Researcher Haotian is bearish on the encryption industry: Is Crypto becoming a "three-party play people for suckers"?

Haotian, a researcher who has been observing the development of the encryption industry for a long time, recently commented on platform X, admitting that his confidence in the encryption industry has wavered. He originally viewed the development of this industry as a “Three Kingdoms Kill” pattern of technological innovation, capital inflow, and trading volume mutually range-bound, forming opportunities. However, after the sudden “Black Swan Event” on October 11, he saw another side: this may not be a fair competition, but an ultimate harvesting targeting the liquidity in the market.

The initial version of the industry “Three Kingdoms Kill”: a three-way melee of technology, traffic, and capital.

Haotian once optimistically divided the encryption industry's ecosystem into three major camps, each holding different core strengths:

1. Technologically Native Faction: Ascetic-style innovation, difficult to land.

Representatives such as Ethereum founder Vitalik Buterin, this group of technical developers remains committed to the belief in “decentralization.” They focus on underlying innovations such as ZK technology, modular architecture, AI agents, automated chain abstraction, and parallel EVMs. These technologies are forward-looking, but they are also deeply mired in the dilemma of infrastructure technical debt and the difficulty of practical application.

2. Exchange Power: CEX controls traffic and Liquidity, creating a hype machine.

The centralized exchange (CEX) forces led by Binance founder CZ quickly create new narratives and projects leveraging two core assets: traffic and liquidity. For example, TGE (Token Generation Event) pipelines, the ICO model of Perp DEX 2.0, etc. While they stimulate market vitality in the short term, they also further strengthen the monopoly and centralization risks of the platform.

3. Wall Street Capital System: Dressed in a compliant facade, secretly expanding its territory.

Third-party forces come from Wall Street, including traditional financial players such as Tether, Circle, and Stripe. With the relatively friendly encryption policy in the United States, they are gradually binding DeFi into their constructed compliant public chain system through stablecoins and ETFs. On the surface, it seems like they are attracting investment to support the market, but in reality, they are laying the groundwork for controlling the financial landscape.

1011 Awakening after the Black Swan Event: Are the three forces not competing, but rather colluding to play people for suckers?

However, in Haotian's eyes, the market bloodbath event on October 11 shattered his original imagination of the three forces as “immortals fighting, retail investors eating meat.” He began to question: are these three parties fundamentally not in healthy competition, but rather colluding to play people for suckers and drain the remaining liquidity from the market?

Exchange: The true orchestrator of creating a blood-sucking traffic pool?

Haotian pointed out that retail investors used to think that exchanges only provided platform services and made profits from transaction fees, but the series of liquidations of USDe in cross-margin operations has led to a reevaluation of the true motives of exchanges. Leverage design, risk control mechanisms, rebate activities, meme coin launch platforms, circular financial products… seemingly abundant products actually hide huge Liquidity risks.

It is particularly noteworthy that although the trading volume of the top ten exchanges in Q2 reached $21.6 trillion, the overall market liquidity is declining. Where has the money gone? Apart from transaction fees, it is more likely that it has been “liquidated” according to the platform's rules.

Wall Street: Does institutional entry really bring stability? Or is it the creator of Black Swan Events?

Many people expect institutional funds from Wall Street to inject long-term stability into the market, but Haotian pointed out that before this crash, there were already several large short positions suspected to be from Wall Street wallets, profiting hundreds of millions of dollars. These operations raise questions: do institutions have an advantage in “front-running”? Have they already foreseen market risks, or even participated in creating panic?

And are those institutions that claim to promote compliance and capital injection actually gradually encroaching on the control of the native crypto world with stablecoins and ETF products?

Technical Developers and Retail Investors: The Fate of Cannon Fodder Under Dual Assault

What makes Haotian feel the most pessimistic is the most sincere group of people in the Crypto world — technical developers and retail investors. They are either building applications or waiting for a “big opportunity” of technological breakthroughs and capital inflows. But now, with altcoins plummeting and liquidity going to zero, many developer projects have directly gone to zero, rendering a year of hard work futile.

If the market only has short-term hot plays like trading MEME, creating memes, and issuing airdrops, then the value of technological innovation will be marginalized, and the altcoin market may face a complete clearing and structural reshuffling.

If there are no systemic breakthroughs in the future of encryption, it may repeat the same mistakes.

Haotian finally lamented that if the current situation of monopoly and successive harvesting by exchanges, capital, and institutions continues, the encryption market will be difficult to escape a vicious cycle. Retail investors will become increasingly marginalized, developers will lose motivation, innovation will be sacrificed, and Crypto will become a casino for a select few.

For those still in the game, perhaps it's time to reconsider: in this “Three Kingdoms Kill,” can we really profit? Or have we already become pawns in a chess game, designed with a predetermined fate?

This article by researcher Haotian is bearish on the encryption industry: Is Crypto's Three Kingdoms Game turning into a “three-way harvesting game”? Originally appeared in Chain News ABMedia.