The encryption industry is experiencing a K-shaped split.

Author: Vaidik Mandloi; Translation: BitpushNews

There is a famous crypto KOL, known online as ThreadGuy. He rose to prominence in 2021 for teaching people how to trade NFTs.

Now, he sits in a New York apartment, with a barrel of US crude oil behind him, trading pharmaceutical stocks and commodities on Hyperliquid. A few weeks ago, he invited Cobie to join a live stream. Cobie has been one of the most veteran voices in crypto since 2012; he sold Echo to Coinbase for $375 million and now works there full-time.

When ThreadGuy asked him about the state of cryptocurrency, Cobie described a phenomenon called the “K-shaped” dynamic.

“There’s a strange K-shaped phenomenon happening in crypto,” he said, “Crypto seems to be achieving extraordinary success, more than ever before. But this success isn’t reflected at all in the prices of assets people can buy.”

That sentence has been stuck in my mind ever since. Because he’s right. Polymarket and Kalshi have become a duopoly in a $44 billion prediction market. Stablecoins are being used to pay gig workers. DoorDash now pays drivers through Tempo. Hyperliquid, on its own chain built from scratch, handles more trading volume than most centralized exchanges. Trade XYZ predicts that the stock market will open within 50 basis points on Monday.

Cryptocurrency was supposed to enable transferring funds without banks, creating markets without brokers, and allowing anyone, anywhere, at any time, to trade anything. By almost every measure critics have pointed out, it has achieved that.

And those who believed in it earliest, those holding tokens, have almost nothing to show for it. You can’t buy equity in Polymarket, you can’t buy Tempo. Circle is public, but half of USDC’s net profit margin—before shareholders see a penny—flows as distribution rights fees to Coinbase. Platforms are winners, but token holders always lose.

That’s the K-shaped theory. As I delved deeper, I realized this isn’t just a crypto problem.

Where does the value flow?

Let’s start with stablecoins, because they are the true “product-market fit” of crypto. It’s estimated that Tether will make $10 billion in 2025, with only about 100 employees. It’s one of the highest-profit companies per capita on Earth. Circle is now public, with a market cap of $23 billion as of April 28. Stablecoin supply has grown 100-fold over the past few years, from $6.8 billion in 2020 to over $20k today. The U.S. Treasury even predicts it will grow to $2 trillion by 2028.

This is real financial infrastructure being built on the crypto track. And for anyone holding tokens, the economic relationship with all this is zero. Tether’s profits flow to Tether’s shareholders. Circle’s earnings go to Circle’s equity holders and Coinbase (which takes 50% of USDC’s revenue just for putting USDC in front of users). DoorDash pays drivers through Tempo, with the value accumulating to DoorDash, Tempo, and the drivers—not anyone’s token portfolio.

Prediction markets tell the same story. Polymarket has evolved from a vertical crypto experiment into a regular feature on CNN. The Wall Street Journal now uses its data alongside editorial reports. Substack has integrated directly with Polymarket, allowing authors to embed real-time odds into articles, turning each newsletter into a live data terminal. The company behind the NYSE, ICE, invested $2 billion at an $8 billion valuation. Kalshi won a legal case against the CFTC and expanded into economics, sports, and science. By 2025, the combined trading volume of these two platforms will reach $44 billion, with monthly peaks of $10 billion.

None of this value flows to token holders. Early supporters of Polymarket—Founders Fund, General Catalyst, and Blockchain Capital—are sitting on huge paper gains. One of the biggest success stories in crypto, built on the crypto track, ultimately falls into a traditional equity structure, with all upside profits going to venture capitalists.

You might argue that Polymarket hasn’t issued tokens yet. That’s true; it might eventually. But even if it does, private investors have already valued it at $8 billion. The window for early users to capture meaningful gains closed long before most people even knew it existed. If it never issues tokens, the entire value of the prediction market revolution—the thing crypto has debated for years, that could change how the world processes information—will be captured entirely by traditional equity structures. Funded by VCs, exiting to institutions, with users having no on-chain ownership.

Even in DeFi, the pattern is the same. Crypto spent nearly a decade building the infrastructure for decentralized finance—from lending protocols, automated market makers, perpetual exchanges, to stablecoin tracks. Most of it was built transparently, with tokens, often during regulatory attempts to kill it. The builders took huge risks. In an era where a single smart contract bug could wipe everything out, liquidity providers and testers of these protocols also bore the risk.

And now, the technology has proven itself. It’s clear that stablecoins, on-chain trading, and tokenized assets are feasible. But the companies capturing the value aren’t those taking the risks.

They are traditional companies with equity structures, private funding rounds, and no obligation to share anything with the users or communities that made the technology possible. Stripe is building stablecoin payments. PayPal has launched its own stablecoin. Banks are tokenizing assets on private blockchains.

They’ve been sitting in the backseat, watching crypto build the infrastructure. Once it’s proven viable, they’re now rebuilding within “walled gardens,” channeling economic benefits to shareholders.

Returns are being privatized. Tokens should have been a mechanism to prevent this—allowing early participants to share in the value they helped create. Instead, the most successful projects either never issued tokens or issued them too late and at valuations so high that public holders are essentially “exit liquidity” for insiders, with entry prices just pennies.

The K-shaped capitalism problem

This isn’t a failure unique to crypto. It’s how wealth is created today, everywhere, and crypto has merely inherited the same disease it was supposed to cure.

SpaceX’s private valuation has grown from zero to about $1.75 trillion. OpenAI’s valuation is $852 billion. Anthropic’s valuation is around $800 billion. These three alone represent trillions in value creation. If you were an ordinary person in the 1970s or early 2000s, and believed Apple, Amazon, or Google would become important, you could buy their stock directly. You could participate in the wealth creation of the companies you believed in. That “seeing the future right” and “getting rewarded” was the social contract of capitalism. Now, that contract no longer exists.

These epoch-defining companies stay private at every stage of generating real returns. The only ones who get the chance are those already inside the circle: Silicon Valley networks, fund-of-funds, LPs writing $50 million checks to venture tools. When SpaceX or OpenAI finally go public, their prices will reflect a decade of private gains, with retail investors having no chance. The number of U.S. public companies has fallen 46% since 1997, from about 7,500 to 4,000.

Today, over 1,400 venture-backed unicorns are valued at $5 trillion, all still private. Companies used to go public to raise funds; now, they raise billions in private rounds from the same small circle of funds indefinitely. When they IPO, the price discovery has long been done in rooms where ordinary people are never allowed.

Data confirms this isn’t paranoia. From 1970 to 1990, IPOs had an average annual return of 5%, less than half the returns of similarly sized public companies. “Low float” IPOs like SpaceX and OpenAI have a 90% failure rate. Since 1980, 10 of 11 low-float IPOs underperformed the market by more than 50% within three years. So, the trade offered to ordinary investors is: when a company is worth $10 million and growing, you’re not allowed to invest; when it’s worth $1.5 trillion and insiders are seeking liquidity, you’re finally allowed in.

This is the so-called K-shaped economy, where profits circulate within closed circles and losses are socialized through overvalued IPOs, forced high-point purchases of index funds, and inflation and stagnant wages shared by everyone.

It’s also why talent is leaving crypto. Since early 2025, crypto code commits have dropped 75%, from 850k weekly to 210k. Active developers have fallen 56%, to around 4,600. Where did they go? To AI. GitHub now hosts 4.3 million AI-related repositories. The adoption of large language models (LLMs) has grown 178% in a year.

From a K-shaped perspective, this makes perfect sense. Every major wave of crypto adoption—2013’s altcoins, 2017’s ICOs, 2021’s DeFi and NFTs, meme coins—has one thing in common: ordinary people can make quick money. AI now has that energy. Someone like Peter Steinberger built OpenClaw alone, later selling it to OpenAI for billions. That’s the kind of energy crypto once had. If you’re a 22-year-old like me, deciding where to spend the next five years, the math is simple: crypto offers governance tokens valued at $16 billion at launch, then declines for two years; AI offers the chance to build an AI agent with three people, which could be worth a billion before your next birthday.

Talent is leaving because somewhere, crypto has stopped sharing the value it creates. The K-shaped dynamic pushes profits upward to VCs, equity holders, and insiders who were supposed to be replaced. Where have the decentralized, anonymous heroes gone?

Alright, enough! What’s the solution?

So, crypto has a problem. The technology is great, but those who believe in it can’t participate in the distribution of its gains. The privatization dynamic that’s eroding traditional markets has already infected this industry, which was designed to prevent it. Is there a way out?

Cobie believes there might be, and I agree. The answer is something only crypto can do—and others can’t: airdrops.

Airdrops directly distribute ownership to users worldwide, without middlemen, at the moment ownership is most valuable. That’s how airdrops should be. But in practice, most are a joke. Yet, one case proves it’s possible and worth understanding deeply.

I’m talking about Hyperliquid. Jeff Yan and his team built a perpetual contract exchange from scratch on their own L1 chain, running for over a year, with total trading volume exceeding $4 trillion. When it came time to distribute ownership, they allocated 70% of the total token supply to the community. None of this involved VCs, advisors, or exchange partnerships. The recipients were traders who used the platform, migrated funds, and conducted months of stress tests. 94k addresses received tokens in a $1.5 billion airdrop, with some overnight millionaires.

And the best part: they didn’t sell their tokens. Because those receiving HYPE weren’t “mercenaries” just there for the airdrop—they were Hyperliquid’s most loyal users. The most active traders, those who migrated the most funds, those who stayed because the product was better. They received ownership proportional to their contribution, and they held it. The team followed suit. After distributing about 20% of the planned tokens in the first two months (probably for taxes), they cut subsequent distributions to 1%. Today, 97% of Hyperliquid’s protocol revenue goes toward HYPE buybacks and burns.

Saurabh from DCo analyzed its valuation logic in detail. Hyperliquid, with about $3 trillion in trading volume in 2025, will earn $8B in revenue, but its P/S ratio is only 10-13x, compared to CME at 25x, ICE at 23x, and CBOE at 22x. It achieved nearly $1 billion in revenue in its first full year, with no debt, no redundant staff, and a buyback mechanism that returns almost all fees to token holders.

Hyperliquid proves it’s possible: distribute to users, not investors; let actual usage drive value; align incentives so that builders and users are on the same side of the trade. Of course, most airdrops aren’t Hyperliquid.

Most are carefully choreographed “performance art,” where people pretend to use products they don’t care about, just to dump tokens they plan to sell at unlock. The project teams know this, and users know the game. But everyone plays along because admitting that airdrops are just customer acquisition costs paid with inflated tokens doesn’t help VC fundraising plans. Because 90% of these tokens exist solely to provide exit liquidity for VCs, not to align incentives with users.

Cobie’s own data is revealing: Ethereum’s ICO allowed retail investors to buy at a $26 million valuation, capturing 7,500x returns. Projects like Berachain had seed valuations of $40 million, but their public listing prices peaked. Retail holders got trapped, while seed investors gained 138x.

The question is simple—and I believe it’s more important than most realize: Is Hyperliquid a replicable model or just an exception?

If it’s replicable, and more teams can build real products, skip the VC bloodsucking machine, and truly share ownership with users, then crypto has something unique. SpaceX can’t airdrop stock to its launch viewers, and OpenAI can’t give shares to everyone using ChatGPT. But crypto can. It has that mechanism. And it’s done it once successfully.

If it’s just an exception, if Hyperliquid was a one-off that aligned timing, opportunity, and team, then Cobie’s K-shaped theory wins. Token holders keep losing money, talented developers keep flowing to AI, and the only way to participate in crypto’s success becomes buying Coinbase or Circle stock. And that’s exactly the outcome crypto originally aimed to eliminate.