Crypto Tokens Face Collapse: Why Regulation Could Be Their Crucial Lifeline

• Crypto tokens losing 90% or more of their value due to insider dominance.
• New regulation and Real-World Assets (RWAs) reshaping token markets.

The current state of the cryptocurrency token market is disadvantaging retail investors through insider dominance, poor tokenomics, and inadequate investor protections. As of August 3, 2025, regulation and tokenized real-world assets may offer the lifeline needed to recover, according to Daniel Taylor, head of policy at Zumo, in Cointelegraph. Taylor identified foundational flaws as barriers to a fair and transparent market environment.

Insider dominance distorts token allocations. Project teams and private investors often reserve a majority of tokens for themselves. This practice leaves retail participants with limited access to the supply. As a result, tokens experience volatile post-launch performance and frequently lose 90% or more of their value.

Another critical issue is that ordinary investors misunderstand utility and governance tokens, often treating them as passive investments. However, these tokens derive their value from active participation in their underlying platforms, such as staking or liquidity provision. Project teams have not clearly communicated this requirement to users.

The lack of regulated access to tokenized real-world assets (RWAs), such as equities and bonds, also contributes to the crypto token market’s narrow focus. Consequently, retail investors currently have limited diversification options beyond volatile crypto-native tokens.

Despite these challenges, Taylor said evolving regulatory frameworks are driving promising reforms. He pointed to the European Union (EU)’s Markets in Crypto-Assets (MiCA) regulation as an example. He explained that its clear guidelines foster transparency in token offerings, encourage public access, and safeguard investor interests.

Upcoming laws will also likely improve token design structures. These laws will require detailed disclosures to prevent flawed tokenomics from reaching the market. This approach aims to ensure tokens deliver tangible value to investors, a shift that enhances market credibility.

Meanwhile, the tokenization of real-world assets is another promising development. Traditional financial institutions and government initiatives support this trend. Such efforts could expand the range of tokens available to investors, reducing the dominance of speculative cryptocurrencies and creating more balanced portfolios.

As of August 3, 2025, 16:19 UTC, Bitcoin (BTC) is trading at $29,152, down 0.45% in the last 24 hours, according to CoinMarketCap.