The First Snow of the Crypto Industry in 2026
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The First Snow of the Crypto Industry in 2026
When the capital’s compass has clearly shifted, faith has become both the cheapest and the most expensive thing.
Navigating Web3 tides with focused insightsBy Sleepy
Beijing, Jianguomen. I met a VC friend at a café downstairs. Through the floor-to-ceiling windows stretched February’s uniquely crisp, gray sky. This was my first coffee chat with someone from the crypto industry in a long time—and that fact alone felt like a signal. Sure enough, as soon as my friend sat down, she gave me a helpless look: “How long do you think this bear market will last? We haven’t made a single investment in six months.”
Six months—nearly a century in an industry where iteration is measured in days.
She told me it wasn’t because founders had stopped launching ventures. Her firm still meets dozens of entrepreneurs every month. Yet they’re now deeply confused: What promising directions or opportunities remain?
She stirred her coffee and let out a wry smile: “Sigh… My boss told me to go take a look at AI—but I still have faith in crypto.”
In that sentence, I heard the final struggle—and resentment—of a practitioner. When capital’s compass has clearly swung elsewhere, faith becomes both the cheapest and most expensive thing of all.
The next day, Kyle Samani, co-founder of Multicoin Capital—and once hailed as the “High Priest of Solana” and standard-bearer of “paper-driven investing”—announced on social media that he was stepping away from the industry. The High Priest had renounced his faith.
When both the industry’s sharpest minds and its most sensitive capital simultaneously choose to exit, I realized: we are entering a critical moment.
The Great Retreat
For the past decade, the crypto story was written atop a global flood of liquidity. Now the floodwaters are receding—not just exposing crypto, but everything else swept ashore with it.
February 2026 has been a nightmare for holders of all global risk assets. What we’re witnessing isn’t the classic seesaw effect. U.S. equities, gold, and crypto—assets historically divergent in risk appetite—are now holding hands and leaping into the abyss together.
Behind this broad-based collapse lies a truth we’ve long anticipated yet refused to believe: the era of cheap money—the era in which we could blindly trust that “tomorrow will be better”—has officially ended.
Economist Hyman Minsky once observed that the end of prosperity is often the beginning of collapse. That moment has arrived. The crisis’s origin lies in Washington’s tightening spigot. During the decade-long quantitative easing cycle, near-zero interest rates flooded global markets with hot money chasing high returns. Like water breaching a dam, this capital surged into any asset class capable of telling a compelling story—and crypto was unquestionably the sexiest of them all.
Yet now, with hawkish Kevin Warsh nominated as the next Fed chair, the Fed shrinking its balance sheet, the U.S. dollar index surging, and global funding costs rising across the board, the tide has gone out. And the first assets exposed are inevitably those most dependent on narrative—not fundamentals.
The Collapse of Two Temples
The crypto world rests upon two temples. One is the Temple of Value, enshrining Bitcoin as “digital gold.” The other is the Temple of Applications, enshrining Web3 as the next internet. Now, both have crumbled—almost simultaneously.
First, the Temple of Value. Since Satoshi Nakamoto’s whitepaper emerged in 2008, “digital gold” has been Bitcoin’s core, most resilient narrative—a hedge against inflation, decentralized, and sovereign-independent store of value.
But when real crisis strikes, markets vote with dollars. As Bitcoin has gained acceptance among mainstream institutions in recent years, its correlation with U.S. tech stocks has soared to 0.8. This means Bitcoin no longer hedges risk—it amplifies it. It’s not a safe harbor; it’s the eye of the storm. A sneeze from the Nasdaq, and Bitcoin may land straight in the ICU.
As the Temple of Value trembles, what of the Temple of Applications?
To grasp its collapse, we must consider a broader context: the foundational tech narrative has shifted.
From 2010 to 2020, blockchain was virtually the only “future technology” capable of igniting capital’s imagination. It was the protagonist of that era’s innovation narrative—the game no VC could afford to miss. Bitcoin’s rise wasn’t merely a monetary phenomenon; it reflected the underlying technological fundamentals.
Now, however, the protagonist has changed. AI has become the new deity.
AI’s ascent acts like a mirror—revealing Web3 applications’ profound emptiness. At first, as the AI wave hit, the crypto industry clung to a sliver of optimism. We tried merging the two, crafting the elegant narrative: “AI is productivity; blockchain is the relations of production.” But today, that appears nothing more than wishful self-comfort. AI needs no blockchain to validate its worth. Capital and talent will always flow toward whatever is easiest to understand, most compelling, and most fertile ground for bubbles. And today—that place is AI.
That same mirror left believers like Kyle Samani despairing. Samani and his firm Multicoin were Web3’s most devoted evangelists—Solana’s earliest and most influential backers, authors of the DePIN paper once hailed as Web3’s most viable path to real-world relevance.
Yet when this High Priest finally conceded that blockchain’s essence is “just a ledger for assets,” it amounted to declaring the Temple of Applications collapsed. We thought we were building Rome for the future—only to realize we’d spent years repeatedly replacing chips and carpets in a casino.
A graver problem looms: the industry is losing its most precious asset—the imagination of what’s possible tomorrow.
Top developers and young talent are voting with their feet, fleeing an industry stuck in an endless loop of Ponzi-like repetition. When startup incubators’ barometers no longer point to Web3, we know an era may well be over.
Still, technology never vanishes just because narratives collapse. Decentralized ledgers, smart contracts, cryptographic breakthroughs—these technologies remain, quietly waiting.
It’s just that no one yet knows their true destination. Perhaps they’ll never reshape the world as conspicuously as AI. Instead, they may quietly solve concrete problems in specific contexts. Such stories, however, lack glamour—and can no longer attract hot money or true believers.
Portraits of the People
The collapse of grand narratives ultimately reverberates through every individual life. As temples crumble to rubble, we see a bleak gallery of human portraits.
In January 2026, Entropy—a decentralized custody startup widely praised for its technical rigor—shut down after four years of operation. Also in January, the trading platform Bit[.]com announced its gradual closure. In February, Gemini—the compliant exchange founded by the Winklevoss twins—announced a 25% workforce reduction and full withdrawal from the UK, EU, and Australia, retreating operations back to the U.S. Since its 2022 peak, the company’s headcount has shrunk by over 70%.
I scroll social media and see developers who once filled their bios with “WAGMI” and appended “.eth” to their names—now updating their profiles to read “Building with LLMs.”
On X (formerly Twitter), I see “Princess” reminiscing about our coffee-shop conversation four years ago, dreaming aloud about the industry’s future. I see many old friends posting nostalgic reflections on the sector’s former boom and vibrancy.
When an industry collectively turns nostalgic, it signals that it has lost sight of the future. We reminisce about summer 2021—the peak when global crypto market cap hit $3 trillion; about the madness of selling a monkey JPEG for millions; about the hallucination of money floating in the air, effortlessly within reach.
During an avalanche, every snowflake insists it’s innocent. But we aren’t snowflakes. We built the snow ourselves—and now watch it melt right in our hands.
Will Consensus Still Find Consensus?
Next week, beneath Victoria Harbour’s glittering lights, the Consensus conference will convene in Hong Kong. Predictably, crypto’s faithful will gather once again—suits pressed, tongues fluent in “consensus.” But will consensus truly emerge in that hall?
This evokes a sharp sense of absurdity. In an industry stripped of its two foundational narratives—digital gold and Web3—in a winter where cheap money has vanished and High Priests keep defecting—what consensus remains possible? Is it consensus born of huddling for warmth—or consensus rooted in admitting defeat?
Perhaps real consensus is never forged in noisy conference halls, but in the quiet introspection of each practitioner—in the courage to begin anew, after acknowledging that the illusion has shattered.
What this industry needs is a thorough, top-to-bottom reckoning—with itself. But reckoning does not mean annihilation. When the tide recedes, something always remains amid the ruins.
Those who genuinely believe in decentralized technology may find embers in the rubble—not the world-altering fire we once imagined, but the modest, steady light needed to solve real problems. Perhaps in the next decade, we’ll see blockchain applications truly rooted in industry, serving specific user groups, unburdened by the goal of 100x token returns. They may appear in supply-chain finance, digital identity verification—or corners we cannot yet imagine.
These will be smaller, slower, but far more authentic stories. They won’t need grand narratives or overnight riches myths—only patience and time. For those still seated at the table, this may be the sole remaining hope.
As I finish writing, I glance outside. Beijing’s morning sky remains gray—just like the industry itself, right now.
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