The following is a guest post from Shane Neagle, Editor In Chief from The Tokenist.

Since the introduction of altcoins, after Bitcoin paved the road for them, we have seen many projects give 10x gains in relatively short periods. It has also been accepted that the crypto space oscillates between altcoin and bitcoin seasons, suggesting more investing opportunities down the line.

A deluge of memecoins flooded the market as well, serving as a more robust gambling system (compared to online casinos). As crypto space lost $530 billion market cap over the last 30 days, it is prudent to examine its fundamentals once again.

Is such a concept as ‘altcoin season’ meaningful moving forward? Is there more to cryptos than cyclical speculation? To answer those questions, we must first remind ourselves of narratives past.

The Merge Foreshadowing

During the evolution of the crypto space, Bitcoin became de-facto the only proof-of-work digital asset worth considering, following Ethereum’s The Merge in September 2022. As a transition from proof-of-work (PoW) to proof-of-stake (PoS), The Merge represents a cleavage in blockchain philosophies.

While Bitcoin’s proof-of-work (PoW) requires computational resources, Ethereum’s PoS eliminates such barriers in order to boost transaction speed and efficiency. In other words, Bitcoin further differentiated itself as a store of value, while Ethereum focused more on cost-effective blockchain utility.

At first glance, this may seem perfectly complementary, but there are several underlying problems that eventually reared their heads.

• PoW is more amenable to decentralization contrasted to PoS, which relies on the cumulative wealth of validators in the “rich get richer” feedback loop.
• PoS is divorced from hard assets, such as energy and machines, while Bitcoin is grounded in them.
• And because Bitcoin’s PoW is part physical, part digital, it is less reproducible than PoS as a commitment mechanism. In turn, this contributes to Bitcoin’s network effect and safeguards against devaluation in the long run.

Altogether, the PoW-PoS bifurcation translates into PoS fragmentation. If PoS-based assets, and PoS-based platforms competitive to Ethereum, are more reproducible, they can be launched with minimal upfront costs. With this foundation, there is no single altcoin asset to cling onto. Ultimately, with a low barrier of entry, this led to the fragmentation of the crypto market across +34,000 digital assets.

From the Bitcoin-Ethereum perspective, as the two largest digital assets by market cap, PoS-led fragmentation manifests as a corrosive effect on Ethereum price level.

To put it differently, Bitcoin’s key features, PoW and scarcity, are reinforcing Bitcoin fundamentals. In contrast, Ethereum suffers from network effect erosion from competing PoS chains, which offer similar functionality and incentive structure.

Moreover, the increased complexity outside of Bitcoin is creating a barrier to entry from new capital inflows. Who can spend time filtering thousands of assets and bet that they will have staying power beyond one year? Even sophisticated investors leveraging popular futures trading algorithms often struggle to navigate the fragmented market effectively.

In fact, this is precisely why memecoin mania gained traction. The complexity and fragmentation of the crypto market lends itself to thinking of digital assets outside their fundamentals. Instead, focus is then on celebrity endorsements, humor, viral marketing, which often turns into pump-and-dump schemes.

Inevitably, this creates a negative feedback loop:

1. Crowded and confused altcoin market births memecoins.
2. Rollercoasting memecoins inevitably erode trust in the altcoin market itself.
3. Legitimate innovative projects are then less likely to gain traction, as capital is misallocated.

But there is an even greater problem than that. Let’s assume that this negative feedback loop created by memecoins doesn’t exist. One has to consider if there even is a market for blockchain based solutions, as it was previously imagined.

Erosion of Underlying Fundamentals

Through anti-money laundering (AML) and know-your-customer (KYC) requirements, governments around the world have expended great efforts to subdue the crypto ecosystem. Let’s quickly remind ourselves of key promises before regulative sweeps took place:

Decentralization as elimination of intermediaries – nearly everything is now intermediated through fiat rails, including transfers from self-custodial wallets.

Financial inclusion as access for the unbanked/underbanked – it is still more convenient to use legacy banking than blockchain tech, which is inherently complex and requires digital literacy. According to the latest EMarketer report, cryptocurrency payment penetration is hitting a wall.

Although the number of crypto payment users is expected to rise by 82.1% from 2024 to 2026, this is from a tiny overall population base of only 2.6%. It may very well end up being the case that a digital dollar, a stablecoin like USDT, will subsume this effort entirely in place of a direct CBDC.

Censorship resistance as a guarantee that transactions cannot be reversed or intercepted by governments and organizations. Governments regularly pursue innovative mechanisms to cancel such efforts, from debanking to the persecution of smart contract developers.

Although Treasury sanctions against Tornado Cash were overturned in January, there is little indication that financial privacy will become a human right any time soon. In fact, indicators point in the other direction.

BREAKING: The ECB’s Digital Euro is set to launch in October. Key concerns include:

– Real-time transaction tracking
– Potential for payment blocking
– Automatic tax deductions
– Restrictions on cash withdrawals
– Programmable money with expiration dates

They couldn’t… pic.twitter.com/UvQH750gbl

— Dr. Simon Goddek (@goddeketal) March 9, 2025

Altogether, this friction between blockchain-led solutions and governments leads to a contained market. And if a blockchain-based solution should be deployed, it will be under governments’ terms.

Lastly, the entire concept of Web3 is dubious as a decentralized, blockchain-based iteration of the internet. Elon Musk’s DOGE revelations in the case of USAID funding clearly point to great efforts to push narratives, control narratives, suppress and de-legitimize dissent.

A semantic, censorship-resistant Web3 is fundamentally at odds with governments’ needs to maintain authority and legitimacy as they push various agendas. To think that established information proliferation nodes such as Google, Microsoft and Facebook would be allowed to erode in favor of Web3 would be foolhardy.

Any government needs centralized nodes to maintain power. This was amply demonstrated in the case of the TikTok ban. Although this video reels app is vastly superior to YouTube shorts, a leverage was pulled to sanitize it and make it less relevant.

Again, this is another factor that contains the blockchain space to a micro-niche instead of propelling it into mainstream expansion. With this in mind, blockchain space is still worthy of engagement.

Crypto Projects with Revenue-Generating Staying Power

Bitcoin will likely remain the main focus of crypto investing, owing to its unique, PoW-based network effect. Although the recent White House Crypto Summit was less bullish than expected, it was still positive in the long run. The decision to use seized bitcoins effectively removed this sell pressure from the table.

Likewise, President Trump seems to be serious about ending the “war on crypto”. But looking at the crypto space from a purely innovative solutions perspective, which projects should retail investors consider during steep discounts?

• Sonic (S) – previously FTM, this is the top performing layer 1 blockchain network with sub-second transaction finality. This alone opens up new use cases such as high-frequency trading (HFT), micropayments, in-game economy, DEXs and IoT supply chains.

• Near Protocol (NEAR) – a layer 1 launching pad for dApps that has gained traction for use in AI initiatives.

• The Graph (GRT) – also adjacent to the AI narrative, this protocol indexes data for AI use similar to how Chainlink (LINK) is used by DEXes to power decentralized financial services.

• Hey Anon (ANON) – this early project could be the key in solving DeFi complexity (barrier to entry) by using conversational AI to manage DeFi strategies across chains.

• Render (RENDER) – former RNDR – with AI generation of assets, it is likely this solution will gain demand by monetizing GPU-based distributed rendering.

These five tokens should be considered as long play exposure during crypto market deflation. After all, it is unlikely that AI narrative will subside any time soon.

In terms of top 10 revenue-generation chains during the market slump, crypto activity is clearly on the side of low-friction payment chains (Tron) and general purpose, high-performing chains (Solana, Avalanche). Ethereum still maintains high ranking due to its large market share within the DeFi ecosystem.

In conclusion, what should crypto investors keep in mind moving forward?

Due to inherent friction with governments, digital assets are unlikely to ever penetrate mainstream to a significant extent. But within the contained ecosystem, investors should focus on long term narratives – AI, infrastructure and chain performance.

A truly decentralized Web3 should be understood as a niche play that will be countered by deep pockets of Alphabet (GOOGL), Microsoft (MSFT) and Meta (META), as centralized node extensions of the USG. By the same token, retail investors would do well to expose themselves to their stock options as safer bets.

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