Crypto Evolution 01 | OKX Ventures & Hashed & Animoca: Revisiting Cycles and Narratives
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Crypto Evolution 01 | OKX Ventures & Hashed & Animoca: Revisiting Cycles and Narratives
Cycles and narratives have always been central themes in the global crypto market. In the past, the industry largely relied on Bitcoin halving events to gauge market cycles and identify major narrative trends. However, following the approval of Bitcoin and Ethereum spot ETFs, the crypto market has become highly correlated with global financial markets, and the variables influencing crypto market movements are increasing in number and complexity.
Navigating Web3 tides with focused insights
Against the backdrop of soaring market volatility, gaining a clearer perception of cyclicality and identifying future narrative trends has become critically important. As frontline hunters of innovative narratives, investment firms often possess a more forward-looking perspective. In light of this, OKX has specially launched the column "The Evolution of Crypto," inviting leading global crypto investment institutions to systematically share insights on current market cycles, emerging narratives, and trending sub-sectors—aiming to spark meaningful dialogue.
Below is the first installment, featuring joint contributions from OKX Ventures, Hashed, and Animoca Digital Research on the topic of "Challenges and Opportunities in the Current Market Cycle." We hope their insights inspire your own thinking.
About OKX Ventures
OKX Ventures is the investment arm of OKX, a leading cryptocurrency exchange and Web3 technology company, with an initial capital commitment of $100 million. It focuses on discovering the most promising blockchain projects globally, supporting cutting-edge innovations in blockchain technology, promoting the healthy development of the global blockchain industry, and investing in long-term structural value. Through its commitment to entrepreneurs driving blockchain advancement, OKX Ventures helps build innovative companies and brings global resources and historical experience to blockchain projects.
About Hashed
Hashed is a team composed of blockchain experts and developers from around the world, dedicated to investing in and advancing decentralized and blockchain technologies. As core technical contributors, Hashed actively participates in and accelerates the widespread adoption of blockchain, driving transformative changes in the global economy and internet infrastructure.
About Animoca Digital Research
After years of strategic investments, Animoca Brands has built a diversified portfolio of over 500 blockchain projects, with a focus on GameFi and infrastructure. As a specialized unit within Animoca Brands’ Digital Asset Team, Animoca Digital Research consists of experts passionate about Web3 and decentralization from various fields. Through alpha tracking and hands-on experience, Animoca Digital Research aims to deliver deep industry insights and unique perspectives, while fostering innovation and vitality within the community. Constantly exploring, humbly moving forward. WAGMI!
I. Cycles and Market Structure
1. What cycle is the current market in? How has the market structure changed compared to previous cycles?
OKX Ventures: We believe the industry cycle should be understood through three key lenses:
First, mainstream societal adoption. The crypto market continues to grow, maintaining a scale of approximately $2 trillion. Bitcoin and Ethereum ETFs have entered mainstream financial markets, with Bitcoin ETF assets surpassing $60 billion. The rise of RWA (Real World Assets) — including government bonds exceeding $1.8 billion — indicates increasing integration between traditional finance and the crypto ecosystem.
Second, improved startup conditions. Venture capital inflows are rising; Q2 2024 saw over $3 billion in total funding, a 28% quarter-on-quarter increase, reflecting heightened institutional activity. Additionally, a steady influx of high-caliber founders — many with top-tier industry or academic backgrounds — continues to inject fresh talent into the space.
Third, mass user onboarding. Infrastructure improvements across Ethereum, Layer 2 solutions, and high-performance public blockchains have created a developer-friendly environment with abundant block space. User-facing applications such as games, social platforms, and Telegram-based ecosystems are enabling users to enter the crypto world seamlessly. Meanwhile, AI applications, intent-centric architectures, and account abstraction are reducing learning barriers. We stand at the cusp of a major application breakout, and remain structurally optimistic.
Hashed: Crypto market cycles are influenced by macroeconomic conditions, policy shifts, and technological progress. This cycle differs significantly due to increased institutional participation, signaling growing regulatory oversight. The extreme volatility seen in prior cycles is unlikely to return under these conditions.
In this cycle, new retail capital inflows have not substantially increased. However, the approval of Bitcoin ETFs has driven stronger institutional interest in BTC, creating an upward price trend. Yet beyond a few top-tier assets like ETH, SOL, and TON, many other large-cap tokens are struggling. The legitimacy of individual tokens — especially utility and application tokens — faces unprecedented scrutiny.
Many altcoins excluded from institutional watchlists face significant headwinds, explaining why they haven’t experienced multi-bagger returns. The continued issuance of tokens lacking fundamentals or coherent valuation logic remains a barrier to new capital inflows, as such tokens are increasingly viewed negatively by retail investors — particularly amid concerns around low float and high FDV (Fully Diluted Valuation).
Moreover, macro-level attention and asset allocation patterns play a critical role. Retail investors wield greater influence in public markets than previously assumed. While they poured into crypto from late 2020 to early 2022, they are now heavily shifting toward generative AI. Despite most AI startups lacking clear profitability, they continue to raise substantial capital and achieve unprovable valuations. This trend mirrors the price dynamics of major crypto assets from 2020–2022. From the standpoint of attention economics, this helps explain why this crypto cycle hasn't generated the same momentum as before.
Animoca Digital Research: As of August 2024, we believe the crypto market remains in a bull cycle. Although global financial markets have recently experienced some volatility, the medium-term outlook remains positive. Compared to past cycles, this one has not yet reached its peak. A recent ~30% correction falls well within historical norms and aligns with typical bull market adjustments.
Despite recent fluctuations in traditional finance (TradFi), we observe several strong medium-term catalysts for crypto:
1. German government sell-off: Large-scale liquidations in July forced leveraged long positions out of the system, leaving behind resilient spot holders. Another round of sales in August further cleared leveraged exposure.
2. ETF buying activity: Most crypto purchases come via BTC and ETH ETFs, revealing two key points:
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TradFi investors understand asset volatility and are less reactive to short-term swings. During recent market turbulence, trading volumes for both ETF types rose only slightly, remaining far below historical highs.
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TradFi buyers are price-sensitive; their purchase decisions are clearly influenced by price levels.
3. FTX liquidation: Up to $10 billion in funds could be released from FTX’s bankruptcy estate before year-end. While timing remains uncertain, this will have a positive market impact.
4. Fed rate cuts: Rising unemployment and cooling inflation increase the likelihood of rate cuts in September. Key indicators include 2.8% Q2 U.S. GDP growth, unemployment rising to 4.3%, and inflation stabilizing between 3.1% and 3.5%.
2. In the context of the global landscape, what core issues must the crypto industry address?
OKX Ventures: Given the current macro environment, we identify two critical issues:
First, sustainable technological innovation. While infrastructure has advanced significantly, enhancing network security — even as transaction efficiency improves and costs decline — remains a pressing challenge. This requires not only continuous technical iteration but also close collaboration and co-innovation across industry participants.
Second, education and cultural integration. Despite rapid growth in the user base, public understanding of crypto technology and its applications remains limited. Enhancing general crypto literacy is essential to help more everyday users understand and engage with the space, thereby supporting long-term, healthy industry development.
Hashed: We see two core challenges requiring urgent attention.
First, using blockchain’s decentralizing power to counteract the increasing centralization of technologies like closed-source AI. This isn’t just about AI — it reflects broader societal concerns about excessive concentration of power in a few entities. Blockchain emerged from dissatisfaction with centralized governments, censorship, and financial control, and a desire for free value exchange and storage. These themes are resurfacing today, now extending to concerns about corporate and governmental centralization and censorship. AI — particularly AGI — holds immense potential and impact on human history. Due to its nature, it's becoming a national security issue, prompting higher walls. If AI development remains concentrated within a few centralized firms, large-scale surveillance risks emerge. If AI is inherently centralized, then addressing this contradiction through blockchain’s ethos — which stands in direct opposition — becomes a real problem the industry must tackle.
Second, the evolution of incentive mechanisms in crypto markets. Tokens, as tools for incentives and ownership, have yet to fulfill their potential. Insufficient engineering of token dynamics and price discovery leads to underutilized alignment incentives within networks. Until this foundational issue is resolved, the growth of token-based decentralized networks will face major constraints.
While various mechanisms have been designed and many protocols have experimented with incentive alignment, effective and capital-efficient distribution and alignment remain unrealized. It’s no surprise, then, that few projects have replaced traditional corporate structures with tokens. We look forward to solutions addressing these long-standing industry challenges. We support participants who understand the economic essence of blockchain protocols and aim to replace traditional corporate models with broader decentralized alternatives.
Animoca Digital Research:
User acquisition and use case expansion remain core industry challenges. This includes both direct users — such as converting gamers into Web3 users or getting ordinary Telegram users to adopt on-chain payments — and enterprise-level use cases, such as penetrating traditional finance via RWAs. Many existing projects, especially infrastructure-focused ones, carry high valuations based on expectations of massive future usage. Only sustained growth in real users and actual usage can justify these valuations and ultimately transform tokens from speculative instruments in users' wallets into payment mediums that power decentralized collaborative networks — thus realizing the true value of these projects.
II. Future Challenges and Opportunities
On Challenges:
OKX Ventures: One major challenge is that despite massive investment in infrastructure, there are still few applications that deliver significant results or attract large numbers of real users. Many infrastructures, while technically advanced, have not meaningfully improved end-user adoption or practicality. Furthermore, blockchain infrastructure must evolve beyond technical showcases to efficiently serve end users. For example, despite breakthroughs like FHE (Fully Homomorphic Encryption) and ZK (Zero-Knowledge Proofs), these technologies still face numerous hurdles before achieving broad, scalable adoption. We need to find a better balance between tech promotion and application development.
Additionally, in practical terms, while DeFi (Decentralized Finance) has matured over recent years and expanded in scale, it still lacks innovative products that solve specific needs. Many DeFi projects are experimenting with cross-chain operations, deeper decentralization, integration of real-world assets, and complex derivatives. But achieving seamless liquidity and functionality across broader use cases requires ongoing effort and innovation.
Hashed: We see two primary challenges: regulatory scrutiny and infrastructure scalability.
First, regulatory uncertainty remains a major obstacle. While crypto is global, becoming a legitimate asset class requires compliance with regulations in key economies like the U.S., China, South Korea, and Singapore. Divergent and rapidly changing rules across jurisdictions make compliance increasingly difficult.
To address this, Hashed actively engages with regulators worldwide to advocate for clear, fair, and consistent frameworks. In 2022, we launched Hashed Open Research (HOR) and Hashed Open Dialogue for Law (HODL) to foster dialogue between the blockchain community and governments, help our portfolio companies stay compliant with best practices, and collaborate with academia and industry experts to guide company development.
Second, infrastructure scalability is another major hurdle. Bitcoin and Ethereum suffer from low efficiency, high fees, and slow processing during peak loads. While Ethereum Foundation upgrades have improved mainnet scalability, Layer 2 protocols and non-EVM L1 chains are equally vital. Hashed has invested in Layer 2 projects Taiko and zkSync, supports Solana’s efforts to boost throughput and reduce costs, and backs ecosystem projects like Backpack. We will continue identifying and funding projects that drive crypto growth and scalability.
Animoca Digital Research: Currently, the industry struggles to sustain retail investor engagement in new projects. After TGEs (Token Generation Events), many projects see rapid declines in Fully Diluted Valuation (FDV), and controversies around opaque token airdrops have further dampened enthusiasm. Yet retail investors are crucial sources of market liquidity, and their absence threatens the long-term health of the crypto ecosystem.
To address this, VCs and exchanges should take proactive steps — such as jointly improving price discovery mechanisms. This could involve developing more sophisticated valuation models and introducing transparent, data-driven pricing processes. By increasing the accuracy and reliability of project valuations, markets can rebuild trust and confidence among users. Project teams should also better align incentives between projects and communities, establishing mechanisms for community members to participate in network effects and share in network value.
On Opportunities:
OKX Ventures: A key opportunity in the new cycle lies in leveraging crypto innovation to onboard Web2 users into Web3 — and retain them. Additionally, the convergence of AI and Web3 presents a major opportunity, particularly in boosting transaction efficiency, enabling personalized services, and building new products. For example, using AI to analyze and predict market trends, or deploying AI-enhanced smart contracts to automate financial services.
Combining the earlier-mentioned challenges with these new-cycle opportunities, OKX Ventures’ current strategy focuses on optimizing resource allocation, tightening project evaluation and investment decision-making, and ensuring capital flows to projects capable of delivering genuine technological breakthroughs and user growth. We’re also seeking innovative projects that bridge existing technology with real market demand — such as Web3 applications that effectively absorb Web2 advantages — to propel overall industry progress.
Moreover, we will maintain active collaboration with other industry players, continuously refining our investment strategies to support industry development in the new cycle. For investment firms, staying at the forefront of innovation requires not just courage and vision, but also meticulous strategic planning and execution. We remain fundamentally optimistic about the next phase of industry development.
Hashed: We see two particularly meaningful opportunities emerging over the next five years: tokenization of real-world assets (RWA) and crypto-enabled “zero-to-one” innovation.
First, RWA tokenization can unlock accessibility and capital efficiency for illiquid assets — such as real estate, commodities, art, and intellectual property. Tokenized assets enable fractional ownership, enhance liquidity, and democratize access to physical or intangible assets previously restricted to select individuals or institutions. To advance this space, we seek teams with expertise in traditional assets and a mission to tokenize them. For example, Story Protocol offers open-source infrastructure that tokenizes IP, enabling programmable provenance, attribution, and monetization.
The second opportunity lies in supporting entrepreneurs who leverage blockchain to achieve “zero-to-one” innovation — redefining paradigms and creating entirely new markets. One area of potential is payments: mobile and blockchain-powered systems could deliver open finance and banking services to the unbanked. Blockchain’s strengths in fast settlement and low transaction costs remain underutilized here, and no clear winner has emerged.
Another opportunity exists in unlocking capital efficiency on the Bitcoin network. Despite a $1 trillion market cap, less than 0.1% of value is captured on-chain. There’s enormous potential in helping users earn yield and implement on-chain strategies. Ethena is a recent example: it tokenizes funding rates to create a “synthetic dollar” — the first native crypto internet bond. Ethena captures funding payments from CEX traders, tokenizes them into a neutral on-chain instrument, and enables cross-chain DeFi use cases such as DEX trading, collateralized lending, and derivatives.
Animoca Digital Research: At present, Web3’s primary goal remains attracting and retaining users migrating from Web2 by offering real utility. We highlight three key directions:
First, the TON ecosystem. TON on Telegram and its Mini Apps framework provide infrastructure to seamlessly integrate Web3 features into daily life. With over 900 million monthly active users and proven success in mini-apps and payments, TON has the potential to create a “red packet moment” akin to WeChat Pay — rapidly onboarding and retaining millions of users. Additionally, TONcoin’s integration within Telegram opens opportunities to improve advertising channels and user value-sharing mechanisms.
Second, GameFi. Animoca Brands’ Mocaverse has built a network of 700 million users and offers multiple powerful platforms. Projects that effectively integrate with the Mocaverse ecosystem are positioned for accelerated growth and enhanced digital asset value, making them more attractive investment targets.
Third, consumer hardware — smartphones and smartwatches — preloaded with Web3 apps and features. These devices can simplify onboarding and embed airdrop mechanisms to incentivize new users. This is especially impactful in emerging markets with underdeveloped infrastructure, where Web3 can enable direct entry into a decentralized digital economy without reliance on traditional institutions.
III. Narratives Watched by OKX Ventures, Hashed, and Animoca Digital Research
OKX Ventures: OKX Ventures continues to broadly invest across AI, GameFi, DeFi, Web3, NFTs, Metaverse, and blockchain infrastructure, currently backing over 300 projects. Our investment focus is guided by current market needs and forward-looking expectations, emphasizing infrastructure development, DeFi product innovation, and narrowing the gap between Web2 users and the Web3 world.
From our portfolio, while infrastructure and DeFi remain core pillars, we’ve observed the rise of Web3 and gamified applications — reflecting a shift from purely financial tools toward platforms offering richer user experiences. As technology matures and markets evolve, crypto may increasingly integrate into everyday life scenarios.
In the next cycle, OKX Ventures believes funding innovation in these key areas will drive sustained industry progress and broader ecosystem maturity. Our goal is to lead technological and business model innovation, delivering richer, more diverse Web3 experiences to users.
On infrastructure: We will continue allocating significant capital to high-performance, cost-efficient technical solutions — including parallel-processing chains like MegaETH and Monad, purpose-built chains such as AI-dedicated L1s, and privacy-enhancing technologies like FHE (Fully Homomorphic Encryption) and ZK (Zero-Knowledge Proofs). These efficient infrastructures not only drive user growth but can generate revenue, contributing to the industry’s sustainable development.
On innovative DeFi: Given DeFi’s mature market and user base, our focus is on multichain interoperability, deeper decentralization, RWA integration, and complex financial derivatives.
On Web2 user onboarding: To accelerate migration from Web2 to Web3, we prioritize opportunities integrating with high-traffic platforms. For instance, leveraging AI platforms like ChatGPT or social ecosystems like Telegram allows Web3 projects to reach hundreds of millions of users unfamiliar with crypto — presenting a massive growth opportunity for the entire industry.
Hashed: Our core narratives remain unchanged — the only difference is that the industry is maturing, allowing us to assess the real-world impact of these applications and infrastructures. We focus on applications and infrastructures that drive positive, meaningful behavioral and lifestyle changes, while nurturing vibrant ecosystems of genuine builders, users, and producers.
For example, our investment Axie Infinity pioneered a new business model, attracting large numbers of players across Southeast Asia and the Asia-Pacific region, providing them with meaningful income. Through infrastructure like Katana DEX and Ronin Bridge, the Ronin ecosystem now boasts over 1.5 million daily active users and 3.8 million monthly active users, supporting high-quality games like Pixels and Apeiron.
Amid growing RWA adoption and the mass migration of Web2 users to Web3, we incubated Modhaus, a blockchain-powered entertainment studio managing the next-gen K-pop girl group TripleS, with plans for additional sub-units. Traditionally, fans could only passively engage via concerts, shows, or merchandise. Modhaus uses blockchain, on-chain governance, and DAOs to change this. Fans vote using purchased photo cards (Objekts) — each vote called a Como — to determine TripleS’s debut single. All activities are transparently recorded on-chain.
Additionally, our investment Story Protocol commercialized programmable intellectual property (IP), capturing attention from media, entertainment, and blockchain builders. Western Hollywood writers’ strikes and Eastern anime industry disparities reveal how IP giants capture most derivative revenues while failing to offer creators transparent monetization. To address this centralization, Story Protocol’s IP graph enables any stakeholder — including original creators — to easily track, verify, and manage IP and its derivatives. Its three core modules — on-chain IP registration, licensing, and royalty management — are currently in testnet, inspiring stakeholders in media and entertainment to explore blockchain solutions to opaque, centralized systems, resulting in exponential user and builder growth ahead of mainnet launch.
Animoca Digital Research: The Web3 ecosystem has evolved from isolated silos to modular components, and is now forming collaborative networks. This allows projects to focus on their core value while leveraging capabilities from others — a crucial step forward. Coprocessors and intent-centric design are two innovations that greatly enhance Web3’s scalability and developer accessibility, making them highly noteworthy.
On Coprocessors
Coprocessors offload heavy on-chain queries and transactions to off-chain processing, returning results to smart contracts in a trustless manner. They provide a powerful framework for managing and verifying digital asset states at scale while preserving trustlessness — enhancing security and auditability for asset ownership, transfers, and other critical operations.
In GameFi, applications often require handling complex game mechanics, player interactions, and economic transactions. For example, a puzzle game on-chain might require tedious signing or validation at every step. With coprocessors, compute-intensive game logic can be processed off-chain, leaving the main blockchain to handle final state confirmation and verification. These innovations allow games to develop richer gameplay and in-game economies — such as fully on-chain loyalty programs.
On Intent-Centric Design
Intent-centric design prioritizes user outcomes over process complexity, aiming to deliver desired results without burdening users with technical details.
In GameFi, intent-centric design lowers the barrier for mainstream users to access and utilize Web3. Users can join Web3 games directly without downloading crypto wallets or managing gas fees; their digital identities and assets can be used seamlessly across games; and rewards can be spent directly on other services without conversion or transfer.
OKX Ventures disclaimer, please read in full:
https://www.okx.com/zh-hans/learn/okx-disclaimer.
Animoca Digital Research disclaimer, please read in full:
https://research.dat.animoca.space/disclaimers
Risk Warning and Disclaimer
This article is for informational purposes only. The views expressed are those of the authors and do not necessarily reflect the opinions of OKX. This article does not constitute (i) investment advice or recommendation; (ii) an offer or solicitation to buy, sell, or hold digital assets; or (iii) financial, accounting, legal, or tax advice. We make no guarantees regarding the accuracy, completeness, or usefulness of the information provided. Holding digital assets — including stablecoins and NFTs — involves high risk and may result in significant price volatility. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. For your specific circumstances, please consult your legal/tax/investment advisor. You are solely responsible for understanding and complying with applicable local laws and regulations.
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