The cryptocurrency market is witnessing a recovery, yet many tokens are failing due to unsustainable practices. Venture Capitalists (VCs) are accused of prioritising quick profits over the industry’s long-term health. With increasing project failures, experts like David Phelps and Hank Huang stress the need for genuine revenue models and community engagement. A shift back to crypto’s original intent of financial independence is crucial to avert future crises.
The cryptocurrency market has shown some signs of recovery recently, with the total market capitalisation exceeding $3 trillion. This rebound indicates a growing confidence among investors, yet the reality is stark: alongside the gains, many tokens launched this year have floundered due to unsustainable growth practices.
A significant factor behind this struggle? Venture Capitalists (VCs). Critics argue that VCs are undermining the long-term potential of crypto by pouring funds into new products merely for quick profits. David Phelps from JokerRace pointed out on social media how VCs traditionally function: they usually provide capital from above while companies build a stable revenue model from below. Unfortunately, in the crypto world, many have taken VCs’ cash, inflated their token valuations, and tried to prop up prices, often with their own assets.
However, as market conditions deteriorate, many VCs have started to pull back, leaving projects in a lurch. According to a recent report by Coingecko, over 1.82 million cryptocurrencies failed in the first half of 2025 alone, compared to approximately 1.93 million that were successfully listed. This represents a significant uptick from 2024, which had only 1.38 million failures. It’s quite alarming, given that we are still not even through 2025.
This growing number of failures underscores a concerning trend: the industry has shifted from its revolutionary financial roots to a culture of gambling for quick profits, compromising the initial vision of cryptocurrency. In a chat with BeInCrypto, Hank Huang, CEO of Kronos Research, provided a strategy for distinguishing legitimate projects from scams:
Starting with a smaller market cap allows investors to see that pricing isn’t artificially inflated. By setting realistic milestones, forging strategic alliances, and offering a transparent roadmap, trust can be built. Employing a DAO model gives the community a voice in essential decisions, whether on product development or which utility to prioritise, fostering engagement and creating lasting benefits through collective efforts.
So, what’s causing many crypto projects and tokens to flop? A main factor seems to be a lack of revenue focus. Many VC-led initiatives rely on what can be termed ‘free money’, providing services for no charge until the funding runs dry. This leads to a situation where investors may be reluctant to pay for something that is offered for free, despite possibly more sustainable options.
The pressing question for the sector is: how can crypto firms transition to business models grounded in real value and revenue driven by user engagement, rather than relying on gimmicks or VC hype? Huang believes the responsibility lies firmly with the firms involved. He contended that crypto projects should kick off with manageable market caps, steering clear of the inflated valuations brought about by short-term enthusiasm. A shift in focus towards tangible revenue through fees or user-led growth will be crucial. Creating an achievable roadmap will enable projects to develop gradually and sustainably, avoiding the trap of over-promising and under-delivering, and instead, cultivating real value for the long haul.
In conclusion, the time is ripe for the crypto sector to get back to its roots of fostering financial independence. This fundamental shift is essential if we aim to steer clear of a potential and devastating crisis in the crypto landscape.
