The cryptocurrency industry, known for its rapid innovation and equally swift failures, is facing a critical challenge that threatens its long-term development: "sunk-cost-maxxing". This phenomenon, where projects relentlessly chase short-term gains and emerging narratives instead of focusing on sustained development, is hindering the creation of meaningful infrastructure and stifling genuine progress.
The term "sunk-cost-maxxing" is derived from the traditional business concept of the sunk cost fallacy, which advises against continuing to invest in a failing venture simply because of the resources already committed. Instead of cutting losses and pivoting strategically, many crypto projects are doubling down on this fallacy, desperately shifting focus to whatever is trending to attract new investors.
Rosie Sargsian, Head of Growth at Ten Protocol, highlighted this issue in a recent analysis, arguing that many crypto founders exhibit "paper hands," abandoning projects at the first sign of difficulty. This constant pivoting has led to a drastically shortened product cycle, now averaging just 18 months. During this period, a new narrative emerges, attracting funding and capital. However, interest soon wanes, and founders scramble for the next trend, making it nearly impossible to build anything substantial.
This frantic chase is exacerbated by the significant drop in crypto venture funding. With less time and money available, founders are under immense pressure to deliver quick results, often sacrificing long-term vision for short-term hype. Investors, too, play a role in this cycle, sometimes even forcing projects to align with current narratives to secure funding.
The consequences of "sunk-cost-maxxing" are far-reaching. Real infrastructure requires at least 3-5 years to develop, and achieving genuine product-market fit demands years of iteration. The constant pivoting prevents projects from maturing and delivering lasting value. Instead, the focus shifts to creating flashy tokens with little utility, propped up by influencers and short-term momentum.
Moreover, the high failure rate in the crypto space underscores the severity of this issue. A staggering number of crypto projects, including those backed by venture capital, cease operations entirely or fail to generate substantial revenue. This not only leads to financial losses for investors but also damages the overall reputation and credibility of the industry. As of March 31, 2025, 1.8 million cryptocurrency projects have failed in 2025, which accounts for 49.7% of all project closures between 2021 and 2025.
Despite these challenges, there are potential solutions. A shift in mindset is needed, one that prioritizes long-term development, robust tokenomics, and genuine utility over fleeting trends. Regulatory clarity, such as the passing of the GENIUS Act, can also foster stability and trust in the market. Furthermore, the rise of Real World Asset (RWA) tokenization and the integration of AI into crypto may offer new avenues for sustainable growth.
Ultimately, overcoming "sunk-cost-maxxing" requires a collective effort from founders, investors, and the broader crypto community. By focusing on building meaningful infrastructure, fostering innovation, and prioritizing long-term value creation, the crypto industry can move beyond short-term hype and realize its full potential.
