DannyManDeBo@DannyManDeBo
I’m amazed by people still talking about how necessary it is to continue “building” in crypto.
Right now, nothing could be further from the truth…
Understanding Industry Dilution and Overcapacity:
Industry dilution refers to the erosion of profitability and overall value within a sector due to excessive competition and oversupply. It often occurs when too many players enter a market, spreading demand too thinly.
Think tens of thousands of meme coins, dozens and dozens of DEXs with little to no volume - and so on.
Closely related is overcapacity, where production capabilities far exceed actual market demand. This leads to widespread financial distress. Think of the many DeFi clones, all generating very little fees, revenue and volume - but they can handle many, many users - so most of these are simply redundant.
There are massive amounts of redundant L1 and L2 blockchains that are basically ghost chains.
It’s leveraged overcapacity!
The consequences will be severe: companies face mounting losses as costs remain high while revenues plummet. Investors flee, credit dries up, and weaker firms collapse, often dragging suppliers and related industries down.
We are at this point of this “new cycle” - so it’s going to get a lot worse…
The overcapacity and dilution in crypto is also more pronounced than in many traditional sectors due to its permissionless nature, near-zero marginal costs for launching tokens, and the ease of forking (cut and pasting) open-source code.
With tens of thousands of cryptocurrencies - again, many being redundant copies deployed on underutilized blockchains- this fragmentation spreads liquidity extremely thin, erodes pricing power, and amplifies volatility.
EXACTLY what we now see occurring!
“Building” often means minimal innovation amid hype-driven speculation.
The current crypto situation mirrors other historical bubbles - but on steroids!
The pain is just beginning:
There is no slowdown of “new” projects, but this will change.
Hopefully soon, because the longer it goes on the more damage will occur.
There will be massive consolidation during the next few years and no past “cycles” or “seasons” will change that.
Everyone should stop listening to these lying influencers who are simply trying to use you for exit liquidity.
A great - and relatively recent - example of this phenomenon is the Dotcom boom/bust:
Thousands of internet startups flooded the market with easy venture capital and low tech barriers (sound familiar?) leading to massive amounts of overvalued “dot-com” plays.
The bust wiped out 90% of these companies!
Literally trillions in value was lost, but survivors like Amazon and Google emerged stronger, consolidating the sector.
Crypto shows very similar hype cycles, with speculative frenzies around NFTs, DeFi, and AI-integrated tokens, but many lack utility - and, especially, revenue.
Basically, there are far too few users, and most people are simply wanting a quick gain to extract.
Again, the pain is only beginning…
Lessons and Implications:
Of course, this doesn’t mean that crypto will go away, but it WILL go through major restructuring. Many players - both large and small - WILL go away …
—DannyManDeBo
