From crypto dumping to US stock takeover: Seeing through the capital's universal cash-out tactics

Author: Tulip King

Compiled by: Saoirse, Foresight News

You may have already noticed that after inflating the valuation of private companies to tens of trillions of dollars, venture capital firms are finally ready to cash out and exit. But their only problem is finding enough liquidity for their exit.

Let’s clarify: I am not accusing San Francisco’s venture capital circle of illegal activities. What I criticize is that their actions are extremely immoral and have destroyed the social contract of capitalism.

The Original Agreement

The Baby Boomer generation is the last group to enjoy the benefits of the era.

The United States does not have a European-style high-welfare national system, and it originally didn’t need one. The social contract used to be: the stock market is America’s welfare system. Traditional fixed-income pensions phased out, replaced by personal contribution accounts; retirement systems were replaced by 401(k) plans; Social Security could only serve as a safety net, and no one relied solely on Social Security for retirement.

The implicit rule behind this is: every ordinary worker will become a shareholder, and the dividends from rising capital will benefit ordinary workers along with it. Even if wages stagnate and the wealth gap widens, it’s okay because everyone’s retirement account is growing compound interest in the background, and everyone is riding the same train of wealth, so the ultimate outcome shouldn’t be too bad.

This is also why the wealth gap in the U.S. can be politically tolerated. You can accept that your boss earns four hundred times your income, as long as your retirement account and your boss’s assets grow along the same curve. Passive index funds are the purest embodiment of this agreement. Cashiers, teachers, plumbers—all can enjoy the market returns generated by professional capital, sharing dividends peacefully. At that time, the capital market belonged to a public dividend pool for all.

But for this agreement to hold, certain conditions must be met: the open market must be the place where value is truly created; the dividends from wealth growth must be shared by the masses; every new capital growth must be included in index fund holdings. These conditions once lasted long, but now they have all failed.

This is everything they have stolen from you.

When companies remain private until their valuation reaches over ten trillion dollars before going public, the open market no longer creates value; it only realizes value. Everything happening in today’s stock market is just wealth distribution, not compound growth. The profits that should have gone to ordinary retirement funds during the company’s growth phase are now all pocketed by pre-IPO equity holders. After Figma went public, its valuation halved within weeks; Klarna’s valuation plummeted by 90%. And all of this was the designed outcome of this system.

The industry also realized that ordinary retail investors are excluded from the dividends, so they spun a narrative: democratize investment, broaden access, bridge the wealth gap, open private markets to retail investors. But the reality is quite the opposite: they are just enabling retail investors to buy into the low-priced chips accumulated by insiders when company valuations were only a thousandth of today’s. Private equity and venture capital products aimed at retail are not investment opportunities—they are just tools for insiders to distribute high-value chips. Even Naval’s own promotional logic confirms this.

(Note: Naval Ravikant is the leading advocate for democratizing private investments in Silicon Valley’s venture capital scene, and the author directly points out: his promotion of ordinary people’s private investments is a propaganda tool for VCs to exit high and harvest retail liquidity.)

The Carefully Designed Exit Strategy

Cryptocurrency circles have always been the first to master this harvesting tactic.

Early crypto project foundations held large amounts of locked native tokens, retail demand had long dried up, and token unlocks were imminent, yet no one was willing to buy.

So they came up with a plan: package these unloved locked tokens as compliant equity assets, allowing traditional financial institutions to buy them. Tokens that retail investors would never buy directly suddenly became stocks; institutional compliance allowed them to buy in, and retail investors could also participate through brokers. The chips were smoothly distributed, the SEC tacitly approved, the project team successfully cashed out, and the new holders became the targets of the harvest from the start.

By the way, Naval was an early entrant into crypto and well-versed in this approach.

Seeing this tactic work in San Francisco’s venture scene, they scaled it up to the trillion-dollar capital markets. Private products for retail investors became the first channel, and Nasdaq’s rule changes became the second.

Nasdaq’s new regulation plans: companies with very few freely tradable shares will have their index weight increased fivefold, with quarterly rebalancing. Take SpaceX as an example: when it went public, only 5% of its shares were tradable, with a total valuation of $1.75 trillion. Under the new rule, passive index funds are forced to buy this stock at a $438 billion scale, executed within 15 days of listing, without market value refinement. The company’s internal lock-up periods precisely align with the next index rebalancing; at that moment, the weight is maximized, and passive funds are compelled to buy large amounts, while insiders can legally cash out. SpaceX plans to go public mid-year, and with the index rebalancing at year’s end, the entire process fits perfectly.

Originally, index funds were a shield for retail investors against internal capital harvesting, but now they have become tools for capital to cash out. Your retirement savings are being quietly harvested by this mechanism.

The logic of the crypto and venture capital worlds is identical: insiders first hold low-cost positions in markets inaccessible to retail; assets appreciate; the buying power in the primary market cannot support high-level exits; then they create new packaging to connect another pool of funds—namely, pension funds and passive index funds that buy blindly based on rules, disregarding price. Internal capital exits smoothly, while new retail investors take on high-level chips. The entire process is fully legal because the packaging itself is compliant; regulators are effectively absent because this institutionalized harvesting is not considered illegal within the rules.

The Final Consequences

Many current chaos stem from this: Sam Altman facing public criticism, autonomous vehicles being maliciously vandalized, data centers facing protests. Ordinary people initiating resistance don’t understand the theory of liquidity exit, but they feel it firsthand: society is divided into two classes—early entrants and late absorbers—and the widening gap is far faster than what personal effort, talent, or opportunity can bridge.

Elites in the tech sector prove with reality: ordinary people’s public capital is being continuously harvested to generate excess wealth for the already advantaged groups.

The K-shaped wealth polarization will become more extreme. It won’t be a normal market correction, because a market correction presupposes participants still believe the current rules are fair.

Today’s protests and conflicts are fundamentally evolving into social and political contradictions.