Under the massive transformation of market structure, which赛道 are particularly worth watching?
TechFlow Selected TechFlow Selected
Under the massive transformation of market structure, which赛道 are particularly worth watching?
Why do cryptocurrency prices and total market cap look decent, yet the industry feels so depressed?
Navigating Web3 tides with focused insightsAuthor: Meng Yan, Co-founder of Solv Protocol
Editor's note: On August 23, Federal Reserve Chair Powell sent strong signals about potential rate cuts during his speech at the Jackson Hole symposium, significantly boosting market sentiment. However, the crypto market continues to face liquidity shortages amid this rally, and underlying the rate cut expectations are concerns about a possible U.S. economic recession. The current market finds itself in an odd situation: cryptocurrency prices and total market cap remain relatively stable, yet the industry is in deep downturn, lacking a powerful overarching narrative. Amid such structural shifts, Meng Yan, co-founder of Solv Protocol, analyzed the future direction and promising sectors of the crypto market on X. BlockBeats republishes the full article below:
The current state of the Web3 industry and crypto market can be summed up as follows: token prices are holding up, but the industry is in a deep bear market. This situation has never occurred before in the history of this industry. Previously, we always saw price and volume move together—either both rising or both falling. This severe divergence between price and volume is unprecedented in over a decade of crypto market development.
While the situation may seem strange, the cause isn't complicated—it’s simply insufficient liquidity. Many people are asking: why do token prices and total market cap still look decent while the industry feels so bleak? But actually, that question is backwards. Let's not forget that the U.S. federal funds rate remains at historically high levels, meaning macro liquidity is still in a tightening cycle. In such an environment, both stock and crypto markets should naturally be in bear territory. So the real mystery isn’t why the industry is struggling—but rather, why are token prices holding up at all?
1. Structural Transformation
When things defy normal patterns, there’s usually a hidden force at play. Beneath the surface disconnect between token prices and industry health lies a fundamental shift in market structure. Few have realized that the crypto market underwent a profound, structural change early this year. The approval of Bitcoin ETFs marked a watershed moment—creating, alongside the open and freely flowing crypto market, a nearly independent digital currency market within the U.S. stock market. This is a historic turning point for crypto, and the current divergence between price and industry conditions is a direct result of this new dual-market structure.
With two distinct markets now in existence, we observe two seemingly contradictory realities. The “decent” token prices are being driven by activity in the U.S. stock market. Meanwhile, the “weak” state of the industry reflects what’s happening within the native crypto ecosystem.
The Bitcoin price surge since late last year has primarily been fueled by ETF inflows. However, the capital entering through these ETFs largely remains within Wall Street and does not flow into the broader crypto ecosystem, let alone support innovative crypto projects. In contrast, the native crypto market continues to suffer from a capital drought caused by high interest rates and competition from AI-driven investments. Without external liquidity, internal competition intensifies. The various struggles currently visible across the crypto industry are all symptoms of this liquidity crunch.
A true bull market will only emerge when liquidity turns accommodative. Conversely, once liquidity loosens, capital will flood back into the crypto market, inevitably ushering in a new bull cycle.
More and more signs suggest the Fed’s rate-cutting cycle is just months away. With interest rates currently at historical highs, optimistic scenarios predict a prolonged easing period—providing a stable, long-term growth environment (a "constant epoch") for the industry. Pessimistic views warn that after a brief rate cut, inflation could spike again, forcing the Fed to hike rates once more—confirming a volatile “chaotic epoch.” I personally hold a cautiously optimistic outlook, but even under a chaotic scenario, 2025 is likely to be a strong year.
In the long run, there will be a major confrontation between these two markets—but it won’t be a zero-sum game. Both will coexist for the foreseeable future.
2. Four High-Potential Sectors
Many are speculating which themes will drive the next bull cycle. Here are my personal views and reasoning—not investment advice, and I take no responsibility for outcomes.
BTCFi
I’ll start by acknowledging a conflict of interest. Currently, Solv Protocol and Babylon are widely seen as the two leading players in BTCFi. To be precise, Babylon leads in native BTC stack-based BTCFi, while Solv leads in EVM stack-based BTCFi. The two projects maintain a strong collaborative relationship. As a co-founder of Solv, placing BTCFi at the top of my list of four key opportunities certainly risks accusations of self-promotion. But if I can’t offer compelling arguments, I won’t convince anyone.
Let me explain why BTCFi is one of the most promising sectors for the next cycle.
First, BTC is the only asset capable of bridging consensus and liquidity between the U.S. stock market and the crypto market in the next cycle. ETH isn’t there yet, and other assets lag further behind. Only BTC has the potential to unify liquidity and trust across both ecosystems.
Second, BTC’s market size is enormous. If BTCFi mobilizes just 5% of BTC’s existing supply in the next cycle—and layers on derivatives—the total value could easily reach tens or even hundreds of billions of dollars.
Third, the infrastructure challenges that long hindered BTCFi have largely been resolved. Whether it’s the Lightning Network, sidechains, BTC L2s, cross-chain bridges to EVM chains, multi-sig wallets, or Bitcoin Script smart contracts, today’s technical capabilities far surpass those of previous cycles. In BTCFi today, it’s mostly a matter of imagination—very little is technically impossible.
Fourth, there’s a shift in mindset among the BTC community. Through our work developing and operating in BTCFi, Solv has observed that BTC hodlers and ETH fans are fundamentally different groups with divergent mindsets and development paths. In the past, BTCFi failed to gain traction largely because BTC holders showed little interest. But with the explosion of the Ordinals ecosystem last year, two changes have occurred: first, a cohort of DeFi-experienced participants has entered the BTC space; second, a small but growing number of traditionally conservative BTC hodlers are beginning to embrace active participation in BTCFi.
Beyond these four relatively obvious reasons, I have a deeper, structural reason for believing in BTCFi.
Those who’ve been in this industry for a while remember that before 2018, many projects raised funds directly in BTC—the liquidity and activity around BTC were extremely high. But after the painful collapse of the 2017–18 ICO bubble, especially with the rise of stablecoins, BTC largely retreated into its “digital gold” role, drastically reducing its utility and activity. Many began to believe BTCFi was a non-starter. Yet anyone familiar with the history of global monetary systems knows this is a challenge humanity has faced—and successfully solved—before.
During the centuries-long era of the gold standard, gold as base money faced a similar dilemma. The core issue was this: gold’s credibility stemmed from its value preservation and inflation resistance—this was the foundation of its monetary consensus. But precisely because of this, people preferred to hoard gold rather than circulate it. Yet money must circulate; non-circulating money fails as a medium of exchange. In other words, gold’s function as a store of value conflicted with its role as a transaction medium. How was this resolved?
In September 1717, Isaac Newton, then Master of the Royal Mint, pegged gold to the British pound. This was another monumental contribution by Newton—beyond his achievements in mathematics and physics—though economically illiterate critics mock his later years as unproductive, which is laughable. Newton effectively created an elastic reserve system for gold: satisfying the public’s desire to securely store physical gold, while using the highly liquid pound as a substitute circulating instrument. This evolved into a two-tier monetary creation system—balancing security with liquidity—and powered rapid economic and trade expansion. During this golden age of human economic history, physical gold rarely appeared directly in commerce, yet economic life everywhere depended on it.
I believe BTCFi stands at a similar historical inflection point. If BTCFi develops well in this cycle, it could become the cornerstone of the entire crypto economy—securely storing BTC as digital gold, while enabling its active, dynamic participation in economic activities through “voucher-like” instruments. This would powerfully and sustainably drive the growth of the crypto economy. This is the fundamental reason I believe in BTCFi.
As a side note, many ask how Solv defines itself. If you understand this deeper rationale, Solv’s strategy becomes clear: our mission is to create an elastic reserve for BTCFi, enabling BTC as digital gold to truly activate the crypto economy.
Meme
Those who know me are aware I’m not a memecoin enthusiast—this is a matter of personal values. Nevertheless, I still include meme as one of the four most promising sectors I’m watching.
This isn’t merely because meme coins are currently the only sector consistently generating narratives in a bear market, but because the underlying logic of memes is increasingly advantageous in the moral dilemmas facing the crypto world.
Meme coins have two key advantages.
The first, obvious one is low entry cost.
The second is more profound: meme coins prioritize fairness and transparency over value promises.
What fundamentally distinguishes meme coins from so-called “value coins”? Value coins promise value first; meme coins promise fairness and transparency first. I’m not claiming meme coins are truly fair—in reality, they often involve manipulation—but comparatively, information asymmetry tends to be less severe than in value coins.
Which is harder: creating value, or distributing it fairly? Wang Yangming said: “It’s easier to defeat bandits in the mountains than to conquer thieves in the heart.” Creating value for an asset is relatively straightforward; fairly distributing that value is much harder. Value coins attempt the easy task first, then tackle the hard one. Since regulatory mechanisms in this industry are still immature, every value coin team faces opportunistic temptations once value emerges—this is the true test few pass. Once a value coin team betrays its promise, the coin ends up neither fair nor valuable. In contrast, a meme coin might lack intrinsic value and resemble a gambling game, but from day one, it establishes clearer rules and better information symmetry. On this foundation, third-party developers may later add real utility—this is doing the hard part first, then the easy part, which is far simpler than trying to restore fairness to a corrupted value coin.
Don’t misunderstand me—I firmly believe crypto must ultimately advance toward value creation, and I strive to build legitimate value coins. But I also acknowledge that choosing meme coins is a rational decision for many people.
Therefore, I believe that while the odds of any individual picking a winning meme coin remain low, meme coins as a category will continue to thrive in the next cycle. Moreover, I expect to see “value二次创作” (value remixing) around existing meme coins—third-party teams building applications on top of them, thereby injecting real utility and value.
Stablecoin Payments
Does blockchain have no use beyond speculation? Many think so, but they’re completely wrong. The largest current application on blockchain is payments, and within that, the fastest-growing segment is stablecoin payments.
To be honest, including stablecoin payments among the four key sectors is almost cheating—because its breakout isn’t a future possibility or speculative guess, but an already established trend. Within the crypto ecosystem, stablecoins have long served as primary assets for investment and incentives. The newer trend is their increasing adoption in cross-border trade. Especially over the past one to two years, numerous small and medium-sized international traders have begun systematically using stablecoins for B2B settlements across their supply chains. In this domain, blockchain’s advantages—settlement finality, minute-level clearing, lifelong transaction traceability—are fully demonstrated. Once users experience these benefits, they become indispensable—no persuasion needed.
The only remaining barrier is regulation.
There’s a widespread misconception in the crypto community that major countries will indefinitely suppress and crack down on stablecoin payments. As the design team behind the ERC-3525 digital voucher standard, we’ve engaged in deep collaborations and exchanges with central banks and international financial institutions across multiple countries over the past two years. I can tell you: the reality is entirely different. From the Bank for International Settlements to the World Bank, from central banks in Southeast Asia and Africa to major international commercial banks with extensive cross-border operations, stakeholders fully recognize the advantages of stablecoins. Most understand this is an unstoppable trend and are adopting proactive stances to learn and embrace it.
This time, it’s not “the boy who cried wolf,” nor is it superficial posturing. It’s grounded in mature theoretical frameworks and practical experimentation. Their main challenge now is figuring out how to implement anti-money laundering (AML) and counter-terrorism financing (CFT) controls—obligations any rule-of-law nation and responsible financial institution must uphold—while generally accepting stablecoin payments as a legitimate payment method. Much of the ongoing research in this space focuses precisely on resolving this issue. Once breakthroughs occur here, stablecoin payments will burst forth like floodgates opening, sweeping across the entire financial industry.
Stablecoin payments will undoubtedly be the first successful segment within RWA (Real World Assets). Many believe RWA will explode in the next cycle, but I think it’s still too early—only after stablecoin payments, as RWA’s vanguard, achieve massive scale will other RWA assets begin to gain momentum. That likely requires at least one more cycle. Still, the upward trajectory of the broader RWA sector is certain. Patient capital should begin positioning itself in RWA now.
Web3 Social
Leaders will emerge in the Web3 social sector in the next cycle—this is my boldest prediction. This topic has been discussed endlessly, yet every attempt so far has failed. Why do I believe a breakthrough is imminent?
Mainly because new approaches and solutions have emerged, exemplified by Solana Blink and TON.
First, understand this: Web3 means the internet of value. Web3 social networks are essentially social platforms with built-in value operations. In other words, Web3 social builds incrementally on Web2 social—it doesn’t require starting from scratch. Functionally speaking, Web2 social networks already excel at content. There’s no need for Web3 to reinvent the wheel. Launching a new platform that spends 99% of its resources replicating what Web2 already does flawlessly, while asking users to abandon years of accumulated social assets and migrate all relationships and data—this isn’t just difficult, it’s foolish. Why not simply add a value layer to existing Web2 social networks, enabling payments and transactions within familiar environments?
This idea is so simple and natural, yet for years, Web3 social entrepreneurs somehow missed it. Fortunately, with the emergence of TON and Solana Blink, this mental barrier has finally been broken. What do TON and Solana Blink have in common? They build value layers atop established Web2 social networks—prime real estate—rather than building isolated platforms in the wilderness and expecting mass migration based on ideology. In short: let Web3 go find traffic, instead of making traffic come to Web3. Many focus narrowly on metrics, criticizing TON for having traffic without value, or mocking Blink for hype without substance. These critiques aren’t entirely wrong, but they miss the bigger picture—the paradigm shift in how we approach Web3 social construction. I’m not saying TON or Blink will definitely succeed, nor that they’ll be the ultimate winners. Just as WeChat followed Momo, or TikTok followed Musical.ly, success may not belong to them, but they’ve opened the right path—drawing in smarter innovators who will carry it forward. That’s what matters.
Social will always reign supreme among applications—true in Web2, and destined to be true in Web3. There’s no logical flaw in Web3 social; past failures stemmed solely from flawed thinking. Now that this conceptual barrier has been broken, we’re bound to see a wave of innovation in Web3 social payments and social trading products—shaping the foundational landscape of the Web3 industry for the next decade. On this, I am deeply confident.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
Yan Meng
