Original article by @BlazingKevin_ , the Researcher at BlockBooster
CEX is facing a consensus shift in users’ confidence after new coins are listed. Although one or two projects can rise against the trend, most projects cannot escape the gravity of the unilateral downward trend. Once this consensus continues to strengthen and gradually shifts from two or three months to a collective consensus of a complete bull-bear cycle, CEX’s user retention rate and user growth rate may be severely hit.
The core contradiction is the difference in pricing between users and project owners. Project owners need to recover the initial costs from retail investors. At the same time, due to the large proportion of VC lock-in, high FDV has become a standard when it goes online. The combination of the two will inevitably lead to TGE prices exceeding retail investors psychological expectations.
The strategy of high FDV and low MC was acceptable in the previous bull-bear cycle, because the consensus of Buy and Hold would eventually reward diamond hands. However, this consensus began to weaken after BTC passed the ETF, and was completely destroyed by the Memecoin craze in the past year. BTC is deeply bound to the US stock market and has become a reservoir of US dollar assets, taking the lead in decoupling from the four-year cycle; the three axes of Zoo, Agent and Celebrity Coin made Memecoin ascend to the altar and then fall at the speed of light, and retail investors can no longer adapt to the market-making cycle of VC coins. The market has obviously undergone earth-shaking changes, but VC coins are still sitting on the death train of inertial situation without knowing it. The death spiral is caused by the following three points:
Due to the large amount of VC and team shares locked up, only a small share can be circulated in the early stage. The excessively high FDV makes retail investors who are accustomed to the Memecoin valuation method extremely uncomfortable.
The project team is still unwilling to let go of this small portion of the circulating supply, and secretly recovers a large number of chips through airdrops and ecological incentives. Retail investors’ profit experience in airdrops is very bad, which makes the community atmosphere before the coin issuance depressed and pessimistic.
Its own shares are locked, so it can only recover the early costs by dumping the chips in the small share of circulation. Therefore, it can only ignore the market sentiment and choose to open high.
The essence of the death spiral is the lack of long-termism and the complete collapse of the consensus of Buy and Hold on altcoins. Once the price falls below the key support level, it will be like mercury pouring out of the ground. When a new coin is launched, there is no support level. The disguised psychological support level is the valuation and pricing expectations of the project. For a project with an expected value of only 10M, the result of pricing after 1B is that the funding fee will reach -2% after the opening. There will be no miracle before the expectation is met. And the poor price performance will not stop even after the price falls to 10M. Such projects are increasing. Even if there are some exceptions in the middle due to reflexivity, the winning rate of shorting VC coins at the opening may still be far more than 50%. When long-termism disappears, and the prosperity brought by the prevalence of short-termism is also made a mess by interest groups that lack supervision, when the bubble bursts, people can only leave and the tea is cold.
Compared with other industries, Crypto is still in its early stages, but practitioners are already pessimistic like the twilight of the gods, because short-termism will not bring faith and value, but will accelerate the overdraft of industry vitality. Therefore, from now on, we need to return to long-termism.
Myshell encounters resistance as it returns to long-termism in pricing strategy
Back to the point at the beginning of the article, when VC coins suffered setbacks, CEX was the most hurt. Binance took the lead in saving itself and conducted some experiments on Myshell. Whether good or bad, this is a signal that the leading exchange has chosen to change. This experiment maintained a good momentum before February 27, but took a sharp turn after Binance listed the coin. The following is a review of the key time points and corresponding market sentiment from the airdrop snapshot on February 12 to the Binance listing on February 27.
Two reversals of market sentiment
Myshells market sentiment went through three stages before Binance Listing, namely airdrop, IDO and Binance Listing. During these three stages, the sentiment of retail investors changed dramatically. First, after the airdrop snapshot was issued, retail investors believed that the airdrop ratio was too low and the number of airdropped tokens was too small. A huge proportion of 30% was allocated to community incentives, but the total number of airdrop addresses and the proportion allocated to users or ecological projects were not clearly stated, which left a lot of room for maneuver. At this time, the market had a negative attitude towards Myshell.
However, during the IDO phase, Myshell reversed the market sentiment. We believe that pricing divergence is the core contradiction between retail investors and project owners. Myshell allocated 4% of the total supply to IDO to benefit Binance wallet users. The low price of only 20 million FDV naturally obtained more than 100 times of oversubscription. Retail investor Fuds sentiment is weakening, but due to the current cycles consensus shift on project airdrops - distrust, many retail investors are still bearish, so the vast majority of airdrop addresses chose to sell at TGE. From the increase in the number of on-chain currency holding addresses, it can be seen that more than 50% of the airdrop addresses chose to sell at the first time.
On the day of TGE, according to the $SHELL pool data on dexscreener BSC, the price reached a maximum of $1.64 in the first hour after TGE on the 13th, with a trading volume of $3.2 million and a circulating market value of $420 million; the highest price fell back to $0.9 in the second hour, with a trading volume of $17 million and a circulating market value of $240 million. The closing price on the 13th was $0.37, with a circulating market value of $100 million.
From the 13th to the 27th, the price was maintained between $0.36 and $0.6, corresponding to a market value of 100 million to 160 million. During this period, $SHELL was supported at a low point and showed a shrinking upward trend. The chips sold by the airdrop address were absorbed by the top holding address, and the concentration of chips further increased.
Expectations are too high and concentrated, leading to insider trading
Before Myshell was listed on Binance, the market had good reviews and the market sentiment of the project was positive. At the same time, the TGE chain opened low, and the Binance contract followed suit. These two chain operations must have washed out a large number of unsteady profit-taking orders, and market makers recovered a large number of airdropped chips. The low price before listing on Binance and the chips were not scattered, which itself had the conditions for pulling the market up. However, if you add Myshell is the new AI leader of BSC, Binance investment, and secondary listing expectations, the low opening on the chain becomes the biggest weakness. The rat warehouses that swarmed in after TGE became the most determined holders before listing, which laid the groundwork for the unilateral market after the listing. The joint dumping of rat warehouses and market makers completely destroyed Myshells efforts in IDO profit sharing.
This is the pain that Myshell and more VC coins will face when their value returns, when they practice long-termism, and when they let the roadmap and products support the market value. The rat warehouses that have existed since the birth of Crypto have become unscrupulous after being nourished by short-termism. When a project has strong expectations, whether it opens low or high, it is traded around expectations. When the expectations are realized, it will collapse.
Myshells current task is to reasonably control expectations based on the roadmap
Opening low to benefit users and launching the community is a reasonable direction, but it requires a reasonable balance between expectations and the actual roadmap. Relying on expectations to attract users, the fundamentals of the product can play a role in building a bottom after the expectations are implemented. The price management range of the token should be based on the reasonable expected maximum market value and the actual product guaranteed market value.
Project parties that return to long-termism cannot rely solely on IDO to give users benefits to gain market trust. This is only the first step. In the future, we should also pay attention to the contradiction between project parties and VCs regarding transparency. When project parties launch tokens through IDO, they no longer rely on the exchange, which can resolve the contradiction between the two parties in terms of transparency. The token unlocking process on the chain becomes more transparent, ensuring that the conflicts of interest that existed in the past are effectively resolved. On the other hand, the dilemma faced by traditional CEX is that the price of tokens often plummets after issuance, which causes the trading volume of the exchange to gradually decline. Through the transparency of on-chain data, exchanges and market participants can more accurately evaluate the true situation of the project.
Projects that open low on the chain must be prepared to not be listed for a period of time, otherwise they will easily encounter the dilemma of Myshell’s insider trading. Only by winning the trust of users and the market on the chain can the price of the currency take a positive spiral.
Kaitos golden mean fits the transition period of industry change
Kaitos airdrop distribution continues the unspoken rules of VC coins: reduce the quota of top users and increase the number of users who can apply for it, that is, long-tail distribution. According to the personal weight algorithm, 1 Yap can be exchanged for 5-20 $KAITO. Ecosystem yappers, Partners and Yappers received 96 million $KAITO, but the detailed proportion has not been announced. This strategy allows the project party to hide and recover chips to the greatest extent in the airdrop, and because there are many airdrop addresses, the selling pressure at the opening is much reduced - compared with the concentrated airdrop to the top KOL. Pricing at the 1 B price point where both long and short parties are more hesitant has facilitated the smooth turnover of floating chips.
Split disc becomes the cornerstone of flywheel
Secondly, Kaito designed a positive spiral around NFT, Yaps and skaito in the early stage, using the characteristics of the split plate to constrain the token price when necessary. The price of Kaito NFT continued to rise before the airdrop snapshot, with the highest floor price of 11 ETH, about 30,000 US dollars. After the snapshot, the price dropped, and it was worth 5,800 US dollars at TGE. The current floor price has gradually recovered to 2.5 ETH. A single NFT received 2,620 $KAITO, about 4,700 US dollars (the average price on February 21 was $1.8), and a total of 1,500 Kaito NFTs received nearly 4 million $KAITO.
The weight of sKAITO is positively correlated with the amount of pledge, the duration of pledge, and the 7-day voting enthusiasm, and is negatively correlated with the Yappers voting pool and the NFT holder voting weight.
Souce: Kaito
The voting weight is composed of Yappers (50%) + Holder [sKaito, NFT] (50%).
1 Genesis NFT ≈ 45,980
1 sKAITO ≈ 11.79
Voting rights per NFT = 3900 $KAITO
The dynamic changes in voting rights of NFT and sKAITO depend on the relationship between the total market value of NFT and the total market value of sKAITO. The voting rights gradually tend to the party with higher market value.
A simple calculation shows that holding NFTs is cheaper than using sKAITO.
By staking Kaito tokens, users can gain voting rights in governance and project decisions. Currently, each Kaito NFT provides 45,980 voting rights, and the voting rights of each NFT are equivalent to 3,935 $KAITO.
The arbitrage space between NFT, Yaps and Skaito allows Kaitos price performance to be regulated to a certain extent by the NFT market value.
It is more important to choose a growth method that suits your own track
Kaitos choice of pricing strategy is neither good nor bad, which is understandable. Because returning to long-termism and allowing products to support market value is a more difficult journey than ever before. Kaitos choice is to steadily return the current market value to product strength through continuous long-term value output.
After Memecoin fell temporarily, Kaito tended to take over the leading position in the distribution of market attention and compete for Mindshare in a single period of time. Mindshare is actually spread by KOLs. KOLs work for Kaito, and Kaito pays yaps. As Mindshare becomes more important, more and more project parties will join Kaito and pay fees. The continuous increase in KOLs, users and project parties is the basis of Kaitos positive spiral. Whether this spiral is successful depends on the degree of market penetration of Mindshare.
It is relatively difficult to observe the market acceptance of Mindshare. Therefore, Kaito has provided a tool such as Yapper Launchpad, which is both a product of toc and an evaluation indicator of tob. In general, the higher the market value of NFT, the higher the sKAITO pledge rate, and the higher the market share of Kaito. The corresponding yaps will also rise, attracting more KOLs to join.
Summarize
Whether the project team chooses to take the lead in reform like Myshell, or chooses the community + VC dual-driven token issuance model, or like Kaito, recognizes its own track positioning and realizes value return through continuous long-term value output. Both are signs of industry innovation moving towards long-termism.
Returning to long-termism is like going from luxury to frugality. This is difficult for an industry without regulation. What’s even more difficult is that the only valuable innovation in Crypto seems to be DeFi. Long-termism in tracks such as NFT, Gamfi, and Metaverse brings a very bad experience to users. Therefore, there is the “wolf” of the complete failure of long-termism in front and the “tiger” of batch and fast-forward short-termism in the back. Returning to long-termism at the moment is an anti-human path, but it may be the only way to survive. If you don’t trust any narrative and are hostile to any technology, then this industry may not allow you to continue to grow.
We need to wait, patiently wait, for the moment of qualitative change that belongs to Crypto, which may be opened by AI Agent or other tracks. However, before that, we need to adhere to long-termism, squeeze out the abscesses that have been hidden for a long time in the process, and adapt to and face the pain caused by returning to long-termism.
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Disclaimer:
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