The rapid growth in the number of crypto tokens is outpacing the value they generate, creating an “existential” problem for the industry, according to Michael Ippolito, co-founder of Blockworks.
In a series of posts on X, Ippolito noted that while total crypto market capitalization remains relatively strong, the average value per token tells a different story. “The average coin is only slightly higher than where it was in 2020 (!) and down ~50% since 2021,” he wrote.
Median token returns have also deteriorated sharply. Most tokens are down roughly 80% from their highs, suggesting that gains have been concentrated in a narrow set of large-cap assets, while the broader market underperforms, Ippolito claimed.
Media token returns drop. Source: Michael Ippolito
He argued that the imbalance appears to be driven by a rapid expansion in token supply. “We created a TON of new assets and STILL total market cap is flat,” he wrote, adding that this dynamic effectively dilutes value across a growing pool of tokens.
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Token prices break from fundamentals
Ippolito also claimed that the relationship between fundamentals and price has weakened. In 2021, token prices closely tracked onchain revenue. Recent data shows that despite a resurgence in protocol revenues, prices have not followed, pointing to a disconnect between usage and investor returns.
He argued that this signals a loss of confidence in tokens as vehicles for capturing value. “The token problem is existential for this industry,” he said, adding that without stronger alignment between fundamentals and price, the sector risks losing its core appeal.
Fundamentals vs price. Source: Michael Ippolito
In a post on X, Arthur Cheong, founder and CEO of DeFiance Capital, said he agrees “with the urgency to fix the current situation of tokens in the crypto industry,” warning that if the market continues to concentrate around a small set of assets like Bitcoin and Ether, the broader crypto ecosystem risks losing relevance.
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Capital shifts from tokens to stocks
Investor demand is increasingly moving away from newly launched tokens toward publicly listed crypto firms, as most token launches fail to hold value, a February research from DWF Labs found. The report revealed that over 80% of projects trade below their token generation event (TGE) price, with typical losses of 50% to 70% within about three months.
The pattern appears structural rather than cyclical. According to DWF’s Andrei Grachev, most tokens peak within the first month before declining under sustained selling pressure. Factors such as airdrops and early investor unlocks add to the supply overhang, reinforcing downward price trends even for projects with active products or protocols.
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