Liquid Founder Yi Lihua: The Collapse of Primary Narrative
Liquid Capital founder Yi Lihua stated that there are four reasons for the decline of the crypto primary market. First, the narrative is no longer being accepted. The path of white papers, institutional endorsements, and total locked volume is largely unrecognized by the market.
Second, there is a supply imbalance. There are already tens of thousands of projects in the market, making it extremely difficult for quality projects to stand out. Third, the 1+3 unlocking mechanism is targeted at venture capital: project parties, market makers, and exchanges can exit first, leaving venture capital locked in the longest. Fourth, the cost of listing tokens is high. The average cost for several leading centralized exchanges to list a token is in the millions of dollars, forcing primary projects to pursue high valuations and large financing amounts.
He believes industry leaders should return to genuine construction. Binance's token listing selection method needs to change; under the current model, even Vitalik Buterin's Ethereum would not have been listed on Binance. Additionally, the 1+3 unlocking mechanism should be completely abolished. Venture capital bears the greatest risk in the primary market but is subjected to the worst unlocking terms, while the success or failure of projects is not determined by venture capital.
The third requirement is for projects to return to real revenue and buybacks. He contrasted this with the years of prosperity in the U.S. stock market, where the core is performance growth and returning benefits to shareholders. Industry leaders should enable secondary investors to find quality projects based on this standard, rather than continuing to pay for narratives and locked price differences.
This aligns with his public statement in March. At that time, he had already requested Changpeng Zhao to provide better exit mechanisms for crypto venture capital, stating that the original intention of the 1+3 lock-up was to cultivate long-term holding, but the result was that teams, market makers, and exchanges exited first, while venture capital was consumed during the long unlocking period, making it harder for quality entrepreneurs to raise funds.
This is a dispute over rules driven by holders, not a new financing event. Buyers are projects and market makers still wanting liquidity on exchanges, while sellers are primary funds locked in the 1+3 terms. Funds flow from venture capital accounts to exchange listing fees, market-making arrangements, and early unlocks for teams. The beneficiaries are the leading exchanges that control the listing entry, while crypto venture capital that cannot exit after token listings and secondary investors who buy overvalued, low-circulation tokens are under pressure.
Source: Public Information
ABAB AI Insight
Yi Lihua has been involved in early crypto funds since around 2016 with LD Capital, later renamed Liquid Capital, focusing on the Ethereum ecosystem, infrastructure, and decentralized finance, publicly claiming to have invested in over 250 projects. On the secondary side, through the associated Trend Research, he leveraged Ethereum to accumulate approximately 793,000 coins at an average price of about $3,267, later selling most at around $2,326 and repaying debts, resulting in a paper loss of about $747 million. In March, he had separately requested Changpeng Zhao to ease venture capital exit mechanisms, and this time he upgraded the same clause into a comprehensive explanation of the primary market's failure.
The path of money is not from new fund contributions but from the exit sequence of existing chips. Projects inflate their valuations to cover the millions of dollars required for listing on leading exchanges, then hand over low-circulation tokens to the secondary market. The 1+3 mechanism locks venture capital into a three-year linear release after a cliff period, while teams, market makers, and exchanges retain earlier liquidity. Venture capital cannot convert paper projects into reinvestable funds, losing investors for the next seed round. The resource mobilization he seeks is to change Binance's selection and abolish this clause, allowing primary capital to circulate again, rather than buying a listing spot from exchanges.
The contrast is the contraction of crypto venture capital after 2022 and the 180-day lock-up period in the U.S. stock market. Multicoin, Paradigm, and a16z crypto significantly reduced their fund sizes after revaluing net worth based on token prices in the last round, shifting fundraising from narratives to revenue. In the U.S. stock market, underwriters typically have a six-month lock-up period, and companies use buybacks and profits to keep shareholders within the same financial statements. The crypto primary market is now at a control stage after expansion: the entry point is not with entrepreneurs but with the listing committees and market-making terms of a few exchanges.
This represents a transfer of pricing power. Token prices are no longer determined by white papers or total locked volume, but by who can list on leading exchanges and who can unlock first. The mechanism is that the circulating supply is artificially reduced, listing fees are capitalized into valuations, and venture capital's risk capital is locked into non-tradable inventory. Secondary buyers are purchasing the exit sequence, not operating cash flow. Only when revenue and buybacks enter pricing will the valuation anchor shift from exchange schedules back to performance verifiable by shareholders.
ABAB News · Cognitive Law
- Narratives are responsible for fundraising, terms are responsible for distribution.
- The first to unlock sets the price, the last to unlock takes over.
- Listing fees inflate valuations, not quality.