Spartan Partner: Thoughts on the Crypto Bear Market – Which Narratives Will Be淘汰ed?
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Spartan Partner: Thoughts on the Crypto Bear Market – Which Narratives Will Be淘汰ed?
The future of DeFi does not require Ponzi schemes that merely recycle its own answers, but rather real-world demand.
Navigating Web3 tides with focused insightsAuthor: Jason Choi
Translation: TechFlow Intern
Nothing lasts forever in crypto.
The sources of financial bubbles are always the same. Many developments in crypto planted the seeds for the historic bull run since 2020, fueled by loose monetary conditions. However, many aspects of crypto were driven by the bull market—here are some of them.
First is DeFi yields. DeFi grew rapidly in 2020, a literal money-printing party. Much of DeFi’s usage revolved around leverage—which increased due to the bull market. Of course, as with all financial markets, it's now time to pay the price for excessive leverage.
In fact, we didn’t even need a bear market to realize that there aren't enough buyers to absorb these inflated, air-dropped tokens funding high yields. Frankly speaking, the yields DeFi will need in the future won't be self-fulfilling Ponzi schemes, but rather demand from the real world. These yields will be lower than what some DeFi speculators desire, but they’ll be more sustainable and still higher than what you’d get from a bank—roughly in the 5%-20% range. Projects moving in this direction today include Maplefinance $MPL and Goldfinch_fi $GFI. Certainly, more such DeFi projects will emerge in the future.
Next is unsustainable P2E economies. The bull market boosted demand for NFTs and in-game tokens. This created profitable opportunities for players and gave rise to a new economy—the guild and scholar economy.
The most well-known example here is Axie Infinity. Many early skeptics who missed out on Axie now take pleasure in seeing SLP’s price collapse during this bear market and AXS’s stagnant user numbers. But personally, I don’t think Axie Infinity will fall too far. With $150 million in funding and its position as a market leader, I believe Axie Infinity will surprise us in the next bull run. What I’m not optimistic about are the dozens of Axie clones that emerged over the past six months.
Without the tailwinds of a bull market, profits in P2E games will be significantly lower. Especially as player counts begin to decline, players are realizing that this “mining-game” economy isn’t sustainable. To survive, P2E must integrate fun gameplay comparable to popular Web2 titles—especially if they aim for unicorn valuations.
We’re already seeing examples through venture investments—Decimated_game $DIO, illuviumio $ILV. More teams now recognize that Axie’s myth cannot be replicated, so they’re choosing to prioritize gameplay first and economics second.
Despite token prices being symbolic, I believe games prioritizing gameplay will drive long-term user growth far better than mere Axie clones. But it’s not easy—many underestimate the budget required to build AAA-quality games (GTA V alone cost $100 million). I think this will be a major challenge.
This topic is getting longer, but I’ll leave you with a few things I think won’t last, for your consideration.
- The current guild scholarship model
- Enthusiasm for DAO tools
- The current version of DeFi
- Underfunded L1 blockchains
One final thought: For aspiring founders and investors, a more relevant question today is—what won’t change in crypto over the next 12–24 months? Which projects or businesses aren’t entirely dependent on a perpetually rising market?
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