The Dilemma of Industrialized Coin Minting: VC Coins Face Market Doubts

Author: Haotian

In the past couple of days, some new coins in the secondary market have collectively fallen back, seemingly reflecting the market's uprising against the current cycle of "first narrative, then financing, and finally TGE" in the VC industrialized coin creation path? It is worth pondering why retail investors would rather participate in high-risk PVP conspiracy coin games on-chain, while keeping their distance from new coins backed by VCs? Next, I will share my thoughts:

1. First of all, it must be acknowledged that the previous round of VC-led industry innovation-driven models has evolved into an "industrial assembly line of financing, token issuance, and launch." For a period of time, the glamorous white paper narratives + top-tier luxury investment lineups + seemingly impressive large financing figures + expectations of major profit-taking have become liquidity harvesting weapons pushed to the market, severely overdrawing the market's trust.

Although it cannot be generalized, when a large number of projects that rarely deliver on their promises and have no wealth effect are pushed to the market, it leads to the current irrationality of the market, which generalizes them as VC scams.

2. The main fatal problem with VC coins lies in their pricing mechanism. After a project completes multiple rounds of financing, the valuation at the TGE has been raised layer by layer, which leads to two inevitable results: first, the buying cost for retail investors is too high; second, early investors have a strong motivation to sell. This undoubtedly creates a "death trap" for new coins. Following this logic, after the TGE of some projects, there is a higher probability of downward space, and one-sided downward trends will also drag the market into negative sentiment for short selling, forming a vicious cycle.

In contrast, although the community coins that start with zero on-chain and have low market values carry significant unknown risks, many retail investors are still unwilling to touch those VC coins with high downward expectations and certainty.

3. A market environment with depleted liquidity can deal a more fatal blow to VC coins. Imagine if all participants know that selling out early after the TGE is the optimal strategy and believe that shorting is the rational choice, all VC coins listed will face a significant market sell-off dilemma. In the case of overall market liquidity depletion, it is highly likely that VC coins will also become the "sacrificial" targets.

This is like a "prisoner's dilemma"; if the project party generously airdrops, it will face selling pressure, but if they are reluctant to release tokens, they will be criticized by public opinion. Either way, it leads to one result: a lack of sufficient buying support.

4. The problem is clear to everyone, how can we break the trust crisis of VC coins? The core issue lies in how to reconstruct the balance of interests between the project party, VC, and the community, for example:

1. Start with a low valuation to leave room for growth: Project teams and VCs should accept a lower initial valuation, making the TGE the true starting point of the project's value rather than the peak, providing the market with sufficient growth expectations; (Recently, I've seen quite a bit of financing still being substantial, which indicates that the issues are far from escalating.)

2. De-Venture Capitalization in Certain Links: Introduce community participation in some specific stages through DAO governance, IDO, and fair issuance, reducing the dominance of VC in token distribution and increasing community weight.

3. Differentiated incentive mechanism: Additional incentives should be designed for long-term holders to truly return value to the participants and builders of the project ecosystem, rather than short-term speculators. This requires further upgrades and modifications to the airdrop mechanism.

4. Transparent Operations: Project teams should adopt a transparent accountability mechanism that regularly discloses development progress and fund usage, rather than simply conducting unilateral market promotion around the TGE.

The above.

In fact, VC has made outstanding contributions during the maturity process of the Crypto industry. Talking about VC and avoiding it completely does not mean that we must fully de-VC the industry. Without VC, the industry could still suffer from the rampant conspiracy groups behind the scenes, which would be another disaster the industry cannot bear.

The current financing ecosystem of the Crypto market still needs to be restructured. VCs should transition from being passive "arbitrage intermediaries" to active "value enablers." Essentially, the current dilemma of VC coins only reflects the excessive internal competition in the market, and is also a sign of the Crypto market's increasing maturity. This places greater demands on ordinary investors in terms of how to identify high-quality projects and how to invest rationally.