Bull and Bear Dilemma: Who is really making money in this market?

As the counterfeit reached an all-time high on December 9 last year, the market entered a chaotic phase, with AI agents soaring and presidents issuing tokens, crazily draining resources. Ultimately, today the crypto market has returned to the starting point before the November trend, prompting newly entered Gen Z players to ask: Did the bull market end just as it began?

It is still too early to conclude whether a bear market has arrived, but the general sentiment is that making money is no longer as easy as it once was. At the recent Hong Kong Consensus Conference, a strange phenomenon emerged where everyone became an agency. Remember the Web3 conference two years ago, where VC managers chased after projects, and good founders had no trouble securing funding, with VCs boasting a DPI of over 5?

Essentially, both VCs and agencies are intermediaries, profiting from information arbitrage. VCs' backers are LPs, seeking to invest in promising early-stage projects at low valuations and aiming for exits in the future; agencies' backers are projects, looking for KOLs and communities that can bring buying power to dump tokens at prices far exceeding VC costs to retail investors. Practitioners have shifted from the upstream of the funding chain to the downstream, indicating that the industry is facing a funding shortage. Why is that?

This round of VC tokens has been criticized for their "high FDV, low circulation" characteristics, leading retail investors to stop buying and turn to meme coins instead. As a result, project teams have been unable to stabilize token prices after TGE, leading to a continuous decline until reaching zero, with even top-tier projects like Starknet and Arbitrum unable to avoid this fate. Moreover, VCs, due to the need for long-term lock-ups, may find that by the time their tokens are unlocked, the prices have fallen below their cost, resulting in losses. Consequently, some VCs may sell their locked tokens at discounted prices OTC to other buyers or directly short the continuously declining tokens.

For project teams, i.e., VC tokens, they need to pay substantial listing fees and token chips to exchanges when listing, leaving them with insufficient funds to absorb selling pressure from yield farmers and exchanges, causing token prices to peak right at launch. Given that GIG DAO has collaborated with many project teams, we have deeply felt the helplessness of founders in this round: token prices are unrelated to products; doing business is less effective than market-making.

So, since neither VCs nor project teams are making money, and retail investors are also the ones buying in, what are the few ecological niches currently making money?

• Exchanges: Although everyone criticizes Binance for being unambitious and listing a bunch of junk coins, it cannot be denied that since the fall of FTX, Binance's position as the industry leader has been unshakeable. They pay fines of billions of dollars without hesitation, and established coins listed on Binance often see a significant price surge.

Recently hacked Bybit has also successfully entered the ranks of top exchanges. Since its founder Ben comes from a quantitative trading background, Bybit's contract experience is considered one of the best among major exchanges. Additionally, due to its early internationalization strategy, the proportion of Chinese users is not high, giving it a differentiated advantage over OKX. It is well-known that contracts are the main source of revenue for exchanges, and the recent theft of $1.5 billion is roughly equivalent to Bybit's profit last year (note: not revenue), highlighting how profitable it is.

• Hackers: In the past few days, Bybit set a record for the largest amount stolen, followed by Infini losing $50 million, demonstrating that hackers are an indispensable constant in every cycle. Besides projects and institutions being hacked, retail investors often lose their hard-earned money due to phishing and private key leaks.

Thus, the security company sector has emerged, including audit firms (serving project teams by auditing contracts before launch), anti-money laundering companies (serving institutions to prevent tainted funds), and security tools (serving retail investors to prevent phishing).

• Service Providers: Their main profit models are acting as intermediaries to earn price differences or providing specialized services. Here we can further categorize the main participants as follows:

• FA: Capital intermediaries, including those who help project teams with financing, listings, and OTC token sales. This demand is generally present in VC tokens, and many top-tier projects we see are packaged this way.

• Agency: Marketing intermediaries that provide KOL and community placements for project teams. As a retail investor, when you see various KOLs fervently promoting a project over a period, you should realize that this might be a paid promotion by the project team.

• Studios: While project teams seek KOL marketing, they also need to find guilds and studios with a broad base in Asia, Africa, and Latin America to "beautify" the data, which is also the current positioning of GIG DAO.

• Media: Possessing authority and extensive dissemination channels (such as apps, communities, etc.), this round primarily profits through submission fees. Some media outlets maintain integrity and will not publish projects with obvious scam attributes, even if paid.

• Custodians/Asset Management Institutions: Mainly serve high-net-worth clients or funds, focusing on compliance and security. However, the threshold for obtaining licenses is high, making it inaccessible for ordinary entrepreneurs.

• Market Makers: Also considered a type of service provider, but due to their unique industry position, they need to be discussed separately. Currently, market makers are divided into compliant market makers and so-called "whales."

• Compliant Market Makers: Well-known market makers like Wintermute, Amber, GSR, and even DWF, known for pumping, are relatively legitimate and often hold offline events to build their brand. They generally engage in passive market making, primarily enhancing trading volume. If they do pump, they won't admit it, as seen when Gotbit was caught by the FBI for their reckless actions.

• Whales: These teams are generally small, have little to no social media following, or may not exist at all. Such teams typically engage in active market making, using leverage to manipulate prices and coordinating with communities to sell off. Many anonymous meme coins in this round have adopted this operational strategy, aka conspiracy groups.

That's all for today. As a community with the slogan "Work to Earn," GIG DAO advises young newcomers: the crypto space is perilous, and earning money through work is never a bad choice. We hope the few niches identified as still profitable can serve as a reference for your job search.

This is the first article from GIG DAO in the Chain Catcher column. In the future, we will continue to provide valuable content from the perspective of industry practitioners. We welcome everyone to follow and share; your support is our greatest motivation for creation!