There Are Millions of Crypto Tokens. Almost None Have Any Value

(Bloomberg) — Charles Hoskinson is angry.

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The founder of Cardano, one of the world’s largest cryptocurrency networks, recently posted a video warning users to brace for more failures after a popular analytics platform announced it was shutting down. More projects will disappear, more businesses will run out of money and more developers will abandon the ecosystem, he predicted.

“I suspect there’s going to be a wave of failures,” Hoskinson said. “This year is going to be very hard.”

His frustration captures a reality that has been overshadowed by Bitcoin’s latest slump. The world’s biggest cryptocurrency fell more than 6% to below $60,000 at one point on Friday, and has declined by about 17% so far this month to hit a low not seen since 2024. There were multiple reasons for the slide: Michael Saylor’s Strategy Inc. sold some Bitcoin; Bitcoin exchange-traded funds continue to bleed cash; and fears that the Federal Reserve may hike interest rates added to the worries. All manner of risk assets fell. More than $1.7 billion of digital assets had been liquidated in the 24 hours ended mid-day Friday, according to data tracker CoinGlass.

“It lost that hot-new-thing label and now it’s just another asset class, it’s just another instrument amongst a sea of ways to invest your money,” said Michael Antonelli, a market strategist at Robert W Baird & Co., of Bitcoin and crypto.

While the largest digital token slumped, a more existential downturn has been unfolding across much of the rest of the crypto market for months. Hundreds of once-promising projects have faded, and billions of dollars have evaporated.

“Altcoins have generally suffered more than Bitcoin lately, though the impact has not been uniform,” said Thomas Probst, an analyst at researcher Kaiko. The privacy token Zcash, for example, fell by more than half since June 3 at one point on Friday due to reports of a possible security flaw.

Cardano’s Hoskinson didn’t respond to a request for additional comment.

Crypto’s token boom was fueled by technology that dramatically lowered the barriers to creating new assets. What once required building an entire blockchain eventually became as simple as deploying a standardized contract. Millions of tokens followed.

The current numbers are stark. Tens of millions of crypto tokens have been created in recent years. Fewer than 1,700 still generate meaningful daily trading activity on decentralized exchanges, according to a recent report from Delphi Digital. Most venture-backed tokens are trading below their launch price — some more than 90% below. The return across a broad sample of tokens studied by the firm was negative 80%.

Bitcoin’s latest slide is seen by many in the community as cyclical – reflecting investors’ changing appetite for risk. The pressure on many alternative tokens runs deeper. Even when Bitcoin was setting records late last year, large parts of the altcoin market were already struggling to attract capital, users and trading activity. The current selloff is exposing weaknesses that had been building for years rather than creating them.

Bitcoin fell again on Saturday for the seventh straight session, the longest streak of daily losses since 2023, according to data compiled by Bloomberg.

Increasingly, capital is concentrating around a smaller group of assets and businesses that can demonstrate real usage, leaving much of the industry’s sprawling token universe struggling to justify its existence.

The promise of the last crypto boom was that blockchain technology would support thousands of thriving digital economies. Instead, much of the industry’s growth has proved fleeting. New tokens appeared by the millions, prices briefly surged and then attention moved on.

“The broad token universe, excepting Ether and Bitcoin, peaked in 2021,” said Cosmo Jiang, a portfolio manager at Pantera Capital. “We are already seeing a major shakeout. A lot of tokens are down 80-90% already. The reality is there are still many tokens that still have multi-billion market caps that don’t have a good reason to exist.”

The shakeout — typical for every crypto market downturn — is a struggle for survival. Even some long-established projects are confronting shrinking user bases, falling activity and difficult questions about how they remain relevant if the money keeps leaving.

Cardano’s active full-time developers have dropped 32% since the beginning of the year, according to Developer Report by Electric Capital. Its funds locked in decentralized apps are down 35% over the same time, per DeFi Llama. Cardano’s ADA token has tumbled around 55% this year to about 16 cents.

The irony is that some of crypto’s most tangible successes have coincided with one of the worst periods ever for token speculation. Stablecoins are becoming embedded in payments. The stablecoin Tether is on the verge of surpassing Ether as the second-largest token by market value. Wall Street is experimenting with tokenized assets. Banks are building blockchain infrastructure. Yet many of the tokens created to capture the value of that future are collapsing.

In previous cycles, enthusiasm for blockchain technology often lifted the broader market. This time, the exuberance is more concentrated. Capital is flowing toward a small number of assets and businesses with clear utility — such as Hyperliquid’s HYPE token, which is tied to one of crypto’s fastest-growing derivatives exchanges — while much of the token universe is being left behind.

“I think there’s a healthy rationalization of the broader token universe right now,” Jiang said. “As capital has become more scarce in crypto, people are becoming more focused on real fundamental value. Many tokens actually do not have a real value proposition. For a long time they continued to persist, and now we are starting to see capital providers saying: ‘We are tired of this nonsense.’”