Back in 2021, the market’s reflexivity was largely fueled by a few dominant narratives, like DeFi and NFTs, along with an abundance of liquidity.

Fast forward to today, and the market has become noticeably fragmented.

So, why does this cycle seem to have breadth but lack depth?

It’s been a while since I last wrote anything here, but with 2025 now upon us, I thought I’d take a moment to share some of my recent thoughts—just a casual update from a regular market enthusiast.

That being said, none of what I share here should be taken as investment advice. In this chaotic “clown casino” we call the cryptocurrency world, always make sure to do your own due diligence and thorough research before making any investments.

Introduction

The crypto market in 2025 feels vastly different from 2021. Back then, a few dominant narratives like DeFi and NFTs, paired with abundant liquidity, drove strong market momentum. Today, the market is fragmented into countless smaller narratives. Every day brings new “hot tokens” and concepts, but liquidity is spread so thin that reflexivity—while still present—has lost much of its concentrated impact. Instead, it’s dispersed across numerous tokens and narratives, leading to a market that’s “wide but shallow.” Many assets see minor gains, but few sustain meaningful upward momentum.

This article explores how reflexivity functions in this fragmented landscape, why liquidity is now the cycle’s “invisible killer,” and how I’ve positioned myself in this phase of the market.

What Stage Are We In?

I believe we’re either at the edge of the bottom or have already hit it (though this might just be wishful thinking to justify my holdings). Most sectors have experienced sharp corrections this year, with AI and meme tokens suffering the hardest, dropping as much as 80%-90%.

If you’ve been chasing narratives or hunting for “the next big token,” you’ve likely felt the market’s fragmentation and thin liquidity. Since the start of this bull market (which I personally mark as January 2024, though others might point to November 2022 or January 2023 post-FTX), we’ve seen an explosion of narratives beyond BTC, ETH, and DeFi.

Animal Coins:

Animal-themed tokens, the original meta-narrative, remain active. Dogecoin and Catcoin alone have spawned countless subcategories.

Real-World Assets (RWA):

Popular with traditional finance (TradFi), this category is marketed as “fundamental” trading rather than speculative hype. Key projects: $ONDO, $PRCL, $CPOOL.

AI Tokens (Intelligent Agents):

Initially focused on projects like $RNDR and $AGIX, the AI narrative has shifted toward intelligent agents and their frameworks. Key projects: $VIRTUAL, $ARC, $AI16Z.

DeFAI (Decentralized AI):

A subcategory of AI focused on intelligent agents performing DeFi tasks. Key projects: $GRIFFAIN, $ANON.

Presidential Tokens:

Self-explanatory. Examples: $TRUMP, $MELANIA.

The Web2 Founder Narrative

If you’re active on Crypto Twitter (CT), you’ve probably come across this storyline: Web2 founders embarking on a “redemption arc” in the crypto world. Notable examples include projects like $VINE and $JELLY.

What’s currently grabbing attention is only the tip of the iceberg. You might have already forgotten that just a few months ago, we saw trends like “hat coins” (wifhats), celebrity coins, zoo-themed tokens, cute animal coins, “euthanasia animal coins,” quant coins, baby coins, senior coins, youth coins, TikTok coins, and more. These narratives keep popping up one after another, with no end in sight.

Taking a step back, we can examine a few key metrics to get a broader perspective: TOTAL3, BTC.D, and the stablecoin supply.

TOTAL3

TOTAL3 represents the total market cap of crypto (excluding BTC and ETH). It essentially measures the combined value of all altcoins, stablecoins, and meme coins. At present, this metric is nearing its peak from November 2021.

Bitcoin Dominance (BTC.D)

BTC.D tracks Bitcoin’s share of the overall crypto market capitalization. Currently, it’s steady at 58%, down from 61% in November 2024.

Between November 2024 and January 2025, the market experienced an “altcoin season” led by on-chain activity, particularly centered around AI and meme coin trends. During this time, BTC.D dropped, TOTAL3 climbed significantly, and the stablecoin supply also grew, now nearing $215 billion.

Reflexivity in Previous Market Cycles

George Soros describes reflexivity as a process where a positive feedback loop between market expectations and economic fundamentals causes prices to deviate significantly and persistently from their equilibrium levels. In simpler terms, it’s the idea that “prices shape narratives, rather than narratives shaping prices.”

The crypto market is an ideal breeding ground for reflexivity due to:

• Lack of clear valuation metrics: Prices rely entirely on speculation;
• Low liquidity: Limited market depth;
• The attention economy: Hype driven by influencers on platforms like Crypto Twitter (CT), TikTok, and Telegram groups.

In 2017, the ICO boom dominated; in 2020, it was all about DeFi yield farming; and in 2021, memecoins and NFTs took center stage. For instance, between January and May 2021, Dogecoin ($DOGE) skyrocketed by nearly 200x.

Dogecoin is a textbook example of reflexivity in the crypto market, showcasing how things have evolved over time. Despite having no intrinsic value or valuation framework, it became the trailblazer for what we now recognize as “memecoins.”

High-profile endorsements—most notably from Elon Musk—sparked a self-reinforcing cycle of hype and demand.

Back then, stablecoin liquidity was similar to today’s levels, but there were fewer investment options, leading to a “crowded theater” effect where capital and speculation concentrated heavily on Dogecoin. The novelty of the market, combined with retail-driven enthusiasm, pandemic-induced boredom, and stimulus checks, reduced skepticism and allowed meme culture to dominate.

What’s remarkable is that this frenzy was almost entirely driven by retail spot trading, not leveraged derivatives. At Dogecoin’s peak, open interest (OI) was just $60 million. In contrast, today, despite Dogecoin trading at half its peak price, its open interest has ballooned to over $1.5 billion.

Reflexivity in Today’s Market

The crypto market in 2024 has diverged from past patterns. Bitcoin remains resilient, while most altcoins struggle to capture attention.

The market seems plagued by “attention deficit hyperactivity disorder” (ADHD), with investors constantly shifting focus from one flashy new narrative to the next. As a result, no single trend has been able to sustain momentum.

While stablecoin liquidity today is comparable to 2021, reflexivity has been diluted and struggles to thrive amid the sheer number of competing narratives. These include AI, decentralized physical infrastructure (DePIN), real-world assets (RWAs), and countless memecoins. The weakening of reflexivity can be attributed to several factors:

• Fragmented capital: Funds are spread thin across hundreds of small-cap tokens, weakening the feedback loop that drives reflexivity.
• Leverage saturation: The growing use of perpetual contracts (perps) has made open interest (OI) a critical indicator.
• Heightened risk awareness: The market shocks of 2022 (e.g., the LUNA crash and FTX collapse) have left investors more wary of speculative “dumb money” plays.

Most new tokens or narratives end up following the same trajectory as Bitconnect—experiencing brief moments of hype before crashing just as quickly.

The traditional “altcoin season” has become increasingly elusive. The once-reliable trend of capital rotating from Bitcoin to altcoins has failed to materialize in this cycle.

As @intuitio noted, unlike previous cycles, Ethereum and other altcoins have significantly underperformed this time around… (and yes, Ethereum still hasn’t broken its all-time high).

The crypto market today is more defined by its breadth than depth. Many tokens see brief, minor price increases, but confidence in any single token is shallow and lacks staying power.

To understand how fragmented the market has become, take a look at the end of 2024: Bitcoin dominance climbed to levels not seen since early 2021. By January 2025, Bitcoin dominance hit 65%. This happened even as the total market capitalization of crypto continued to grow, which means that the performance of other tokens fell far behind.

While there are countless tokens with varying levels of activity, very few have managed to sustain momentum and outperform Bitcoin. In fact, throughout most of 2024, the Altcoin Season Index remained firmly in the “Bitcoin Season” zone.

The Rise of Attentionomics

In this market cycle, “attention” has become the most valuable asset. Traditional fundamentals and tokenomics have been overshadowed by memes, viral trends, and reflexive hype.

This phenomenon, known as “Attentionomics,” suggests that the value of many tokens is determined more by their ability to capture attention than by their underlying fundamentals.

In a market flooded with thousands of tokens, human attention has become the only truly scarce resource. Projects that manage to grab attention often see their prices soar.

As @redphonecrypto aptly put it:

“In the world of Attentionomics, a token’s ability to attract attention outweighs any other metric. The better it is at grabbing attention, the higher its potential upside. And this ability can be measured by some very real and observable factors.”

The Attention Flywheel

In today’s social media-driven crypto market, “Attentionomics” operates as a self-reinforcing “attention flywheel.” The cycle typically unfolds as follows:

A Viral Spark: A meme or event ignites curiosity and creates a new narrative, prompting someone to launch a token. For instance, “Ghiblification” is a notable example.

Early Hype: Early speculators rush in, causing the token’s price to surge. In the crypto world, price movement itself becomes content. Charts showing tenfold price increases in just hours start circulating on social media, drawing even more attention.

Price as Proof of Hype: The price spike is taken as evidence of the meme’s strength, attracting a second wave of buyers eager to join the next “moonshot.” Liquidity inflows push prices higher, and soon, copycat tokens (Beta tokens) appear.

The Feedback Loop: This cycle of attention → price → more attention can unfold incredibly quickly, sometimes completing within a single day of the meme’s creation.

Breaking Into the Mainstream: If the frenzy grows large enough, it spills beyond the crypto community. Media coverage, exchange listings, or celebrity endorsements amplify the hype, creating value through viral momentum.

This reflexive cycle turns attention into a form of potential energy. As crypto influencer Cobie observed:

“People in crypto always talk about scarcity—whether it’s NFTs creating digital scarcity or the idea that ‘there are 55 million millionaires but only 21 million Bitcoin.’ But in truth, the only scarce resource in crypto is attention. Risk-seeking capital is anything but scarce.”

Projects or tokens that “win the attention lottery” can see explosive growth in market cap—something rarely seen in traditional finance.

From Jokes to Wealth Generators: The Rise of Shitposts

Reflecting on the hottest tokens of 2024-2025, many were essentially “shitposts with a price feed”—jokes that turned into wealth codes.

For Example, $ROUTINE

$ROUTINE was created purely as a joke (and a way to make money) based on a trending topic. Ironically, this blatant “self-parody” didn’t scare off investors. Instead, it became part of its charm, fitting perfectly with the ironic humor that defines crypto culture.

That said, attention-driven projects tend to have short lifespans. To combat this, some of the most successful meme projects have started trying to add real utility or build infrastructure for their tokens.

But does this strategy actually work?

Take $Pepe as an example. The team proposed building a dedicated Pepe Chain and related products, leveraging its massive community. By creating a Pepe-themed Layer 2 (L2) network or decentralized exchange (DEX), $PEPE holders could gain more ways to use the token beyond just buying and selling. This approach aims to use Pepe’s strong “brand” recognition to attract real platform users.

However, for many meme projects, the so-called “utility” often feels like an excuse added after a price surge. While some meme-branded DEXs or merchandise stores exist, they rarely add significant long-term value to the token. At the end of the day, this “utility” is often just a thin cover for the community’s speculative tendencies.

In these cases, attention remains the primary driver, while the actual product takes a backseat.

The Musical Chairs of Capital

What happens when attention doesn’t stick around? Traders enter a never-ending game of rotation.

In crypto, capital constantly shifts from one sector to another or moves down the risk curve into “copycat” tokens (Betas). This has become a common strategy.

Since no single narrative consistently delivers 10x returns (especially for those who miss the initial wave), the best approach is to ride a series of smaller waves.

This phenomenon even inspired the meme “Euthanasia Coaster.”

We’ve seen this play out in real life: after traders made big profits on $ROUTINE, the gains quickly moved into related tokens like $SARATOGA (another meme coin from the same viral video).

This hot money rotation explains why we see strange market cycles, like one week where all dog-themed meme coins pump, the next week it’s AI-related tokens, and then suddenly old DeFi tokens get random inflows because someone says, “Hey, Yearn hasn’t pumped yet—it might be next.”

It’s a fast-paced reflexive game:

Spot a price increase,

Buy in,

Push the price higher,

Sell before the price drops.

Then repeat.

From Spot Trading to Leverage: A Major Shift

Since 2021, the crypto market has undergone a massive shift—the rise of leverage.

Back in 2021, the Dogecoin (DOGE) craze was fueled by spot trading. Millions of retail investors used their stimulus checks to buy DOGE directly on platforms like Robinhood and Coinbase.

Today, however, most of the market’s momentum comes from derivatives, especially perpetual contracts (Perps) and options. Many traders now use margin to place high-leverage bets on platforms like Binance and Bybit.

When open interest (OI) grows to massive levels, price movements can become extremely volatile.

For example, in November 2024, Bitcoin shot up from $75,000 to $90,000 in just two days, driven by multiple short squeezes. This kind of price surge is a textbook example of leverage-driven reflexivity:

Shorts get liquidated → forced buying → price rises → more shorts get liquidated → repeat.

However, this reflexive mechanism is a double-edged sword.

High leverage amplifies reflexivity but often leads to unhealthy and unsustainable price movements.

We’re now seeing price swings that are more frequent and extreme, far beyond what’s reasonable. These swings are often driven by leverage but eventually revert to the mean because they’re not supported by steady inflows of new capital.

The key takeaway is that while open interest can drive prices higher, it doesn’t necessarily mean new money is entering the market. Ultimately, this is more of a player-versus-player (PVP) game.

For example, between November and December 2024:

Total open interest (OI) increased by $70 billion,

Stablecoin supply only grew by $30 billion.

The OI levels in 2024 far surpass those of 2021, showing that today’s reflexivity is more mechanical than organic.

Back in 2021, when tokens surged, people bought and held with conviction. Now, when tokens surge, traders are more likely to say, “I’m long—don’t let me get rekt!” while keeping their fingers ready to sell at any moment.

Summary

The current crypto market is defined by a cycle of breadth over depth, with numerous narratives and tokens experiencing their own isolated mini-cycles of growth.

Perhaps we’re in a transitional phase, waiting for a deeper, more unified market cycle to emerge. Institutional developments—like ETF approvals and RWA (real-world asset) integration—could eventually spark a broader bull run, flooding the altcoin market (alts) with capital, unleashing the “dry powder” of stablecoins, reducing Bitcoin dominance (BTC.D), and triggering a classic “altseason.”

At the same time, the growing fragmentation of the market may already be the new normal, signaling the maturity of the crypto industry. The space has become so large and diverse that expecting everyone to FOMO into the same trade is no longer realistic. Gone are the days of 2017, when all tokens rose together. Today, thriving in this market demands selectivity, agility, and a healthy dose of skepticism.

No matter where the market goes, reflexivity will always play a role, though its form and intensity may vary. The real challenge—and opportunity—is identifying which feedback loops are fleeting hype and which have the potential to evolve into major trends.

Just when you think a narrative is over, it might make a surprise comeback.

Who would’ve guessed that “Trump meme coins” would become a trending topic? But they did.

And when you think an asset is “too big to fail,” it can still take an even harder fall (like ETH dropping further from $1,800).

As the market continues to evolve, I’ll hold onto the lessons learned from this cycle: stay flexible, know when to step back, and approach every narrative with skepticism.

It’s true that describing the market as “broad but shallow” might sound like a complaint, but it also reflects the reality of a market maturing in unexpected ways. In the next phase, we might see the return of market depth—or perhaps the space will fragment even further into smaller, niche echo chambers. Either way, opportunities will always exist for those who are prepared, while traps will be unavoidable for those who aren’t cautious.

Reflexivity hasn’t disappeared—it’s just become more intricate.

Stay safe, stay sharp, and when your meme coin turns into an apartment, don’t forget to protect your freedom. I’ll leave you with a timeless quote from @mgnr_io:

“In subjective trading, the best position is often no position at all.

Do nothing. There are five golden opportunities a year—free money lying on the ground.

Pick it up, and then go back to doing nothing.

That’s how you achieve outsized returns.”

Best wishes!

This article is for informational purposes only, based on current facts and sources, and should not be taken as professional advice. Always do your own research and consult qualified advisors before making any decisions. The author is not responsible for any consequences arising from the use of the information in this article.

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