• VCs and Market Makers as the Primary Frontline Barrier for Exchanges
• Airdrops and Memes Kickstart On-Chain Value Reassessment
• More Complex Token Economics Conceal Weak Growth

Retail traders have been facing challenges lately. First, RedStone went through multiple twists and turns, and in the end, retail investors failed in their counterattack—RedStone still made it onto Binance. Then, the GPS incident pulled the rug, exposing deeper issues, prompting Binance to take strong action against market makers, demonstrating the absolute dominance of the world’s largest exchange.

The story is far from perfect. As VC-backed tokens gradually decline, so-called “value tokens” have become mere excuses for project teams, VCs, and market makers to offload their holdings. Each market cycle’s volatility sees the urgent execution of a three-step playbook: foundation establishment, airdrop launch, and exchange dumping.

Image Caption: Traditional and Emerging Value Transfer
Image Source: @zuoyeweb3

It is predictable that BTCFi ecosystems like Babylon and Bitlayer will follow this same pattern. Looking back, the bizarre price action of IP tokens post-listing had nothing to do with the project’s actual performance but was instead closely tied to the aggressive buying power of South Korean traders—along with potential collusion among market makers, project teams, and exchanges.

This is precisely why Hyperliquid has taken a truly unique approach: no investment from VCs, no backing from major exchanges, and no internal conflicts of interest. It has struck a balance between project teams and early users by channeling all protocol revenue into empowering its native token, ensuring long-term value retention for later buyers.

From the performance of IP and Hyperliquid, it is evident that a project’s internal cohesion and willingness to empower its ecosystem can counteract centralized token concentration and sell-off strategies by exchanges and VCs.

As Binance pushes market makers into the spotlight, its own industry moat is rapidly crumbling.

A Self-Fulfilling Prophecy: The RedStone Exposure

“In my world, RedStone is buried 16 layers underground—it must be mined before it can be refined.”

Throughout the entire gold rush process, exchanges, leveraging their absolute traffic dominance and liquidity, become the ultimate destination for tokens. Superficially, it appears to be a win-win scenario: exchanges gain more token listings to attract users, while users get access to new assets and potential gains.

On top of this, the value-add from platform tokens like BNB/BGB further solidifies the exchange’s industry dominance.

However, since 2021, the entry of large Western Crypto VCs has driven excessive initial valuations across the industry. Take the cross-chain bridge sector as an example—based on pre-listing valuations:

• LayerZero was valued at $3 billion
• Wormhole at $2.5 billion
• Across Protocol at $200 million (2022 valuation)
• Orbiter at $200 million

Currently, the fully diluted valuations (FDV) of these four projects stand at:

• $1.8 billion (LayerZero)
• $950 million (Wormhole)
• $230 million (Across Protocol)
• $180 million (Orbiter)

Data Source: RootData & CoinGecko
Chart by: @zuoyeweb3

Every Big Name endorsement added to a project ultimately comes at the expense of retail investors.

Every endorsement effect added by a Big Name to a project is essentially at the expense of retail investors’ interests.

From the mid-2024 VC coin storm to the early 2025 He Yi “Bestie Coin Scandal” AMA, the relationship between exchanges and VCs has become unsustainable on the surface. The endorsement and listing assistance traditionally provided by VCs now seem laughable amid the Meme frenzy. The only remaining role of VCs is to provide capital, and under the drive for returns, token investments have effectively replaced product investments.

At this point, Crypto VCs are at a loss. Web2 VCs can’t invest in DeepSeek, and Web3 VCs can’t invest in Hyperliquid. An era has officially come to an end.

After the collapse of VCs, exchanges have no choice but to rely on market makers as safe harbors for retail investors. Users speculate on-chain with meme coins, while market makers focus on facilitating liquidity within the internal PumpFun market, external DEX exits, and the market-making of a few listed tokens. Of course, the relationship between on-chain activities and market makers is beyond the scope of this article, so we will focus on the internal operations of exchanges.

At this point, for both market makers and exchanges, meme coins are just as expensive to price as VC coins. If even so-called value tokens have no value, then air coins certainly cannot be fairly priced based on thin air. The common strategy among all market makers is now rapid accumulation followed by quick dumping.

As the entire process gets repeatedly intensified within the industry, “speedrunning Binance in a year” is not the original sin of market makers—rather, the fact that Binance can be speedrun is the real crisis of the industry. As the last link in the liquidity chain, Binance has lost the ability to identify and promote truly long-term tokens, marking the birth of an industry-wide crisis.

This time, Binance may choose to push RedStone forward despite its issues, or it may righteously prosecute market makers. But what comes next? The industry will not change its existing model—there will still be overpriced tokens waiting in line for the listing process.

Complexity and Gigantism Signal the End

Ethereum’s L2 solutions are multiplying, and eventually, every dApp will evolve into its own chain.

Tokenomics and airdrop strategies are becoming increasingly complex—from BTC as a Gas to the intricacies of ve(3,3)—far beyond the comprehension of ordinary users.

Since SushiSwap first airdropped tokens to Uniswap users in an attempt to capture market share, airdrops have become an effective way to incentivize early adopters. However, under Nansen’s anti-sybil screening, airdrops have turned into an ongoing battle of wits between professional farming studios and project teams. The only ones left out? Regular users.

Airdrop farmers want tokens, project teams need trading volume, VCs provide initial funding, exchanges crave new listings—ultimately, retail investors bear all the costs, left with nothing but relentless price declines and their own powerless rage.

Shifting toward Meme coins is just the beginning. The real shift is that retail investors across the industry are reevaluating their own cost-benefit calculations. Why trade on Binance when they can open contracts on Bybit or Hyperliquid?

Currently, on-chain derivatives trading volume has reached 15% of Binance’s daily volume, with Hyperliquid alone accounting for 10%. This is not the end—it’s just the true beginning of on-chain finance. Interestingly, DEXs currently process around 15% of CEX volume, while Uniswap alone makes up about 6% of Binance’s trading volume, highlighting Solana DeFi’s rapid ascent.

Image Caption: On-Chain DAU
Image Source: TokenTerminal

Currently, Binance boasts 250 million users, while Hyperliquid has only 400,000 and Uniswap’s active user base stands at 600,000. Meanwhile, Solana records 3 million daily active users (DAU). Overall, we estimate the on-chain user base to be around 1 million, still at a very early adoption stage.

However, the proliferation of L2s and the increasing complexity of dApp tokenomics reflect the inability of projects to balance their own interests with those of retail investors. Without involving VCs and exchanges, a project struggles to launch. Accepting VC and exchange backing inevitably sacrifices retail investors’ interests.

Throughout the history of evolution, whether viewed through Darwin’s theory or molecular biology’s probability models, one fact remains consistent:

Whenever a species grows too large or evolves into an overly intricate form—like the Quetzalcoatlus (giant pterosaurs)—it often signals the onset of extinction. Today, birds dominate the skies, not their colossal ancestors.

Conclusion

Exchanges purging market makers is ultimately an internal battle within a zero-sum market. Retail traders still face the same VC and project team onslaught, and the overall situation will not fundamentally change.

The migration to on-chain finance remains an ongoing historical trend, but even a platform as strong as Hyperliquid is not yet ready to handle a billion-user influx.

The fluctuation of value and price, the tug-of-war between interests and allocations—these forces will continue to shape each cycle, forming yet another chapter in the painful history of retail investors.

Disclaimer:

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2. Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute investment advice.
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