transact and enforce contractual relationships without government or corporate intermediaries

• Digital dollars that can be stored and transferred anywhere on earth where there's internet, providing billions of people with cheap and reliable money

• Permissionless exchanges that enable anyone, anywhere, to trade the top global assets across any asset class, 24/7, in a single transparent venue

• Novel derivative instruments such as event contracts and perpetual swaps, that offer society valuable predictive insights and more efficient price discovery, respectively

• Global collateral markets, that enable users to permissionlessly access credit through transparent, automated infrastructure that substantially reduces counterparty risk

• Democratized asset creation platforms that enable anyone, individuals and institutions alike, to issue publicly tradable assets at fractions of a penny

• Open fundraising platforms, that enable anyone in the world to raise capital for their business and overcome local economic constraints

• Physical infrastructure networks that crowdsource capital and distribute operations across independent operators, creating more scalable and resilient infrastructure

This isn’t a comprehensive list of all the valuable use cases this industry has built so far. Regardless, the point is that many of these use cases are demonstrating real value and are growing regardless of crypto price action.

In parallel, dual equity–token models are being rectified as regulatory pressure eases and founders recognize the cost of misalignment. A number of existing projects are consolidating assets and revenues into a single token, while others are clearly delineating that onchain revenues belong to token holders while offchain revenues belong to equity holders. To add to it, disclosure practices are improving as third-party data providers mature, reducing information asymmetry and enabling better analysis.

At the same time, there is growing consensus around the simple, time-tested principle that 99.9% of all assets need to generate cash flows, with store of value assets like BTC and ETH serving as rare exceptions. As more fundamental investors enter the asset class these frameworks will only be reinforced, with rationality increasing over time.

In fact, with enough time, the idea of self-sovereign ownership of onchain cash flows may come to be understood as a similar scale unlock as self-sovereign digital stores of value. Afterall, when else in history have you been able to hold digital bearer assets that are paid autonomously every time a program is used, from anywhere on earth?

Against this backdrop, winning blockchains are emerging as the internet’s monetary and financial foundation. With each day, Ethereum, Solana, and Hyperliquid’s network effects grow stronger, anchored by their growing ecosystems of assets, applications, businesses, and users. Their permissionless design and global distribution has enabled their applications to be among the fastest growing businesses in the world, with unrivaled capital efficiency and revenue velocity. In the long run it's likely these platforms will underpin the financial superapp TAM that almost all leading fintechs are now competing for a slice of.

Wall Street and Silicon Valley incumbents are unsurprisingly marching full steam ahead on blockchain initiatives with this backdrop. Not a single week passes anymore without a fresh wave of product announcements ranging from tokenization to stablecoins and everything in between. Notably, unlike prior eras of the cryptoeconomy, these efforts aren't experiments. They're production-grade products, mostly built on public blockchains rather than siloed private systems.

This activity will only accelerate as the lagged effects of regulatory change continue to work its way through the system in the coming quarters. With greater clarity in place, enterprises and institutions can finally shift their focus from "is this legal?" to how blockchains can expand revenue opportunities, reduce costs, and unlock new business models.

Perhaps one of the more telling signs of where things are, few industry analysts are modeling for exponential growth. Anecdotally, many of my peers on both the sellside and buyside aren’t even entertaining annual growth rates higher than 20% for fear of seeming too optimistic.

With valuations now reset following four years of pain, it's important to now ask yourself, what if this all does in fact go exponential? What if it actually will pay to dream again?

The Twilight Zone

“To light a candle is to cast a shadow” — Ursula LeGuin

On a cool fall day in 2018, I stopped into an old professor’s office before another grueling day of investment banking to talk shop on everything blockchain. As I sat down he recited to me a conversation he had with a skeptical equities hedge fund manager, who claimed crypto was entering a nuclear winter and was a solution in search of a problem.

After giving me a crash course on unsustainable sovereign debt loads and collapsing trust in institutions, he ultimately tells me what he told the skeptic, that “In 10 years the world will be grateful we built this parallel system.”

It hasn’t quite been 10 years since, but his prediction is looking prescient, as crypto starts to look more like an idea whose time has come with each passing day.

In a similar spirit, and what the entire thrust of this essay was about, is to make the case that the world is still underappreciating what’s being built here. And what’s most relevant for all of us investing, is that the multi-year opportunity is underpriced for the leading projects.

The last part is key because while crypto may be inevitable, your favorite coin may actually be headed to zero. The flip side of crypto becoming inevitable is that it's attracting greater competition and the pressure to deliver has never been higher. As the institutions and enterprises I alluded to earlier enter the industry, they’ll likely clean out many of the weaker players. And this isn’t to say they’ll win it all and co-opt the technology for themselves. But what it does mean is that only a few native players will become the big winners that the world reorients itself around.

The point here isn’t to be cynical either. 90% of startups fail in all emerging technologies sectors. The fact that there may be more public failures in the coming years, shouldn't distract you from the bigger picture.

There is perhaps no single technology that fits today’s zeitgeist more than crypto. Declining trust in institutions across advanced societies, unsustainable government spending among G7 countries, blatant currency debasement from the largest fiat currency issuer in the world, deglobalization and fragmentation of the international order, the growing thirst for a new system that’s fairer than the old one. As software continues to eat the world with AI as its latest accelerant, and younger generations inherit wealth from aging boomers, there couldn’t be a better time for the cryptoeconomy to be exiting its own little bubble.

While many analysts frame this moment through classic frameworks like the Gartner hype cycle and Carlota Perez’s “post-frenzy” phase, suggesting that the best returns are behind us and what follows is the more boring utility phase, the truth is far more interesting.

The cryptoeconomy is not a single market maturing in unison, but a collection of products and businesses moving along different adoption curves. And perhaps more importantly, speculation doesn’t disappear when a technology enters its growth phase, it just ebbs and flows with shifts in sentiment and the pace of innovation. Anyone telling you the speculative days are over is probably just jaded or doesn’t understand history.

It’s reasonable to be skeptical, but don’t be cynical. We are reimagining money, finance, and how our most important economic institutions are governed. It should be equally fun and exciting as it is challenging.

Your job from here is to figure out how to best take advantage of this emerging reality, not write endless tweet threads on why it's all doomed.

Because through the fog of disillusionment and uncertainty, lies the opportunity of a lifetime for those willing to bet on the new era’s sunrise, rather than mourn the old era’s sunset.

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