Jademont Zheng, co-founder and CEO of Waterdrip Capital, said the crypto industry has reached a point that most people would not have expected a few years ago.
Token projects, exchanges and primary-market capital are all losing ground
Zheng said Web3 token projects are dying in batches. According to him, almost no founder behind a token project has avoided investor rights disputes, lawsuits or community-led liquidation. He added that some founders genuinely wanted to build products and ecosystems, but once the broader collapse began, very few were able to stay untouched.
He also said major centralized exchanges, or CEXs, are gradually losing their influence over the industry. Even with trading volumes repeatedly setting new highs, he argued that these platforms are increasingly functioning like traditional brokerages: they facilitate trading, but no longer control asset issuance or pricing power. In his comparison, the gap between crypto exchanges and capital-market infrastructure such as Nasdaq has been widening rather than narrowing.
Primary-market investment institutions, he said, are exiting as a group. The issue is not a lack of capital, in his view, but the lack of an exit mechanism. Some institutions have tacitly allowed project teams to manipulate token prices and complete value transfers together, while others have chosen to leave the sector entirely. Without long-term returns or what he described as any emotional upside, he said, investors would rather deploy capital in other sectors.
The “heavy snowflakes” in crypto’s collapse
Zheng wrote that in an avalanche, no snowflake is completely innocent, but not every snowflake bears the same responsibility. In his assessment, several of them were especially heavy.
The first were FTX and Luna.
He said the back-to-back collapse of the two during crypto’s most prosperous period destroyed traditional capital’s trust in the entire sector and left large pools of institutional money still unwilling to re-enter.
The second were the leading CEXs.
Zheng said that at the height of the industry, top exchanges should have acted as leaders by setting higher listing standards, helping the market identify stronger projects, advocating long-term thinking and shaping a healthier industry culture.
Instead, he said, short-term interests overrode everything else. Token-issuing groups mass-produced what he described as “air coins” and made rapid liquidity extraction the mainstream strategy. Platforms collected listing fees and trading volume, but in the process they also consumed the industry’s credibility. When the tide went out, he said, there were no winners because everyone was on the same boat.
His criticism of Ethereum’s shift to Proof of Stake
The third party Zheng singled out was the Ethereum Foundation.
He said he has consistently viewed Ethereum’s move from Proof of Work, or PoW, to Proof of Stake, or PoS, as a decision that was heavily overrated. In his words, the change did cut energy consumption, but the savings were almost negligible compared with the development opportunities that were lost.
Zheng went on to argue that if Ethereum had continued evolving along the PoW path and kept pushing forward compute infrastructure, it could have grown into the world’s largest blockchain-based AI compute network and taken a more important strategic position in the AI era. The shift to PoS, he said, ended that possibility early.
The two developments he believes could restart a boom
Asked whether the industry still has a chance, Zheng’s answer was yes.
Still, he said the number of variables that can genuinely reverse the trend is now very small compared with the factors that already shaped the industry’s direction.
In his view, only two developments may be capable of opening a new phase of prosperity:
- the United States adds BTC to its national strategic reserves and continues making real purchases, rebuilding global capital’s confidence in crypto assets;
- an onchain super app emerges with hundreds of millions of users and the ability to create real value, allowing blockchain to prove once again that it can do more than issue assets and can also generate demand.
Other bullish developments, Zheng said, would look more like cyclical rebounds than the start of a new era.