The new year will bring a comprehensive reshuffle, but it also contains tremendous opportunities.
Author: Bitpush News
Source: Chain Catcher
Structural issues in the crypto market
The adoption of on-chain financial tools and the trend of machine economy are thriving. Over the past year, we have seen significant expansion of blockchain-native finance across five dimensions:
(1) Stablecoins
(2) Decentralized Lending and Trading
(3) Perpetual Contracts
(4) Prediction Markets
(5) Digital Asset Treasuries (DATs)
The regulatory environment in the United States has become extremely favorable, prompting an increase in both the number of projects and risk appetite.
Setting aside the uncertainties brought by tariffs and market structure, the tolerant macro environment has also provided fertile ground for crypto innovation to take root. These trends are well-known and need not be reiterated with data.
However, 2025 will be an extremely difficult year for long-term investors in tokens and crypto assets other than Bitcoin. If you are a trader or banker, things may be looking good—we have seen record commissions pushing DATs to market and huge fee income from trading platforms like Binance during the coin listing process. But for those of us with a 3-5 year investment horizon, the market structure has been terrible.
We are completely trapped in a 'negative prisoner’s dilemma': token holders expect future selling pressure, thus selling off any and all assets; meanwhile, the market makers and trading platforms that support the entire crypto economy take speculative positions focused solely on short-term gains. The unlocking mechanism of tokens and their issuance price often drag them down before projects have achieved profitability or found market fit.
Moreover, the structural failure in the market on October 10 of this year has clearly impacted several major players in the market. Although the losses have not been disclosed, the aftermath of the liquidation continues. The correlation between all crypto assets has risen close to 1, indicating a broad industry-wide deleveraging behavior among participants, despite their fundamentally different logics. It is easy to choose to retreat and become cynical at this moment.
But we prefer to conduct 'mark-to-market' as clearly as possible to plan for future allocations. The downturn in the crypto investment sector in 2025 is information but not a conclusion. It is likely that 2026 will see massive liquidations in the secondary market for private companies, at which point we will analyze how, during the crypto boom, so many special purpose vehicles (SPVs) were issued at inflated valuations. Meanwhile, the vision of programmable finance and 'robot money' continues to unfold, and we must keep striving to find the best positioning during its inevitable rise.
To provide context, please see the chart below. This chart zooms out to the past decade, showcasing the value creation across various regions and industries.
When we look at this history, the value creation in the cryptocurrency and AI sectors is astonishing compared to other parts of the world.
European capital markets (approximately $2-3 trillion for various countries) have made almost no progress and are merely maintaining the status quo. You might as well invest in government bonds for a 3% annual return, which may create more value. On the right side of the chart, India and China show compound annual growth rates (CAGR) of 5-10%, with net market value growth of approximately $3 trillion and $5 trillion, respectively, during the same period.
Having understood this scale, let’s take a look at what we define as 'robot money':
(1) The 'Magnificent 7' representing technology and AI has increased its market value by about $17 trillion at an annual rate of 20%;
(2) The crypto asset market, representing modern financial tracks, has increased by $3 trillion during the same period, with a compound annual growth rate as high as 70%.
This is the future financial center.
But being logically correct is not enough. We must carefully identify those parts of the value chain that have yet to be perceived by the world. Recall the discussions about robo-advisors in 2009, new banks (Neobanks) in 2011, or DeFi in 2017, when the vocabulary and associations had not yet formed, and it took 2-5 years for these outcomes to harden into clear business opportunities.
Value capture in the machine economy
As a form of 'self-masochistic' exercise, we have compiled a 158-page summary report covering the most relevant participants in the machine economy of 2025.
In the public market, 2025 will be a year of 'the strong get stronger, and the weak fall behind.'
The clear winners are the owners of physical and financial bottlenecks: electricity, semiconductors, and scarce computational power. Bloom Energy, IREN, Micron, TSMC, and NVIDIA have significantly outperformed the market, as capital chases those assets that 'machines must pass through.' Bloom and IREN are typical examples: they are directly positioned at the forefront of AI capital expenditures, transforming urgency into revenue. In contrast, traditional infrastructure like Equinix has performed poorly, reflecting the market’s belief that the value of general capacity is far lower than that of power security and high-density customized computational power.
In the software and data fields, performance is differentiated along another dimension: (1) Mandatory vs. (2) Optional. Platform enterprise systems that embed workflows and mandate renewals (such as Alphabet and Meta) continue to grow compoundly, both having risen year-to-date, as AI expenditures strengthen their existing distribution moats. ServiceNow and Datadog, despite strong product capabilities, have seen their returns dragged down by valuation pressure, bundling pressures from hyperscale cloud service providers, and slower AI monetization speeds. Elastic illustrates the adverse situation: strong technical capabilities, but squeezed by cloud-native alternatives, with unit economic returns deteriorating.
The private market also shows a similar filtering mechanism.
Foundational model companies are the protagonists of this story, but vulnerabilities are increasing. OpenAI and Anthropic are experiencing rapid revenue growth, but neutrality, capital intensity, and margin compression have now become clear risks. Scale AI serves as this year's cautionary tale: part acquisition by Meta destroyed its 'neutral' position and triggered customer loss, demonstrating how quickly a heavily service-based business model can collapse once trust is broken. In contrast, companies that control value (Applied Intuition, Anduril, Samsara, and emerging fleet operating systems) appear better positioned, even if value realization largely remains in the private domain.
Tokenized networks are the weakest-performing segment.
With very few exceptions, decentralized data, storage, agents, and automation protocols have performed poorly, as usage has not translated into token value capture.
Chainlink remains strategically important but struggles to align protocol revenue with token economic models; Bittensor is the biggest bet in the crypto AI space but does not yet pose a substantial threat to Web2 lab companies; Giza and similar agent protocols show real activity but are still constrained by dilution and thin fees. The market no longer rewards 'collaborative narratives' that lack mandatory charging mechanisms.
Value is accumulating in areas where machines have already paid for—electricity, silicon, computational contracts, cloud bills, and regulated balance sheets—rather than in areas they may choose in the future.
In 2025, the market rewarded ownership of 'chokepoints' while punishing projects that are full of ideals but lack control over cash flow or computational power. The future's core lies in identifying where economic forces already exist and betting on those assets that machines cannot bypass.
Core insight:
· The realization of AI value is 'deeper' than most people expect.
· Neutrality is now a first-class economic asset (see Scale AI).
· A 'platform' is only effective when combined with control points, rather than merely being a function.
· AI software is deflationary (pricing pressure); AI infrastructure is inflationary.
· Vertical integration is only important when it can lock in data or economic effects.
· Token networks are repeatedly undergoing the same market structure tests.
· Simply having exposure to AI is not enough; the quality of positioning determines everything.
Robotic hardware and software will be the next hype cycle, and we may see similar waves of investment and selective winners.
Positioning for 2026
Over the past two years, we have built a core portfolio that covers the key themes discussed here. Looking ahead to 2026, our positioning and investment execution will be further strengthened. Next, I will discuss our holding strategy.
While the long-term vision for autonomous agents, robotics, and machine-native finance is correct, the market is in a phase where valuations in the private AI and robotics sectors are extremely absurd. Aggressive secondary liquidity and an implied valuation of over $100 billion mark the transition from the 'discovery phase' to the 'exit phase.'
As an early fund with a fintech angle, we must lock in these downstream targets of expenditures:
Machine Transaction Surfaces: Machines or their operators have already borne the layers of economic activity, such as payment, billing, measurement, routing, and the orchestration, compliance, custody, and settlement primitives of capital or computational power. Returns are obtained through transaction volume, acquisitions, or regulatory status, rather than speculative narratives. Walapay and Nevermined in our portfolio are examples.
Budget-supported application infrastructure (Applied Infrastructure With Budgets): Enterprises or platforms that have already procured infrastructure, such as computing power aggregation and optimization, data services embedded in workflows, and tools with recurring expenses and switching costs. The focus is on ownership of budgets and depth of integration. Examples include Yotta Labs and Exabits.
High-novelty opportunities: A few asymmetrically rising but uncertain-timed opportunities include foundational research, frontier science, and AI-related cultural or IP platforms. Our recent investment in Netholabs (which aims to simulate a complete digital brain of a mouse) fits this description.
Moreover, before the token market structure issues are resolved, we will invest more aggressively in equity. Previously, our exposure was 40% in tokens and equity, with the remaining 20% flexibly allocated. We believe the token sector needs 12-24 months to digest the current predicament.
Key insights
You don't need to be a venture capitalist to learn from and benefit from these market dynamics.
Massive capital expenditures are flowing from tech giants to energy and component suppliers. A handful of companies are expected to become trillion-dollar winners in the public market, but they choose to remain private while divesting special purpose vehicles (SPVs). Public companies are doing their best to defend themselves. Political power is centralizing and nationalizing these initiatives—whether it's Musk and Trump or China and DeepSeek—rather than supporting their decentralized alternatives in Web3. Robotics is intertwined with the national manufacturing and military-industrial complex.
In the creative industries (from gaming to film and music), there is a growing resistance to AI, with those engaged in 'human craftsmanship' rejecting robots that pretend to do the same things. Meanwhile, in software, science, and mathematics, people view AI as a great achievement that can help discover and build efficient business architectures.
We need to stop believing in this collective illusion and return to reality. On one hand, dozens of companies have already achieved over $100 million in annual revenue through serving users; on the other hand, the market is also filled with a lot of fakes and scams. Both can coexist without contradiction.
The new year will bring comprehensive reshuffling, but it also contains immense opportunities. Only by cautiously walking the tightrope of opportunity can success be achieved. Let’s meet again on the other side!
