Examining the Dilemmas and Opportunities of the Cryptocurrency Market through Financial History
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Examining the Dilemmas and Opportunities of the Cryptocurrency Market through Financial History
When financial markets develop to a certain extent, an increasing amount of capital is entrusted to institutional investors for management.
Navigating Web3 tides with focused insightsAuthors: 0xSheldon, Researcher at TPTrade; Jerry, Founder of TPDAO
Introduction
If we take the rise and fall of Athens—the birthplace of global financial history—as our lens, we must be pessimistic: finance exists solely to serve money, enabling it to generate more money. Moreover, the prosperity and diversification of finance have historically depended on war—bloody and brutal as it may be.
Yet the turbulent history of New York offers us hope. Wall Street has faced existential crises more than once, yet instead of collapsing, it has grown stronger. This resilience stems from its foundational DNA: optimizing capital allocation. Notably, during the development of modern finance in New York, funds played an indispensable and uniquely critical role.
So what about the crypto market?
01 The Rise and Fall of Athens
Taking ancient Athens as a representative example of the origins of world finance, we can more clearly see that the essence of finance is exploitation. Consider Athens’ "Six-One Farmers"—a brutally oppressive system where borrowers had to surrender five-sixths of their harvest as interest, keeping only one-sixth for themselves. If even that five-sixths wasn't enough to cover interest payments, creditors had the right to enslave the debtor and their children.
Thanks to its unique geographical position, Athens rose through commerce among Mediterranean civilizations—but ultimately collapsed due to finance.
The brilliant Athenian civilization once represented the pinnacle of human achievement. Yet during wartime, heavily reliant on trade-based economics, Athens increasingly turned to financial mechanisms—maritime credit emerged, early banking institutions appeared, and temples began engaging in lending activities. Finance brought economic prosperity, but under the assault of monetary incentives, defeat in war led to the erosion of civic duty. More seriously, citizens’ moral values also deteriorated. Moral decline follows an irreversible ratchet effect—once spending habits are formed, they are easy to escalate upward but nearly impossible to scale back down.
In short, Athens' downfall began from within.
02 The Turbulent History of New York
For understanding modern financial history, no case study is more iconic than the rollercoaster ride of Wall Street—and one of its most pivotal elements is the fund. As financial markets mature, individual investors on Wall Street became less significant, with increasing amounts of capital entrusted to institutional investors. In 1961, individual investors accounted for 51.4% of total trading volume on the New York Stock Exchange, while institutional investors made up 26.2%. By 1969, institutional share had risen to 42.4%, while individuals dropped to 33.4%.
The subsequent bull market was primarily driven by sharply rising portfolio turnover rates among institutional investors, steadily boosting trading volumes. In 1955, mutual funds had an annual turnover rate of about 1/6; by 1960, a 50% turnover rate had become normal. Institutional investors also engaged in block trades (buying or selling securities in lots of 10,000 shares or more).
By the late 1960s, the bear market was blamed on Wall Street. Once again, the same narrative resurfaced as during the Great Depression of the 1930s: “Wall Street is about to die.”
Yet Wall Street did not perish—in fact, it achieved a new victory. Thanks to timely interventions by the Securities and Exchange Commission and technological advancements, Wall Street was rescued. This outcome was possible because New York’s financial system, born amid the Industrial Revolution, carried strong DNA of “finance empowering real economy,” with Wall Street fulfilling the crucial role of “optimizing capital allocation.”
This model deserves global emulation—and will prove applicable to the crypto ecosystem.
03 Crypto's New Opportunity
Benefiting from the support of Bitcoin ETFs backed by Wall Street, this bull run so far remains largely confined to Bitcoin. Therefore, we believe the reason this “bull market fails to feel bullish” lies in the lack of momentum from native crypto funds.
There are many analyses explaining why the bull market feels weak, with the most popular being the complementary dynamic between VC tokens and meme coins absorbing demand. We argue that beneath this phenomenon lies the absence of “native crypto funds” in the ecosystem.
VC firms capable of identifying high-potential projects are extremely rare. Most VCs simply follow-on invest, leading to inflated valuations before tokens even list—resulting in a peak-at-launch scenario. Meanwhile, retail investors who’ve tasted 100x gains remain intoxicated, chasing meme coins relentlessly. But their fate is even grimmer than “nine out of ten lose”—most meme coins go to zero, and achieving 100x returns is a one-in-ten-thousand miracle.
Drawing parallels with New York’s financial evolution, this bull cycle marks the moment when “native crypto funds” should step into the spotlight. (Here, the term “crypto fund” excludes venture capital funds, referring specifically to native quantitative hedge funds and value investment funds focused on secondary markets.)
Compared to traditional-market crypto funds, these native funds must possess the ability to invest beyond just Bitcoin and Ethereum—whether through quantitative or fundamental strategies, they bring their own logic and sharp instincts.
Clearly, both traditional financial players entering crypto and “native crypto funds” are passionate about money. But for native crypto funds, belief matters more. In 2021, numerous traditional financial funds and elite traders flocked into crypto, driven purely by profit. But after enduring the trials of 2022–2023, only those truly passionate about the industry remain.
Only a vibrant secondary market can fuel primary market growth. Because the market failed this test, the anticipated development of “crypto applications” has stalled. Despite significant improvements in blockchain scalability, cross-chain interoperability, and foundational components like NFTs and DID, initiatives such as “AI+Web3,” “DePIN,” and previously tested sectors like GameFi remain all thunder and little rain. The root cause? The roles of “finance empowering real economy” and “finance optimizing capital allocation” have yet to manifest in the crypto space.
The starting point for this transformation lies precisely in breaking through the current impasse of a “bull market that doesn’t feel bullish.” The key catalyst? Native crypto funds. We believe the role, status, and impact of native crypto funds—and the value opportunities they unlock—will gradually emerge in this cycle. Will you be part of it?
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