Why are retail investors willing to participate in high-risk PVP conspiracy coin games on-chain, yet keep their distance from new coins endorsed by VC?

The current financing ecosystem of the Crypto market still needs to be restructured. VCs should shift from the passive "arbitrage intermediary" to the active "value enabler."

Written by: haotian

In the past few days, some new coins in the secondary market have collectively retreated, seemingly reflecting the market's uprising against the current cycle of "first narrative, then financing, and finally TGE" in the industrialization of VC coin creation? It is worth pondering why retail investors would rather engage in high-risk PVP conspiracy coin games on-chain, while keeping a respectful distance from new coins endorsed by VCs? Next, let me share my thoughts:

1. First of all, we have to admit that the last round of VC-led industry innovation-driven model has evolved into a set of industrialization assembly lines of "financing, coin issuance, and launch". For a period of time, the gorgeous white paper narrative + top-level luxury investment lineup + seemingly glamorous huge financing figures + king-level hair-raising expectations have become a liquidity harvesting killer pushed to the market, seriously overdrawing the trust of the market.

Although it cannot be generalized, when a pile of projects that rarely deliver on promises and have no wealth effect are pushed to the market, the market irrationally generalizes them as VC scams.

2. The main fatal problem of VC coin is its pricing mechanism, when the project completes multiple rounds of financing, the valuation of TGE has been raised layer by layer, which leads to two inevitable results: first, the purchase cost of retail investors is too high; Second, early investors have a strong incentive to sell. In fact, this undoubtedly designs a "death trap" for the new coin, according to this logic, some projects will have a greater probability of downside after TGE, and the unilateral downside will envelop the negative sentiment of the market shorting, which will form a vicious circle.

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

3. A market environment with depleted liquidity will deal a more fatal blow to VC coins. Imagine if all participants know that selling early after the TGE is the optimal strategy and believe that shorting is a rational choice, all VC coins 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 targets of "sacrifice."

This is like a "prisoner's dilemma"; if the project team generously airdrops, it will face selling pressure, while if they hold back and do not release tokens, they will be criticized by public opinion. No matter what, 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 among project parties, VCs, and the community, for example:

1. Start with a low valuation to leave room for growth: project parties and VCs should accept a lower starting valuation, making the TGE the true starting point of the project's value rather than a peak, allowing the market to have sufficient growth expectations; (Recently, I've seen a lot of funding still being quite large, indicating that the problem is far from escalating.)

2. Partial VC Devolution: In certain special phases, introduce community participation through DAO governance, IDO, fair issuance, etc., to reduce the dominance of VC in token distribution and increase community weight;

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

4. Transparent Operations: The project team should adopt a transparent accountability mechanism to regularly disclose development progress and fund usage, rather than merely engaging in unilateral market promotion before and after the TGE.

Above.

In fact, VC has made outstanding contributions to the maturity development process of the Crypto industry. Talking about VC with disdain does not mean we must completely eliminate VC. The absence of VC would lead to the dominance of conspiracy groups behind the industry, which would also be another disaster that the industry cannot bear.

The current financing ecosystem of the Crypto market still needs to be restructured. VCs should shift from a passive "arbitrage intermediary" to an active "value enabler." Essentially, the current predicament of VC coins only reflects the excessive competition in the market and is also a sign of the maturing Crypto market. This places greater demands on ordinary investors regarding how to identify quality projects and how to invest rationally.