The golden era of the crypto space is nearing its end, moving towards new financial innovation

There is a view that tokenization of the US stock market is a fatal blow to crypto projects, leaving no chance for even a tiny copycat in the future. The reason is that funds originally used for crypto would be attracted to high-quality US stocks. Undeniably, a portion of the funds previously used for crypto will flow into tokenized US stocks. But, this is only one side of the coin; the other side exists.

Because asset tokenization, including the tokenization of USD, US Treasuries, US stocks, physical gold, and others, will lead to a significant increase in on-chain assets, and the financial sector within crypto is highly composable. If Ethereum scales properly and privacy issues are addressed, there is a possibility of an explosive growth in on-chain transactions—not only in DEXs, perpetuals, and prediction markets, but also that funds previously used for US stocks might partially flow into the crypto market. Funds that once wanted to play in US stocks but had no opportunity to do so will enter the market, overall increasing liquidity.

More importantly, US stocks on the chain are not entirely unidirectional; they could also be bidirectional. However, the concern is that crypto projects may not generate enough revenue to sustain themselves. But wealth effects are not solely dependent on revenue; there are industries with income but low market cap.

Of course, this also inevitably means the end of the widespread copycat seasons seen in the previous two cycles. But high-quality copies and on-chain infrastructure—including public chains like Ethereum, DeFi, oracles, privacy tech, digital identity, wallets, and more—will still be in demand. There is even a high probability that innovations like crypto AI agents and asset tokenization will combine to create new gameplay, potentially leading to new sectors similar to prediction markets/PERP.

The core message here is that we shouldn’t think that US stock tokenization will inevitably bring doomsday or that liquidity will be stolen away. Once stablecoins, US stock tokens, and other assets are on-chain, they won’t just sit there; liquidity must emerge. The composability of crypto will be fully utilized. If there are good narratives and quality projects, not only will crypto funds flow in, but external funds will also enter. It’s just a matter of competition.

A few high-quality projects in crypto, once they have a compelling narrative, may not necessarily underperform compared to US stocks. In the next cycle, projects similar to prediction markets and PERP are likely to emerge. These projects are unique to crypto and have no equivalent in traditional finance, with a high on-chain liquidity and composability explosion. The human desire for money and innovation is so urgent that, through continuous exploration, new crypto species are being created from the bottom up.

Furthermore, the previous cycle’s copycat season was never very likely to return. Even without US stock tokenization, the comprehensive copycat seasons of the past two cycles have already exited the crypto stage. But a few high-quality crypto projects still have opportunities, especially those infrastructure and applications used to support US stock tokenization.

Finally, each cycle has its own “version of the son.” The one from two cycles ago, the last cycle, and this cycle all have different “version of the son,” and the next cycle will be no different.

The golden era of the Western world in crypto is gradually coming to an end. With institutional involvement, the crypto space has entered a new phase of financial innovation.

In this stage, there are still opportunities for high returns. Compared to the golden era before, the probability of success is much lower, but it’s not impossible. Perhaps the “version of the son” in the next cycle is still in college, or maybe it lost a lot of money in this cycle, lying dormant, waiting for the next cycle to see the flying dragon in the sky.