Crypto reels from a US$200 billion crash as casino crowd moves on

[NEW YORK] Crypto’s riskiest tokens are crashing on a scale that stands out even by the industry’s own volatile standards, abandoned by retail speculators saddled with humiliating losses and a growing sense that the game is rigged.

Cryptocurrencies beyond Bitcoin have been hit hardest in the market downturn that kicked off in early October. A MarketVector index tracking 50 mid- and micro-cap tokens has fallen nearly 70 per cent this year, hitting its weakest level since early 2020. Altcoins have now shed US$200 billion on paper since the market peaked.

The retail tide that once lifted everything from Trump-branded coins to dog-theme tokens is no more. In past cycles, altcoins would surge alongside Bitcoin and then fall harder. This year, the cohort largely missed the rally – and when the downturn hit, they cratered afresh, sending once-popular tokens like Dogecoin 50 per cent lower since the September high.

One reason: competition for retail dollars has become far more crowded. Zero-day options, speculative tech stocks, leveraged exchange-traded funds (ETFs) and prediction markets can offer faster upside, better thrills, and less chaos. And with thousands of small coins, from joke tokens to half-abandoned blockchain experiments, the question is how far the shakeout runs.

For many traders, the meme-era logic was the point: buy a token early, hope someone else arrives later, and repeat. It was speculation built on the greater-fool trade, and for years, it worked. But that engine has broken down. Prices are no longer rising simply because new buyers show up. Investors are starting to judge tokens the way they judge companies – by whether they have users, revenue, or a working product.

“For years, many tokens appreciated simply because of market cycles rather than real progress, and that era is ending,” said Shuyao Kong, who is building a new blockchain platform called Megaeth. “Today it’s influenced by cypherpunks, traders, Wall Street institutions, and even politics. No single narrative moves the market anymore, and the rise of traditional valuation frameworks is unsettling for some.”

Altcoins sit at the market’s outer edge, a mix of memecoins, decentralised-finance experiments and governance tokens designed to give holders a say in how projects run. Most trade in shallow markets with few natural buyers, driven by social-media buzz, day-trader leverage and hopes of catching the next ten-fold jump. That model thrives when money rushes in and collapses just as quickly when it rushes out. And even many of the governance tokens tied to projects with clearer economic models have slumped, another sign of retail exhaustion.

Part of it comes down to something simple: many of the new places to speculate feel safer or easier to understand. Turbocharged stock funds and options have become everyday tools. And on the blockchain, a newer crop of products that track real companies, essentially crypto versions of stock futures, let traders bet on firms such as Apple, Nvidia or Tesla with around-the-clock access. These products are still tiny but show where speculative habits are drifting.

Daily volumes for small- and mid-cap crypto derivatives on Hyperliquid, an altcoin trading hub specialising in perpetual futures, have thinned sharply since October’s crash. By contrast, prediction-market activity on Polymarket has hit records.

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The venues themselves have changed too. Apps that once funnelled retail money into altcoins now offer other ways to bet. Robinhood Markets is leaning into sports bets. Gemini Space Station, the crypto exchange founded by billionaires Tyler and Cameron Winklevoss, is preparing to offer prediction market contracts. Decentralised-finance platform Hyperliquid lets users spin up DIY contracts on everything from stock indexes to shares of private companies, while Coinbase Global has expanded its offerings.

At the same time, billions of US dollars have been absorbed by Bitcoin ETFs, money that no longer sloshes into smaller, riskier tokens. Together, those shifts leave far less capital flowing into the altcoin universe than in past cycles.

Jack Melnick, who works in digital assets and trades his own money, said he has shifted much of his activity from altcoins to these new crypto-based stock bets.

“For the first time, as someone who likes to keep capital on-chain, I now have the ability to trade the same businesses I covered in my TradFi days,” he said. “These products give me easy leverage and exposure to companies that generate real revenue at more reasonable fundamental valuations than their crypto counterparts.”

Melnick said this cycle has exposed how few altcoin projects ever build something people actually use – what the industry calls product-market fit. At the same time, he noted, many new tokens launch at increasingly high valuations after large private funding rounds.

“By the time users get access to bidding altcoins,” he said. “The majority of the upside has already bled away.”

Another drag this cycle is basic supply pressure: many projects released large batches of new tokens this year, flooding the market and keeping prices pinned down. The launch of the Trump memecoin underscored the point – money rotated into it, draining demand from dozens of smaller meme tokens.

Altcoins won’t vanish, the greater-fool impulse always finds new outlets, but the reliable bid that carried past cycles is missing.

There are notable exceptions. Tokens such as BNB and HYPE have held up because they use parts of their revenue to buy back coins and reduce supply – a mechanism closer to stock buybacks. A few others, including Zcash, have posted temporary eye-catching gains thanks to narrative buzz. But those winners are notable mainly because they are so rare.

Only about a dozen crypto projects generated more than US$1 million in revenue over the past month, according to Token Terminal, out of thousands still trading. The vast majority are drifting lower, with little to anchor their value.

“Mainstream retail traders are no longer seeing the convex returns in altcoins that they have in previous cycles and instead are finding that upside in equities tied to AI, quantum, nuclear energy and other emerging speculative sectors,” said Joshua Lim, global co-head of markets at crypto prime broker FalconX. BLOOMBERG