YWR GP: Institutionalising Crypto

Crypto is experiencing a painful transition from niche “dot-crypto” to a mainstream asset class. Much of what drove crypto markets in the early days, such as speculative token launches untethered from viable business models, has dissipated, giving way to a more sustainable dynamic rooted in institutional adoption and regulatory clarity. While the short run remains unclear, the long-term trajectory for crypto has never been brighter.

Over the years, I’ve pointed out that crypto bull markets tend to coincide with mass token generation events: the issuance of assets on blockchains. Mirroring how bull markets in traditional markets align with waves of IPOs, private funding rounds, and the launch of new businesses.

2017: The ICO Boom – Thousands of initial coin offerings flooded the market, fuelling speculative frenzy.

2020/2021: The Beginning of DeFi – Decentralised finance protocols exploded, promising high yields and finance without intermediaries.

2021: NFTs – Non-fungible tokens turned digital art and collectables into a multi-billion-dollar phenomenon.

Each of these mass token generation events sparked bull markets not just in prices, but in user adoption, developer activity, and ecosystem growth. While past cycles were fuelled by the thrill of groundbreaking native crypto tokens, many of those tokens were speculative by design and launched without robust business models. Leaving their prices and fundamentals vulnerable to the ups and downs of crypto’s overarching hype.

Crypto’s early days remind me of a classic South Park episode of the Underpants Gnomes. In it, gnomes run an elaborate underground scheme to collect underpants in pursuit of profits. When the boys uncover the Gnomes’ plan, they discover it’s comically incomplete.

The parallel in crypto’s early days is strikingly similar: Step one: launch a token loosely tied to a big idea; step two: figure it out; step three: profit.

The combination of zero-interest-rate policies in the developed world during 2020 and 2021, coupled with crypto’s enormous addressable market, turned many of these projects into funding magnets, drawing in billions of dollars. As interest rates normalised and central banks began tapering their balance sheets, a reckoning for crypto ensued.

This is why the prices of most crypto projects have endured prolonged drawdowns even as crypto wins on regulation, adoption, and institutional participation. Consider this snapshot of the top 50 cryptoassets listed on Binance at the height of the 2021 mania; most are now trading below the lows hit during the FTX collapse in late 2022.

Source: Luke Martin @VentureCoinist

Dot-crypto’s deflated asset bubble has soured sentiment among crypto natives, breeding nihilism and driving many into the escapist chaos of memecoin gambling. It echoes the thesis I laid out in “The Great Divergence“. Interest in crypto has fragmented into bullish institutions piling in with production capital and battle-weary crypto natives retreating from the fray.

This month, I’ll double down on that argument. We’ve reached the end of the “dot-crypto” era, defined as an insular, niche internet subculture obsessed with experimental tokens.

We are now in a post-”dot-crypto” era, where dot-crypto has become a misnomer, as every financial service comes onchain, but with that maturation come higher expectations for crypto to deliver on its promises of the future.

Big ideas are no longer good enough; speculative capital has dried up and is now chasing opportunities in AI, quantum computing, and nuclear. Like a teenager coming of age, these years will represent significant change as crypto enters adulthood.

I am bullish on crypto’s adulthood. Here is why: