The Great Ebb: The Collapse and Reckoning of Crypto Faith
- Core Viewpoint: The article argues that the cryptocurrency industry is undergoing a profound crisis triggered by global liquidity tightening and a shift in tech narratives. Its two core narratives—"digital gold" and "Web3 applications"—have simultaneously collapsed, leaving the industry facing severe challenges of capital flight, talent drain, and shaken faith.
- Key Elements:
- Shift in Capital Sentiment: Venture capital firms have not invested in crypto projects for half a year, shifting their focus to the AI sector. High-profile figures like the co-founder of Multicoin Capital have announced their "exit from the circle."
- Drastic Macroeconomic Changes: The Fed's tightening policies have ended the era of cheap money, leading to synchronized declines in global risk assets (including cryptocurrencies). Bitcoin's correlation with US tech stocks has increased, causing it to lose its safe-haven appeal.
- Narrative Competition Failure: The rise of AI has replaced blockchain as the core tech narrative pursued by capital and talent. The "Application Temple" narrative of Web3 has proven to lack substantial value support.
- Signs of Industry Contraction: Several well-known crypto companies (e.g., Entropy, Gemini) have recently shut down operations or conducted significant layoffs, with individual practitioners shifting to other fields.
- Possible Future Paths: The industry needs a "self-reckoning." In the future, blockchain technology may return to pragmatic applications that solve specific, real-world problems, rather than pursuing grand narratives and financial bubbles.
Beijing, Jianguomen. I met up with a VC friend at a café downstairs. Outside the floor-to-ceiling window was the crisp, grey sky unique to February. This was my first coffee chat with someone from the Crypto circle in a long time, and I felt that in itself was 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, for an industry that measures iteration speed in days, is almost an eternity.
She told me it wasn't because no one was starting businesses anymore; they still meet with many entrepreneurs every month. But now they are confused, unsure of what good directions or opportunities are left.
Stirring the coffee in her cup, she gave a bitter smile: "Sigh, my boss told me to go look into AI, but I still have faith in crypto."
In that sentence, I heard the final struggle and unwillingness of a practitioner. When the capital winds have clearly shifted direction, faith becomes the cheapest yet most luxurious thing.
The next day, Kyle Samani, co-founder of Multicoin Capital—once the "High Priest of Solana," the standard-bearer of "thesis-driven investing"—announced on social media that he was leaving the space. The high priest had apostatized.
When the smartest minds and the most sensitive capital in an industry simultaneously choose to exit, I realized we are facing a serious moment.
The Great Ebb Tide
Over the past decade, the story of cryptocurrency was written upon the surging floodwaters of global liquidity. Now, the tide is receding, but what's being washed ashore isn't just cryptocurrency.
February 2026 is a nightmare for holders of all global risk assets. What we're seeing is no longer a seesaw effect. US stocks, gold, and cryptocurrency—assets with historically different risk appetites—are now holding hands and jumping into the abyss together.
Behind this comprehensive decline lies a fact we long foresaw but were reluctant to believe: the era of cheap money, where we could blindly believe "tomorrow will be better," has officially come to an end.
Economist Minsky once said that the end of a boom is often the starting point of a crash. Now, that moment has arrived. The source of this crisis is the faucet being tightened in Washington. During the decade-long quantitative easing cycle, near-zero interest rates flooded global markets with hot money searching for high returns. This money, like water overflowing a dam, poured into every asset class that could tell a compelling story. Cryptocurrency was undoubtedly the most compelling of them all.
However, when hawkish figure Kevin Warsh was nominated as the next Fed Chair, when the Fed began shrinking its balance sheet, when the US dollar index strengthened relentlessly, and when global funding costs began to rise, the tide receded. The first to be exposed are always the assets most reliant on narrative rather than value.
