When Shitcoin Consensus Fails, Where Can You Still Find Alpha?

Original Title: Why 'Fundamentals' still aren't the trade for 2026.

Original Author: @airtightfish, Crypto Researcher

Original Translation: AididiaoJP, Foresight News

Part 1: What is the Current Market Sentiment?

“What excites you most about cryptocurrency?”

“What areas are you investing in?”

When attending conferences, I always pose these questions to venture capitalists and hedge fund peers. They usually have the most macro insights into the industry trends. However, the answers I received at last December's Breakpoint conference were not very exciting.

Most answers were focused on the market consensus track:

For example, "Stablecoins," "Perpetual Contracts," "Prediction Markets," "Real World Assets (RWA)," "Digital Banks."

Some answers also revealed deeper concerns:

Such as, "Nothing to be excited about," "Non-crypto businesses using blockchain infrastructure," "Taking a temporary rest and observation."

Overall, it seems that most people's bets are leaning more towards industry "maturity" rather than "innovation." Behind these conversations, there is a prevalent sense of nihilism.

While this sentiment is rarely expressed explicitly, most people can feel it. It stems from the endless scams, projects with low circulation and high valuations going public, coin pumps on exchanges, and influencer marketing games. This sentiment reflects the current state of the industry but cannot predict the future; in fact, the future may very well not be a continuation of today.

Betting on mature tracks or areas with a clear Product-Market Fit (PMF) is essentially a subconscious "risk-averse behavior," and the root cause is precisely this nihilism. Participants want to avoid the worst aspects of the industry and, in an environment where tokens are generally underperforming, they are unwilling to take risks for innovation.

I believe that by 2026, none of these directions will be good liquidity trading options:

The problem lies in the fact that market efficiency is still low, and this inefficiency continues to support the prices of many altcoins. Industry maturity implies that prices will revert to fundamental value—in fact, this will likely result in most tokens experiencing a downturn in the medium term. Unless you are shorting, it is challenging to find fundamental-based investment opportunities.

Engaging in trend continuation trading in a field with an already established Product/Market Fit (PMF) may seem like a reasonable strategy, but it is challenging to execute in a liquid market due to the ongoing issue of "adverse selection." Most of the time, when you buy a token in a consensus-driven sector, you are either buying into a low-quality meme coin or entering at an exorbitant valuation.

For example: You believe in the prediction market for 2025? So, which token did you actually buy?

Part Two: What Is the Value of Cryptocurrency Really About?

Industry maturity implies a shift towards fundamental pricing. However, this exposes a core issue: the fundamental scale is too small to sustain the current valuations and does not have the power to drive the market.

So, what is actually driving token prices? The following chart provides a rough breakdown of cryptocurrency market capitalization by asset category and has been adjusted to more intuitively illustrate the issue:

Two main adjustments have been made:

· A 75% discount has been applied to the Layer 1 sector as a whole, and a 50% discount to the application sector as a whole

· This reflects the viewpoint that a significant portion of these two asset categories lack fundamentals strong enough to support the current valuations.

After adjusting, two key points are very prominent:

1. Market Size Cannot Support Grand Narratives

Despite the attention on the application layer, the actual market size remains quite small. Last year, total on-chain fee revenue was around $10 billion, and not all revenue was attributed to token holders. Viewed globally, this number is insignificant. It could even be argued that the total valuation of the entire on-chain application ecosystem, before adjustments, is not even comparable to a food delivery company like DoorDash.

2. Even after experiencing declines, speculative premium still dominates the valuation of meme coins

Going deeper:

Fundamentals

Fundamentals determine the price floor. For most tokens, this floor is far below the current price. Even at the current valuation levels, the market capitalization of the vast majority of tokens is still driven by a speculative premium — the value people assign due to the expectation of being able to sell at a higher price in the future. This premium is highly correlated with overall market volatility and naturally decays over time. The more mature the sector, the smaller the speculative space.

This situation is unlikely to change in the short term. Therefore, as speculative premiums fade, the performance of most existing altcoins will be inferior to Bitcoin. The faster the industry matures, the faster this weakness will emerge.

Layer 1

Layer 1 remains an important category, but the game rules have changed. A winner-takes-all general-purpose blockchain has likely emerged. Minor performance improvements are unlikely to disrupt the network effects already in place such as liquidity, developer ecosystem, and more. New general-purpose blockchains will no longer receive the same premium as in past cycles. Instead, application-specific chains will gradually be valued by their "application class."

Revenue and Applications

Direction towards "revenue focus" is correct, but it is often misunderstood in the crypto space. People often talk about revenue multiples, but very few crypto businesses truly have a sustainable moat. Much of the revenue comes from incentives, and cash flow has historically been fragile. Even if the business is strong and cash flow is stable, it is often unclear whether the token can effectively capture this value. A low valuation multiple does not necessarily make it a good investment.

The application layer still holds the greatest long-term potential, but truly solving problems takes time. From a liquidity investment perspective, there is a huge opportunity here, but the timeline may be longer than what the market generally expects.

"People always overestimate short-term change and underestimate long-term transformation." — Amara's Law

The core conclusion remains unchanged: no matter how attractive the revenue narrative is, no matter how much capital is betting on industry maturity, speculation remains the primary driver of market value. Fundamental expansion to a sufficient scale will take time, and until then, valuations will still be driven by expectations rather than cash flow.

Part Three: Promising Trading Trends in 2026

In a single asset or market, speculative premiums will diminish over time. This is an old story in the crypto world — AI agents, early DeFi, NFTs have all been through such cycles.

Speculation always flows to those areas where valuation is still unclear, narratives are still forming, and market size is not defined (infinite imagination space).

In a nutshell: Bet on innovation.

Assets most likely to absorb speculative premiums in 2026 typically have the following characteristics:

· Can create entirely new assets or markets on-chain

· Having a viable path to achieving a "Currency Premium"

· Being difficult to value due to novelty or unclear cash flow attribution (which is also a key reason for the Currency Premium narrative)

· Facing some barrier: technological, cognitive, or acquisition (hard to arbitrage + better distribution)

· Aligning with a larger global trend — unlimited market size

These conditions will delay the arrival of market efficiency, extend the window of mispricing, and leave room for speculation.

Specific Tracks and Projects of Interest

1. uPOW (Usability Proof of Work)

uPOW shifts mining output from pure inflation to output with actual utility, transforming "mining for distribution" into "mining to increase asset value." This direction has been discussed for a long time, and now the underlying technology is approaching viability. The uPOW project is novel, hard to value, represents a new class of productive assets, and has the potential to achieve a Currency Premium. Currently, two key focuses:

@nockchain: An early-stage project that requires time to develop, aligns with this theme, and benefits from zero-knowledge proofs and a privacy narrative

@ambient_xyz: In the private sale pre-mining stage, expected to launch this year. With a strong cyberpunk style, it provides computing power for a perennial large-scale language model using POW.

2. Ownership Tokens

The era of "Atmosphere Coding" has arrived. Small teams developing short-cycle, niche MVPs will become the norm, some of which will grow into real companies. The lightweight funding process and the token's growth empowerment effect will continue to be valuable. The core issue with these tokens is the claim to business value, but various mechanisms are already exploring solutions. The opportunity lies in both the token itself and the launch platform. Focus on two:

· @MetaDAOProject: Often recommended, a clear leader in this field

· @StreetFDN: Earlier-stage, focused on serving offline startups

3. Distributed Training and Compute Market

Distributed training remains one of the most promising areas of AI x Crypto, with deployment progress slower than expected. Leading teams have started testing and are hopeful for a full launch this year. Apart from the project tokens themselves, they are more likely to spawn secondary applications and token ecosystems built on them. True liquidity opportunities may lie there, although project tokens may also rise. Leading teams:

· @NousResearch

· @primeintellect

· @pluralis

4. Social Metaverse

The digital social space continues to evolve. Product-market fit remains elusive, but experiments are ongoing. It is expected that this area will continue to iterate this year. The winner may not have emerged yet, so the following are currently worth watching:

· @zora: Showing great resilience, with significant synergy between its creators and content tokens

· @trendsdotfun: A Solana ecosystem project reaching the Asia-Pacific market, yet to receive widespread attention

· @tryfumo: Included because it proves that execution itself is a moat

· @ShagaLabs: Metaverse data direction—expect more similar projects

5. Solana: @solana ($SOL)

The general-purpose public chain has matured. With the strengthening of network effects, the importance of marginal technical improvements is no longer as critical as existing liquidity, developer ecosystem, and distribution channels. The winner is quite likely already decided.

Solana has a strong core ecosystem, a rare long-term view for builders and capital, and a reliable roadmap for ongoing expansion. The next round of speculation will occur on top of the existing infrastructure. Regardless of the specific narrative, Solana is structurally prepared to handle a significant amount of such activity.

Areas where I see limited opportunity: robots, meme coins.

Conclusion

Nihilism is not insight; it is a lagging emotional response to price action, a symptom of industry issues rather than a prophecy of the future.

During times of low sentiment, capital retreats to “mature trading” and consensus narratives to mitigate risk. However, in crypto, like in other industries, safety does not yield excess returns.

The industry is still in a “pre-fundamental” stage structurally, with price discovery driven by speculative capital rather than cash flow. The transition from this situation will be slower than people imagine.

Speculative bubbles always follow innovation. Believe in innovation, try new applications, spend time with builders, and bet on innovation.

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