Crypto markets are facing renewed pressure as the number of tokens keeps rising faster than the value those assets create. 

Market participants are now questioning whether token launches, supply schedules, and value capture models still support long-term investor interest across the wider sector.

Michael Ippolito, co-founder of Blockworks, said the crypto industry now faces an “existential” token problem as supply continues to expand. In a series of posts on X, he said total market capitalization has stayed relatively firm, but the average value of individual tokens has remained weak.

He wrote that “the average coin is only slightly higher than where it was in 2020” and is down about 50% from 2021 levels. He also said most tokens now trade roughly 80% below their peak prices, showing that gains have stayed concentrated in a small group of large-cap assets.

Price and Fundamentals Lose Alignment

Ippolito also said token prices no longer move in line with protocol fundamentals as closely as they did in 2021. At that time, prices and onchain revenue often moved together. Recent data, however, shows that protocol revenues have recovered in many cases while token prices have not.

He said this gap points to weaker confidence in tokens as tools for capturing network value. According to him, “the token problem is existential for this industry,” as the market no longer rewards activity and revenue in the same way it did in earlier cycles.

Arthur Cheong, founder and chief executive of DeFiance Capital, agreed with the urgency of the issue. In a post on X, he said the market needs to address token structure problems before attention shifts even more toward a narrow group of assets such as Bitcoin and Ether.

That view adds to growing concern that smaller tokens may continue to lose relevance if investors keep focusing on a few dominant names. The trend has raised questions about whether the broader token market can still attract capital on a wide scale.

Investors Shift Focus to Crypto Stocks

A February report from DWF Labs said investor demand has increasingly moved from newly launched tokens to publicly listed crypto companies. The report found that more than 80% of projects trade below their token generation event price, with losses of 50% to 70% within about three months.

DWF Labs partner Andrei Grachev said most tokens reach their highest level within the first month after launch and then fall under steady selling pressure. 

He said airdrops and early investor unlocks often add more supply to the market, making it harder for prices to hold even when projects remain active.