原文作者:Regan Bozman
Original source: X
编译:深潮TechFlow
The current token issuance structure has contributed to a "fall, not rise" model in which the price of the token will be hit hard.
Tokens are issued with high FDV, slowly drain as airdrop recipients sell, and then collapse as VCs are unlocked.
Some ideas on how to break the current pattern
Mike Zajko always describes the worst-case scenario of a team's token trajectory as an ICP chart, and if your token price looks like this, you're in trouble in the long run.
Reflexivity can be a beautiful thing for the protocol, and price increases can help catalyze a true community/developer ecosystem
But the reverse is also true, and it can be very cruel.
Before I go any further, let's quickly define a few things, there are two main indicators of token supply:
- Circulating Supply: Tokens in circulation
- Fully Diluted Supply: The maximum number of tokens
The circulating supply increases over time until it equals a fully diluted supply
For example, if team tokens are locked at TGE (Token Generation Event), they will be added to the circulating supply when they begin vesting in the 12th month. They are always part of a fully diluted supply.
Market Cap = Circulating Token Supply * Price, Fully Diluted Valuation (FDV) = Fully Diluted Supply * Price.
Market capitalization is a measure of demand, while FDV is only a measure of supply.
Market capitalization is the total value of public demand, which rises and falls as prices change, and is a reliable indicator assuming good liquidity.
FDV increases with market capitalization, as both metrics are based on the current market token price, however, an increase in market capitalization does not imply additional demand for these locked tokens.
Holders of locked tokens may actually be happy to sell at a much lower price, and as a result, FDV may not be a very accurate measure of the true value of the network.
There is a claim that in fact FDV (fully diluted valuation) is a meme because some tokens are trading FDV like crazy (e.g. Worldcoin has an FDV of $50 billion)
This may make sense for retail investors, as if you trade frequently in these assets, FDV may not be as important unless you are hedged at unlock.
But FDV is absolutely important to VCs because they are the ones who hold the locked tokens! Currently, the vast majority of funding agreements from VCs have a one-year lock-up period that then expires in the next 18-36 months.
VCs should value assets at the expected FDV in 3-4 years as this is a true reflection of what they can return to LPs, but unfortunately that's not how this market works.
So what is this current paradigm I'm talking about now?
- Tokens are issued with a high FDV (fully diluted valuation).
- There is no public token sale
- Massive airdrops
Dymension is an example of this, with a whopping $8 billion in FDV at launch, 16% in circulation, no public sale, and a 9-figure airdrop in value.
Why is this happening?
I think once the airdrop paradigm starts, it's a way to boost the dollar value of the airdrop without adding more tokens.
And it boosts the self-esteem of the team and venture capitalists.
Yes, VCs and teams can sell locked tokens, but I'm not sure how much demand for locked tokens is, so I'm not sure how common this is.
But that's not always how these projects are launched! Most of today's dominant L1 (Layer 1 blockchains)
- At the time of issuance, it was less than $1 billion in FDV
- The unlocking methods are generally similar, but the vesting period is usually shorter
- Retail investors can buy at a relatively low price (
- There are no airdrops
In the case of NEAR, the circulating volume is 20% at launch, but the community sale starts unlocking immediately, 50% is circulating within 1 year, and the FDV at launch is $5-$800 million.
About 20% of the SOL was in circulation at first, but about 75% was in circulation a year later. The initial FDV is between $300 million and $500 million
You can buy $SOL for less than $5 for many, many months.
$LINK Issued in the hundreds of millions of FDVs, which are typically below $1 billion in the first 18 months of trading.
These tokens all have strong communities and a solid base of token holders, and their costs are relatively low. What are these legendary crypto communities that we always talk about?
IMHO: community means making money with your netizens. In the cryptocurrency space, there are very few strong communities that don't make money.
Thinking back to the ICP chart, do you really think that there is a strong ICP community?
What happens next?
The price of the token will only increase if there are more buyers than sellers.
So who are the buyers in today's market? Definitely not institutional investors!
Yes, there are some liquidity funds, and there are also some crypto venture capital funds that buy tokens, but there really isn't much capital flowing into the liquid market
Putting aside ETH/BTC, its absolute maximum annual inflow is $10 billion to $15 billion.
This week alone we've seen the issuance of three tokens with a total supply of over $5 billion, and there's no chance that there will be enough institutional bids to eat up the supply in the market.
Ultimately, the end buyers of all these tokens are retail investors.
The problem is that retail investors have extremely limited interest in high-valuation, low-float tokens. There are two problems:
- First of all, these tokens are expensive. No one will feel that it is cost-effective to buy something with a ten-figure FDV
- Second, with these mega airdrops, retail investors can get tokens for free! So why would they want to buy more?
The most anticipated token launch of the year
EigenLayer may be issued for more than $10 billion in FDV. I'm willing to bet that at least most ETH holders with some level of knowledge are already farming Eigenlayer
More than 3% of ETH has been deposited, and an ecosystem of over $5 billion has formed around the airdrop narrative.
Logically, if you want an airdrop from Eigenlayer, you most likely already own ETH.
If you have ETH, you're most likely using it right now to earn Eigen tokens! So a large percentage of potential buyers will get tokens for free
Of course, people can go and buy more, obviously there will be some non-zero purchases, but I'm skeptical that it's a huge market
I personally have a fair share of ETH on various LRTs or Eigens and hope to get a decent airdrop.
If it was $20 billion in FDV, would I buy more?
So what's the other buyer's market?
Retail investors want to get their hands on Eigenlayer, but are unable to buy tokens for various reasons. Obviously, the number of buyers is not zero, but I don't believe there is a large number of retail investors who want to buy $EIGEN for $25 billion in FDV.
Well, we've established that the buyer's audience is limited.
What about the seller?
If your FDV is high enough, the VC will obviously sell!
If you've gone from $100 million seed to $20 billion in FDV, it makes perfect sense to take the money off the table!
Retail investors are aware of this dynamic and are tracking it!
I haven't seen a lot of data on the percentage of sales in this round of airdrops, but there's a clear psychological notion that you value what you get for free less than what you buy.
Most airdrops are also based on the notional value of the assets you deposit/pledge, so they don't have a large percentage of your portfolio, for example, if you deposit 1 ETH in Eigen, you may get 0.05-0.01 ETH worth of points, so it doesn't mean much to most people who masturbate airdrops.
So that's why we're in a down-only paradigm, and I'm not trying to find fault with these projects. I don't know what they're doing, I think they're all well-intentioned, Eigen is a novel product.
How do you get out of this pattern?
I think there are three ways to get out of the current pattern:
- Linear unlocking
- Public Token Sale
- Create something cool
6MV has done some great research and generally found that smaller unlock events have less impact on the price than larger ones.
I think the right direction should be something like 20-25% of the tokens in circulation at TGE, with a linear 36-month vesting approach.
In addition, a public token sale should be employed. Getting retail investors to buy your project on a large scale, Near's token sale demand was so great that it crashed the CoinList website twice.
Obviously, there was a lot of demand before TGE! Allowing the community to accumulate $5-25K in tokens outside of the airdrop will buy more loyalty.
Finally, it's about creating cool things. The projects that perform better this cycle tend to be super novel, such as Ethena or Jito. Not sure if this applies to the rest of the cycle, but intuitively, it might look like this.
Perhaps retail investors are tired of being pushed to the tenth parallel DA (Data Availability) modular solution.
Venture capitalists can complain about the Meme coin causing them trouble, but if they think that the market structure of the previous cycle will last forever, then in reality the problem lies with themselves.
I remain highly bullish and we are actively deploying. This is not a macro view of the market.
This is a caveat, buying up to the current token offering structure will obviously not set you up for long-term success.
I've been bringing these protocols to market for the past decade and have seen dozens of times which ones work and which don't.
Stop listening to bad advice from VCs, advisors, or anyone who are trying to tell you that it's wise to buy at the highest FDV.