Addressing Crypto's Mid-Life Challenge: The Need for Structured Secondary Markets

Cryptocurrency has made great strides with launchpads and active spot markets. However, a significant gap exists in the mid-life phase of tokens, where a lack of structured secondary markets leaves billions in tokens locked and untradeable. This article discusses the necessity for a well-regulated mid-life market, similar to traditional finance structures, which would enhance liquidity and provide clearer valuation mechanisms.

Key Takeaways

The token lifecycle reveals a significant lack of structured, transparent secondary markets for mid-life tokens.
Current crypto markets often lead to inefficiencies, resulting in price discrepancies and confusion among retail investors.
Traditional finance models highpoint the importance of secondary markets that aid in liquidity and price accuracy.
Real-world assets in crypto, while promising, struggle due to the absence of reliable secondary liquidity.
A blockchain-based mid-life market can enhance access for retail investors and ensure fair pricing in token trading.

A Nasdaq Private Market style infrastructure, built for programmable assets, gives tokens a predictable mid-life, fairer markets, and real tokenization

The Gap in Crypto's Token Lifecycle

Cryptocurrency has developed excellent launchpads and some of the most liquid spot markets globally. New tokens can be created, listed, and traded swiftly. However, when the unlocking or vesting contracts are fulfilled, there remains a significant issue. Billions of vested and locked tokens are left in limbo, lacking structured and transparent venues for trading, pricing, or managing their circulation.

Reflecting on my experience trading in crypto since 2018 at one of Hong Kong's first Bitcoin exchanges, I observed how inefficiencies and a lack of transparency create opportunities for a select few while leaving others confused. We've seen individuals flying in from Korea with bags of cash to take advantage of the kimchi premium, illustrating how market disconnects and uneven information access lead to significant disparities.

This repeated imbalance manifests throughout a token's lifecycle. Opaque Over-the-Counter (OTC) transactions and off-chain price discovery thrive, resulting in price discrepancies, skewed retail expectations, and unsustainable token economies. Large holders engage in off-the-record negotiations, while private chats set prices, culminating in volatility spilling over into public markets. By the time public markets react, retail investors often face stark price differences.

Learning from Traditional Finance

Traditional finance has addressed similar issues for years. Public markets demand regulatory filings that outline fundraising terms and discounted allocations for insiders and institutions. Platforms like Nasdaq Private Markets serve to provide private companies with structured solutions for secondary trading and liquidity management before entering public markets. The conclusion remains clear: healthy markets require structured and transparent "mid-life markets" to maintain liquidity and accountability throughout a token's lifecycle.

Missing the Bridge in Crypto

In robust capital markets, primary and secondary markets function cohesively. Capital is raised in the primary market while layered, structured secondary markets offer the ability to recycle liquidity, refine price discovery, and widen distribution. This interconnectedness is what sustains systems over decades rather than across mere cycles.

In the crypto space, however, a significant bridge is missing. The market leapt directly from issuance to spot exchanges and perpetual contracts. In many trading venues, gaining an advantage comes at the expense of someone else’s loss in leveraged trades. While this approach suits speculative strategies, it does not foster sustainable ownership or long-term liquidity.

The consequences of lacking a mid-life layer are evident: public and private markets exhibit price gaps, grey zone trading complicates oversight and inconsistent valuations persist across platforms.

The Challenge of Real-World Assets

Real-World Assets (RWAs) have emerged as a highly debated topic in the crypto space. We increasingly see credit, private debt, treasuries, and other yield-producing instruments represented as tokens. RWAs align well with on-chain finance because they are portable, familiar to traditional finance, and linked to cash flows understood in the real world.

Nonetheless, reliable secondary liquidity for these assets remains limited. Holders lack controlled methods for exiting positions, and institutions don’t have standardized pricing frameworks they can trust across the board. Without a mid-life market, the promise of tokenization risks being reduced to a mere technical showcase rather than forming an essential financial infrastructure.

To entice RWAs into the spotlight, liquidity must circulate responsibly between issuance and redemption. This necessitates secondary markets capable of managing lockups, compliance, Know Your Customer (KYC) regulations, and distribution guidelines—all through programming, not spreadsheets and informal communication.

Designing a Functional Mid-Life Market for Crypto

A truly functional mid-life market for tokens will not simply replicate the bureaucratic structures of traditional finance on-chain. Instead, it should create an environment that mirrors the workings of programmable assets. Issuers should be kept informed about what is trading and the associated rules. Vesting and lock-up terms should be upheld by design. Pricing must be transparent, while compliance should leverage smart contracts instead of relying on paper processes.

Crucially, access must be equitable. Currently, the secondary market for locked tokens is predominantly controlled by institutions and professional trading teams, who have the necessary connections, risk management capabilities, and patience for large, long-term positions. Retail investors seldom see such favorable terms.

The objective should be to broaden this access without turning everyone into speculative traders, affording more individuals an opportunity to secure value-based positions if they are willing to be patient and buy at scale. In traditional markets, bulk purchasers who accept lock-ups and maintain long-term perspectives tend to enjoy better pricing. There’s no valid reason for crypto markets to function differently or for only a few funds to reap such benefits.

A well-constructed mid-life market would allow holders to purchase discounted locked tokens via transparent channels that involve the issuer, hold them throughout the agreed lock-up duration, and even relist them as conditions evolve. Each re-trade of those tokens would ensure value moves through on-chain contracts rather than disappearing into private communications or documentation.

Consequences of Ignoring mid-life Markets

If the crypto industry ignores this pressing need, OTC channels will persist as the default choice. Market volatility will continue to be amplified by information shocks rather than fundamental shifts, ensuring ongoing asymmetric access to information.

Furthermore, the adoption of RWAs will stagnate due to liquidity restrictions, as serious investors will be reluctant to engage with assets lacking reliable entry and exit options. This hesitance will keep institutions from broadening their exposure beyond a handful of blue-chip assets. Regulators may feel compelled to intervene with blunt instruments, resulting in a landscape where crypto mirrors the poorest aspects of traditional finance, such as opacity, insider advantage, and unequal access, without the protective measures that confer resilience to those markets.

Ultimately, every mature financial system incorporates a structured secondary layer. If crypto aspires to be recognized as a durable infrastructure rather than just a speculative playground, it must bridge the gap between issuance and exchange effectively.

Establishing a Nasdaq Private Market-like infrastructure tailored for programmable assets will provide tokens a reliable mid-life, fairer markets, and authentic tokenization. It can transform locked allocations into transparent and manageable inventories rather than hidden risks. This crucial layer will determine if Web3 liquidity becomes trusted, sustainable, and globally accessed—or if we remain trapped in the same inefficiencies that motivated us to enter the space in the first place.