BEARISH 📉 : Castle Labs predicts most crypto tokens will lose value
Castle Labs argues that the crypto market is structurally overbuilt, with most tokens likely to be valued near zero unless they demonstrate real business traction and tighter token alignment. The current market is seen as a selection phase rather than recovery.
- The top five crypto assets account for 84.4% of total market capitalization, leaving thousands of smaller tokens competing for liquidity.
- In contrast, US equities show a more even distribution, with the MAG7 representing 31% of the market.
- Castle Labs suggests that 99% of the coins should go to zero for the industry's overall health.
Castle Labs proposes three scenarios for market rebalancing:
- Majors losing share to smaller tokens
- External liquidity boosting the broader market
- Weaker tokens losing value while majors absorb more capital (the most likely scenario)
Market dynamics show that token unlocks are increasing supply, but demand remains selective. In 2025, out of over 5,600 protocols listed, only 76 generated more than $1 million in revenue within 30 days.
Revenue concentration is high, with top protocols accounting for 80% of total crypto revenue. Only a few tokens have launched from these high-revenue protocols.
New token launches in 2025 saw 84.7% trading below their TGE valuation, highlighting inflated launch prices and weak structures.
The Alignment Problem
Tokens often lack economic alignment with their products. For instance, Circle's acquisition of Interop Labs excluded Axelar’s token AXL, showing divergence between product and token value.
Buybacks signal alignment, as seen with Hyperliquid, Aave, and Uniswap. Castle Labs emphasizes rotating capital toward protocols with real revenue, tokenholder alignment, and mechanisms to offset dilution.
Total crypto market cap stands at $2.16 trillion.
