The crypto market is facing an existential problem as the growth in the number of tokens outpaces their value creation.
A recent analysis by Blockworks found that the average token value has decreased significantly since 2021, with most tokens down around 80% from their highs.
This trend is driven by a rapid expansion in token supply and a weakening relationship between fundamentals and price. The analysis showed that the total crypto market capitalization remains relatively strong, but the average value per token is only slightly higher than where it was in 2020 and down around 50% since 2021.
According to Michael Ippolito, co-founder of Blockworks, this imbalance appears to be driven by a rapid expansion in token supply. 'We created a ton of new assets and still total market cap is flat,' he wrote. This dynamic effectively dilutes value across a growing pool of tokens.