Why Your Utility Tokens Are Failing: 3 Reasons You’re Investing Wrong
Your portfolio is a graveyard of "great utility" that will never recover.
Stop buying tokens because they "do something." Doing something doesn't make a token valuable. It makes it a tool. Tools are meant to be used, used up, and replaced.
I spent the last three years analyzing 200+ whitepapers. I talked to the founders. I tracked the on-chain flows.
Here is the hard truth: 95% of utility tokens are designed to fail as investments. They are built for the product, not for your wallet.
If you’re holding a token because it’s a "medium of exchange" for a decentralized app, you aren’t an investor. You’re a customer who got tricked into holding the bill.
Here are the 3 reasons you’re investing wrong.
1. The Velocity Trap: Demand is not Value
Most investors think: "If more people use the app, the token price goes up."
This is the most expensive mistake in crypto. It’s a fundamental misunderstanding of Velocity.
Imagine a ticket for a train. You buy the ticket. You get on the train. You give the ticket to the conductor. The conductor throws it away or sells it back to the next guy.
The ticket is "useful." Thousands of people need it every day. But does the price of the ticket go to the moon? No. Because nobody wants to hold it. They want to spend it.
If a token is a "Medium of Exchange" for a service—like paying for file storage or compute power—users want to hold it for the shortest time possible. They buy it, spend it, and the service provider sells it to pay their bills.
The velocity is high. The "sink" is non-existent.
I saw this with dozens of "DePIN" and storage projects. The usage went up 400%. The token price dropped 60%. Why? Because the users treated the token like a hot potato.
High usage does not equal high price. If there is no reason to hold, there is no reason for the price to move.
2. The Governance Illusion
"Hold this token to vote on the future of the protocol."
It sounds democratic. It sounds powerful. It’s actually a scam.
I’ve participated in "Governance." Here is how it actually works: Three whales and the venture capital firms that funded the seed round hold 70% of the supply. They decide the outcome before the proposal is even posted.
Your "utility" is the right to click a button on a website that changes nothing.
Governance tokens are a legal loophole. Founders call them governance tokens so the SEC doesn't call them securities. It’s a "Get Out of Jail Free" card for the dev team, not a value-add for you.
When you buy a governance token with no revenue share, you are buying a stock that has no claim on earnings and no right to a dividend.
In the real world, we call that a donation.
If the token doesn't give you a direct cut of the protocol’s fees, the utility is imaginary. You are holding a decorative badge while the VCs use you as exit liquidity.
3. The Friction Problem
The best products make life easier. Most utility tokens make life harder.
Imagine if you went to Starbucks and they told you that you couldn't pay with Dollars. Instead, you had to go to a separate exchange, buy "StarbucksBucks," pay a gas fee to move them to a wallet, and then buy your latte.
You would never go back.
Forced utility is friction. If a project forces you to use their native token to access their service, they are limiting their own growth.
The best protocols are moving toward "Account Abstraction." They let you pay in USDC or ETH, and they handle the token mechanics in the background.
If the "utility" of a token is just being a mandatory middleman, it will eventually be programmed out of existence. Developers want users. Users want ease. Forced tokens are a barrier to both.
I’ve watched "Utility" tokens die the moment a competitor launched the same service using stablecoins. Convenience wins every time.
If the token doesn't have a "moat" beyond being a required currency for its own app, its value is headed to zero.
The Insight: The "Agentic" Shift
The market is changing, and most people are still playing the 2021 playbook.
The "Utility Token" era is over. The "Productive Asset" era is starting.
We are moving toward a world where tokens aren't "spent"—they are "staked" to provide a guarantee of service.
The winners won't be the tokens you buy to use a service. They will be the tokens you hold to guarantee a service.
The shift is from "Currency" to "Collateral."
Stop looking for the next "PayPal of Crypto." Start looking for the "Insurance Fund of AI."
The tokens that accrue value are those that create a "Supply-Side" crunch. If a token is required to be locked up for a node to run, and that node earns real yield in ETH or USDC, you have a winner.
If the token is just a "cool way to pay," get out. You’re holding a coupon, not an investment.
I stopped looking at what a token does. I started looking at why people can’t sell it.
That is the difference between a 100x and a 90% drawdown.
Are you holding a tool or an asset?