When a Shitcoin Loses Consensus, 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?

Which 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 particularly exciting.

Most answers were focused on the market consensus track:

Such as '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 utilizing blockchain infrastructure,' 'Taking a temporary break and watching.'

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

While this sentiment is rarely explicitly mentioned, most people can feel it. It stems from the endless scams, projects with low circulation high valuations going public, exchange-listing hype, and influencer marketing games. This sentiment reflects the current state of the industry but cannot predict the future; in fact, the future is likely to be not a continuation of today.

Betting on a mature track or areas with a clear Product-Market Fit (PMF) essentially represents a subconscious 'flight to safety,' and the root of this is precisely this nihilism. Participants want to avoid the worst parts of the industry and, in an environment where tokens are generally performing weakly, 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 numerous altcoins. Industry maturity implies prices reverting to fundamental value — in fact, this would result in most tokens experiencing a short- to medium-term decline. Unless you are shorting, it is challenging to find fundamental-based investment opportunities.

Engaging in trend continuation trading in a field with already established Product/Market Fit (PMF) may seem logical, but it is challenging to execute in a liquid market due to the persistent issue of "adverse selection." Most of the time, if you buy a token in a consensus-driven sector, you are either purchasing a low-quality hype coin or entering at an unreasonably high valuation.

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

Part 2: Where Is the Value of Cryptocurrency?

Industry maturity implies a move towards fundamental pricing. However, this exposes a core issue: the fundamental scale is too small to adequately support the current valuation and is also insufficient to drive the market.

So, what is really driving token prices? The following chart roughly breaks down the cryptocurrency market cap by asset category and has been adjusted to more intuitively illustrate the issue:

Two main adjustments have been made:

· A 75% discount to the entire Layer 1 sector and a 50% discount to the entire Application sector

· This reflects the viewpoint that a large portion of these two asset categories lack fundamental support to sustain the current valuation.

After the adjustments, two points are very prominent:

1. The market size cannot support the grand narrative

Despite considerable attention to the application layer, the actual market size remains small. Last year's total on-chain fee revenue was about $10 billion, and not all revenue belongs to token holders. Viewed globally, this figure is negligible. One could even argue that the total valuation of the entire on-chain application ecosystem, before adjustment, is not even as high as that of a food delivery company like DoorDash.

2. Even after experiencing a decline, speculative premium still dominates the valuation of altcoins

Looking 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 cap of the vast majority of tokens is still primarily driven by speculative premium—a value attributed by people expecting to sell at a high 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 speculation 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 quicker this weakness will manifest.

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 that have already been established in terms of liquidity, developer ecosystem, and more. New general-purpose blockchains will no longer receive the premium seen in past cycles. Instead, application-specific chains will gradually be valued based on their "application class."

Revenue and Applications

The focus on "revenue" is correct, but it is often misunderstood in the crypto space. People often discuss revenue multiples, but very few crypto businesses have a sustainable moat. A lot of revenue comes from incentives, and cash flow has always been fragile. Even if a 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 has the greatest long-term potential, but real problem-solving takes time. From a liquidity investment standpoint, 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 change." — Amara's Law

The key conclusion remains unchanged: regardless of how attractive the revenue narrative is, regardless of 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 set by expectations rather than cash flow.

Part Three: Trading Themes to Watch in 2026

In a single asset or market, speculative premiums will fade 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 areas where valuations are unclear, narratives are still forming, and market size is undefined (infinite imaginative space).

In short: Bet on innovation.

In 2026, the assets most likely to absorb speculative premiums typically have the following characteristics:

· Can create entirely new assets or markets on-chain

· Having a viable path to achieving "Monetary Premium"

· Difficult to value due to novelty or unclear cash flow ownership (which is also a key reason for the Monetary Premium narrative)

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

· Aligning with a larger global trend—market size is unlimited

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 a utility-driven output, 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 feasibility. The uPOW project is novel, hard to value, represents a new class of productive assets, and has the potential to achieve a Monetary Premium. Currently, two main focuses:

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

@ambient_xyz: In the private sale pre-mining stage, expected to launch later this year. It has a strong cyberpunk style and provides computing power for a perpetually young large 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, with some growing into real companies. The lightweight fundraising process and the token's growth empowerment effect will continue to be valuable. The core issue with these tokens is the claim to the business's value, but various mechanisms are already exploring solutions. The opportunity lies in both the token itself and the launch platform. Focus on two:

· @MetaDAOProject: Has been recommended multiple times, a clear leader in this field

· @StreetFDN: A more early-stage project, focused on serving offline startups

3. Distributed Training and Computing Power Market

Distributed training remains one of the most promising areas for AI x Crypto, with a slower-than-expected rollout. Leading teams have begun testing and hope to launch fully this year. In addition to the project tokens themselves, they are more likely to spawn secondary applications and token ecosystems. 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 field will continue to iterate this year. The winner may not have emerged yet, so stay tuned to:

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

· @trendsdotfun: A Solana ecosystem project reaching the Asia-Pacific market, still under the radar

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

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

5. Solana: @solana ($SOL)

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

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

Areas where I see limited opportunities: robotics, meme coins.

Summary

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 avoid risk. However, in the crypto space, just like in other industries, risk aversion does not lead to outsized returns.

The industry is still in a "pre-fundamentals" stage structurally, with price discovery driven by speculative capital rather than cash flows. 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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