Institutional money is flooding into a market of fake users
The post Institutional money is flooding into a market of fake users appeared on BitcoinEthereumNews.com.
Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial. Institutional investors poured around $50 billion into crypto ETFs this year. Fortune 500 blockchain adoption hit 60%. Major exchanges like Coinbase reported record revenue. The narrative is clear: crypto has finally achieved mainstream legitimacy. Summary Web3 growth is inflated: Up to 70% of reported users and marketing spend are bots or Sybil wallets, not real humans. The economics are broken: True user acquisition costs are 2–5× higher than reported, and most airdrops reward fake or extractive actors. Verification is now essential: Web3’s next winners will be projects that prove real human usage, not those optimizing vanity metrics. But there’s a number missing from that story: one that should terrify everyone betting on web3’s growth. Only 30% of web3 marketing budgets actually reach real humans. The remaining 70% evaporates into bot farms, Sybil networks, and automated arbitrage schemes. And here’s what makes it worse: 65% of users who sign up never become real users at all. They’re wallet downloads, automated transactions, and fake engagement — the digital equivalent of paying for a concert where 70% of the audience is cardboard cutouts. Institutional investors aren’t just betting on blockchain technology anymore. They’re betting on user metrics that don’t exist. The crisis nobody wants to discuss When Web3Quest analyzed verification data across major crypto projects in 2025, we discovered something that contradicts every bullish narrative in the industry. The verification gap is catastrophic: User acquisition stage Total users recorded Verified real users Fake/bot users Initial signup 100% 35% 65% Wallet connected 70% 28% 58% First transaction 42% 22% 48% 7-day active 20% 15% 25% 30-day retained 8% 7% 12.5% What this means: A project that reports one million users has…
