Bitcoin underperforms gold, but the golden age of the crypto economy has just begun

Author: Ryan Watkins

Translation: DeepSea TechFlow

Introduction: By 2026, the crypto economy is in its most critical transformation in eight years. This article explores how the market has achieved a “soft landing” from the overexuberance of 2021 and is gradually establishing valuation frameworks based on cash flow and real use cases.

The author explains the pain of the past four years through the “Red Queen Effect” and points out that with the easing of US regulations and the explosion of enterprise applications, crypto assets are shifting from cyclical speculation to long-term trend growth.

Faced with a global trust crisis and currency devaluation, this is not just an industry recovery but the rise of a parallel financial system. For investors deeply involved in Web3, this is not only a cognitive restructuring but also an undervalued, cycle-spanning entry opportunity.

The full text is as follows:

Key Points

• This asset class overextended expectations prematurely in 2021; since then, valuations have been rationally correcting, and high-quality assets are now approaching fair value.
• With the easing of US regulatory environment, issues of token alignment and value capture are finally turning positive, making tokens more investment-worthy.
• The growth of the crypto economy is shifting from cyclical to secular, with some valuable use cases emerging outside of Bitcoin.
• Winning blockchains are consolidating their status as standards for startups and large enterprises, becoming hubs for some of the fastest-growing businesses worldwide.
• Due to altcoins experiencing a four-year bear market, market sentiment has bottomed out, and multi-year opportunities for top projects are mispriced; few analysts model exponential growth.
• While top projects may thrive in the next era of the crypto economy, increased delivery pressure and corporate competition will eliminate weaker players.
• Nothing is more powerful than the idea that “the time is ripe”; the crypto economy has never felt more unstoppable than now.

In my eight years in this industry, the crypto economy is undergoing the greatest transformation I have seen. Institutions are accumulating chips, while pioneering cypherpunks are diversifying wealth. Enterprises are preparing for S-curve growth, while disillusioned native developers are leaving. Governments worldwide are steering global financial transformation onto blockchain rails, while short-term traders still worry about chart lines. Emerging markets celebrate financial democratization, while angry youth in the US lament it as just a casino game.

Recently, many articles have discussed “which historical period the current crypto economy most resembles.” Optimists compare it to the period after the dot-com bubble burst, believing the speculative era is over, and long-term winners like Google and Amazon will emerge and climb the S-curve. Pessimists compare it to emerging markets, such as some markets in the 2010s, implying weak investor protection and long-term capital shortages may lead to poor asset performance, even as the industry flourishes.

Both views have merit. After all, history is the best guide for investors besides experience. However, analogies have limited insights. We also need to understand the crypto economy within its macroeconomic and technological context. The market is not a single entity—it consists of many roles and stories interconnected but distinct.

Below is my best assessment of where we have been and where we are headed.

The Red Queen’s Cycle

“Now, here, you see, you have to run as fast as you can just to stay in the same place. If you want to get somewhere else, you must run at least twice as fast!”

— Lewis Carroll

In many ways, expectations are the only thing that matters in financial markets. Surpass expectations, and prices rise; fail to meet expectations, and prices fall. Over time, expectations swing like a pendulum, and forward returns are often negatively correlated with them.

In 2021, the crypto economy overextended expectations far beyond most people’s understanding. In some aspects, this overheating was obvious, such as DeFi blue chips trading at 500 P/S multiples, or when eight smart contract platforms had valuations exceeding $100 billion. Not to mention the chaos of Metaverse and NFTs. But the chart that best reflects this is the Bitcoin/Gold ratio.

Despite significant progress, the Bitcoin-to-Gold price has never hit a new high since 2021 and has actually been declining. Who would have thought that, in the “crypto capital” Trump mentioned, after the most successful ETF listing in history, amid systemic dollar devaluation, Bitcoin’s success as digital gold would be worse than four years ago?

As for other assets, the situation is much worse. Most projects entered this cycle with a series of structural issues that intensified challenges in responding to extreme expectations:

1. Most projects’ revenues are cyclical, relying on asset prices to keep rising;
2. Regulatory uncertainty hindered institutional and corporate participation;
3. Dual ownership structures led to misaligned interests between insiders and public market token investors;
4. Lack of disclosure standards created information asymmetry between project teams and communities;
5. Absence of shared valuation frameworks caused excessive volatility and lack of fundamental price floors.

The combination of these issues caused most tokens to continue “bleeding,” with only a few reaching their 2021 highs. This had a huge psychological impact, as few things are as frustrating as “hard work with no reward.”

For speculators and traders who believe crypto is the easiest way to get rich, this disappointment is especially intense. Over time, this struggle has sparked widespread burnout across the industry.

Of course, this is a healthy development. Mediocre efforts should no longer produce extraordinary results as they did before. The era before 2022, when vaporware could create huge wealth, is clearly unsustainable.

Nevertheless, the one glimmer of hope is that these issues are widely understood, and prices have already reflected these expectations. Today, apart from Bitcoin, few crypto natives are willing to discuss any long-term fundamental arguments. After four years of pain, this asset class now has the necessary conditions to surprise the market again.

( The Enlightened Crypto Economy

As mentioned earlier, the crypto economy entered this cycle with many structural issues. Fortunately, everyone is now aware of this, and many of these problems are gradually becoming history.

First, besides digital gold, many use cases have shown signs of compound growth, and more are in transition. Over the past few years, the crypto economy has produced:

• Peer-to-peer (P2P) internet platforms: enabling users to trade and execute contracts without government or corporate intermediaries.
• Digital dollars: storable and transferable globally via the internet, providing hundreds of millions with cheap and reliable currency.
• Permissionless exchanges: allowing anyone anywhere to trade top global assets across asset classes 24/7 in a transparent venue.
• New derivative instruments: such as event contracts and perpetual swaps, offering valuable predictive insights and more efficient price discovery.
• Global collateral markets: enabling users to access credit via transparent, automated infrastructure, substantially reducing counterparty risk.
• Decentralized asset creation platforms: allowing individuals and institutions to issue tradable assets at very low cost.
• Open finance platforms: enabling anyone worldwide to raise funds for their business and overcome local economic restrictions.
• Physical infrastructure networks (DePIN): distributing operations to independent operators via crowdsourced capital, creating more scalable and resilient infrastructure.

This is not an exhaustive list of all value use cases built so far in the industry. But the key point is that many of these use cases are demonstrating real value, and regardless of price movements, they continue to grow.

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Meanwhile, with regulatory pressure easing and founders gradually realizing the costs of misalignment, dual equity–token models are being corrected. Many existing projects are consolidating assets and revenues into a single token, while others explicitly allocate on-chain revenue to token holders and off-chain revenue to equity holders. Additionally, as third-party data providers mature, disclosure practices are improving, reducing information asymmetry and enabling better analysis.

At the same time, there is a growing consensus on a simple, time-tested principle: apart from rare value storage assets like Bitcoin (BTC) and Ethereum (ETH), 99.9% of assets need to generate cash flows. As more fundamental investors enter the space, these frameworks will only be reinforced, increasing rationality.

In fact, given enough time, the concept of “on-chain cash flow sovereignty” could be understood as an equally transformative paradigm as “autonomous digital value storage.” After all, when have you ever been able to hold an anonymous digital asset that autonomously pays you whenever the program is used, from anywhere on Earth?

In this context, the winning blockchains are gradually emerging as the monetary and financial backbone of the internet. Over time, networks like Ethereum, Solana, and Hyperliquid are strengthening their network effects thanks to growing assets, applications, businesses, and user ecosystems. Their permissionless design and global distribution make their platforms the fastest-growing businesses worldwide, with unparalleled capital efficiency and revenue turnover. In the long run, these platforms are likely to support the overall potential market (TAM) of financial superapps—an area currently contested by nearly all leading fintech companies.

In this environment, giants from Wall Street and Silicon Valley are pushing ahead with blockchain initiatives, which is no surprise. Every week, new product announcements emerge, covering everything from tokenization to stablecoins and everything in between.

Notably, unlike the pre-crypto era, these efforts are not experiments but production-grade products, mostly built on public blockchains rather than isolated private systems.

As regulatory lag continues to permeate the system over the coming quarters, these activities will accelerate. With increased clarity, enterprises and institutions can finally shift focus from “is this legal?” to how blockchain can expand revenue opportunities, reduce costs, and unlock new business models.

Perhaps one of the clearest signs of the current state is that very few industry analysts are building models for exponential growth. Anecdotal evidence suggests many sell-side and buy-side peers around me dare not consider annual growth rates above 20%, fearing to appear overly optimistic.

After four years of pain and valuation resets, it’s time to ask: what if all this truly achieves exponential growth? What if “daring to dream” again yields returns?

( Dusk Moment

“Lighting a candle casts a shadow.”

— Ursula LeGuin

On a cool autumn day in 2018, before starting another exhausting day at an investment bank, I walked into an old professor’s office to talk about everything blockchain. After sitting down, he recounted a conversation with a skeptical hedge fund manager who claimed cryptocurrencies were entering a “nuclear winter,” a “search for problems’ solutions.”

After giving me a crash course on unsustainable sovereign debt burdens and the ongoing erosion of institutional trust, he finally told me how he countered that skeptic: “In ten years, the world will thank us for building this parallel system.”

Although it wasn’t yet ten years, his prediction proved remarkably prescient, as cryptocurrencies increasingly seem like a “timing is ripe” idea.

In the same spirit—and the core message of this article—is to demonstrate that the world is still underestimating what is being built here. For all investors, the most relevant point is that the multi-year opportunities of leading projects are undervalued.

The final part is crucial because, although crypto may be unstoppable, your favorite token might actually be heading toward zero. The flip side of crypto becoming unstoppable is that it is attracting fiercer competition, and the pressure to deliver has never been greater. As I mentioned earlier, with institutions and enterprises entering, many weaker players are likely to be weeded out. This doesn’t mean they will win everything and own the technology, but it does mean only a few native players will become the big winners as the world repositions itself.

The focus here is not cynicism. In all emerging tech fields, 90% of startups fail. There may be more public failures in the coming years, but that should not distract you from the bigger picture.

Perhaps no technology better embodies the current zeitgeist than cryptocurrency. Declining trust in institutions in developed societies, unsustainable government spending in G7 countries, blatant currency devaluation by the world’s largest fiat issuer, de-globalization and fragmentation of the international order, and the growing desire for a fairer new system—these are all factors. As software continues to dominate the world, AI becomes the latest accelerant, and younger generations inherit wealth from the aging Baby Boomers, there is no better time for crypto to emerge from its small bubble.

While many analysts frame this moment using classic frameworks like Gartner’s hype cycle and Carlota Perez’s “Post-frenzy” stage, implying that the best returns are behind us and the subsequent phase is more dull and tool-oriented, the reality is much more interesting.

The crypto economy is not a single mature market but a collection of products and businesses at different points on the adoption curve. More importantly, when a technology enters the growth phase, speculation does not disappear; it simply fluctuates with sentiment and innovation pace. Anyone telling you the speculative era is over might just be tired or simply unaware of history.

Maintaining skepticism is reasonable, but don’t be cynical. We are reimagining money, finance, and how our most important economic institutions are governed. This should be challenging but also fun and exciting.

Your next task is to figure out how to best leverage this emerging reality, rather than endlessly tweeting about why everything is doomed to fail.

Because through the fog of disillusionment and uncertainty, those willing to bet on the dawn of a new era—rather than mourn the sunset of the old—will find opportunities rare in a lifetime.