Token Distribution and Market Performance Analysis

Recent token distribution situations of multiple projects show that the proportion of VC is generally between 10% and 30%, which has not changed much compared to the previous period. Most projects choose to distribute tokens to the community through airdrops, but the actual effect is not ideal. Users tend to immediately sell the tokens obtained from airdrops, leading to significant selling pressure on the market. This phenomenon has existed for the past few years, and there has been no significant change in the way tokens are distributed. In terms of price performance, tokens dominated by VC generally perform poorly, often falling into a one-sided downward trend after issuance.

It is worth noting that some projects have adopted different strategies. For example, one project allocated 4% of its tokens through an IDO, with a market cap of only $20 million, making it stand out among many VC-driven tokens. Additionally, there are projects that choose to distribute over 50% of the total token supply through a fair launch method, combined with a small number of VCs and opinion leaders for significant community fundraising. This community-friendly approach may be more easily recognized, and the funds raised from the community can be locked in advance. Although the project team no longer holds a large number of tokens, they can repurchase chips in the market through market-making, which sends a positive signal to the community while recovering chips at a lower price.

The End of the Memecoin Bubble

The market has shifted from being dominated by VC-driven projects to a purely "pump" token issuance bubble mode, leading to tokens being caught in a zero-sum game, where ultimately only a few people profit while most retail investors may incur losses and exit. This phenomenon has exacerbated the collapse of the primary and secondary market structure, and rebuilding or chip accumulation may take a longer time.

The atmosphere of the Memecoin market has fallen to rock bottom. Retail investors are gradually realizing that Memecoins are essentially still under the control of certain groups, including decentralized exchanges, capital parties, market makers, VCs, opinion leaders, and celebrities. This has led to a loss of fairness in the issuance of Memecoins. The severe losses in the short term have quickly affected user psychological expectations, and this Token issuance strategy is approaching a phase of conclusion.

In the past year, retail investors have made relatively the largest profits in the Memecoin sector. Although the AI Agent narrative has attempted to drive market enthusiasm, it has proven that this wave of AI Agent hype did not change the essence of Memecoins. A large number of Web2 individual developers and Web3 shell projects have quickly occupied the market, leading to a surge of AI Memecoin projects that are wrapped in the guise of "value investment."

Community-driven tokens are controlled by certain groups and are subjected to "fast-tracking" through malicious price manipulation. This approach severely impacts the long-term development of the project. Previously, Memecoin projects alleviated token sell-off pressure through support from religious beliefs or niche groups, and achieved an acceptable project exit process for users through market maker operations.

However, when the Memecoin community no longer hides behind religion or niche groups, market sensitivity has declined. Retail investors are still looking for a chance to get rich overnight, eager to find high-certainty tokens and expecting projects that have deep liquidity right from the start. This is precisely the fatal blow that certain groups deal to retail investors. Bigger bets mean richer returns, and these returns begin to attract the attention of teams outside the industry. Once these teams reap the benefits, they will no longer use stablecoins to purchase cryptocurrencies, as they lack faith in Bitcoin. The liquidity that has been drawn away will forever leave the cryptocurrency market.

The Dilemma of VC Coin

The strategy from the previous cycle has become ineffective, yet many project teams still use the same strategy out of inertia. A small portion of tokens is released to VCs and highly controlled, allowing retail investors to place buy orders on exchanges. This strategy has become ineffective, but the inertia in thinking makes project teams and VCs reluctant to change easily. The biggest drawback of VCs driving token distribution is the inability to gain an early advantage during the token generation event (TGE). Users no longer expect to achieve ideal returns through buying tokens, as they believe that project teams and exchanges hold a large number of tokens, creating an unfair position for both sides. At the same time, the return rate for VCs has significantly decreased during this cycle, which has led to a decline in VC investment amounts. Coupled with users' reluctance to take over on exchanges, the issuance of VC coins faces enormous difficulties.

For VC projects or exchanges, directly listing may not be the best option. Some token teams have withdrawn liquidity from the industry without injecting it into other tokens, such as Ethereum, SOL, or other altcoins. Therefore, once VC coins are listed on exchanges, the contract fees will quickly turn into -2%. The team will have no motivation to pump the price since the goal of listing has been achieved; exchanges also will not pump the price as shorting new coins has become a market consensus.

When a Token is issued and immediately enters a unilateral downtrend, the frequency of this phenomenon increases, and the market users' perception will gradually be reinforced, leading to a situation of "bad coins driving out good coins." Assuming that in the next TGE, the probability of a project immediately crashing the price after issuing coins is 70%, while those willing to support and provide liquidity is 30%. Under the influence of consecutive crashing projects, retail investors will engage in retaliatory short selling, even knowing that the risk of shorting immediately after the issuance is extremely high. When the short selling situation in the futures market reaches its peak, the project parties and exchanges will also have to join the ranks of short sellers to make up for the target returns that cannot be achieved through crashing the price. When the 30% of the team sees this situation, even if they are willing to provide liquidity, they are reluctant to bear such a huge price difference between futures and spot. Therefore, the probability of project parties crashing the price immediately after issuing coins will further increase, and the teams that create a beneficial effect after issuing coins will gradually decrease.

Unwilling to lose control over the chips has led to a lack of progress or innovation in a large number of VC coins during the TGE compared to four years ago. The inertia of thinking is more restrictive to VCs and project parties than imagined. Due to the decentralized liquidity of projects, the long unlocking period for VCs, and the constant turnover of project parties and VCs, despite the ongoing issues with this TGE approach, both VCs and project parties display a numb attitude. Many project parties may be establishing projects for the first time, and when faced with unfamiliar difficulties, they tend to exhibit survivor bias, believing they can create different value.

The Rise of the New Model

Why choose the dual-drive of VC+ community? A model driven purely by VC will increase the pricing discrepancy between users and project parties, which is not conducive to the price performance of Token issuance in the early stages; on the other hand, a completely fair launch model can easily be maliciously manipulated by certain groups behind the scenes, leading to a loss of a large number of low-priced chips, causing the price to complete a cycle of fluctuations within a day, which is a devastating blow to the subsequent development of the project.

Only by combining the two can VCs intervene in the early stages of project establishment, providing reasonable resources and development plans for the project party, reducing the team's financing needs in the early development stage, and avoiding the worst outcome of losing all chips due to fair launches, only to obtain low certainty returns.

In the past year, more and more teams have discovered that traditional financing models are failing - the routine of giving VC small shares, having high control, and waiting for the market to pump has become unsustainable. With VC funds tightening, retail investors refusing to take over, and large exchanges raising the thresholds for listing coins, under these threefold pressures, a new approach more suited to bear markets is emerging: collaborating with leading opinion leaders and a small number of VCs to promote projects through a high proportion of community launches and low market cap cold starts.

Some projects are opening up new paths through "large-scale community launches"—uniting top opinion leaders to endorse, distributing 40%-60% of the tokens directly to the community, and launching projects at valuations as low as $10 million, achieving millions of dollars in financing. This model builds consensus FOMO through the influence of opinion leaders, locking in profits in advance while exchanging high liquidity for market depth. Although it gives up short-term control advantages, it allows for compliant market-making mechanisms to repurchase tokens at low prices during bear markets. Essentially, this is a paradigm shift in power structures: from the VC-dominated game of hot potato (institutional takeover - sell-off - retail buys) to a transparent game of community consensus pricing, forming a new symbiotic relationship between project parties and the community in liquidity premiums.

Recently, a project can be seen as a groundbreaking attempt between a trading platform and the project party. 4% of its tokens are issued through IDO, with an IDO market capitalization of only $20 million. To participate in the IDO, users need to purchase a certain token and operate through the exchange wallet, with all transactions directly recorded on the blockchain. This mechanism brings new users to the wallet while allowing them to gain fair opportunities in a more transparent environment. For this project, market maker operations are carried out to ensure a reasonable price increase. Without sufficient market support, the token's price cannot be maintained within a healthy range. As the project develops, the gradual transition from low market capitalization to high market capitalization, along with the continuous enhancement of liquidity, leads to the project's gradual market recognition. The conflict between the project party and VC lies in transparency. After the project party launches the token through IDO, it no longer relies on the exchange, thus resolving the conflict between both parties regarding transparency. The token unlocking process on-chain becomes more transparent, ensuring that past conflicts of interest are effectively resolved. On the other hand, traditional centralized exchanges face the dilemma of often experiencing price crashes after token issuance, which gradually decreases the trading volume of the exchange. Through the transparency of on-chain data, exchanges and market participants can more accurately assess the true situation of the project.

It can be said that the core contradiction between users and project parties lies in pricing and fairness. The purpose of fair launch or IDO is to meet users' expectations for Token pricing. The fundamental problem with VC coins is the lack of buying pressure after the launch, with pricing and expectations being the main reasons. The breakthrough point lies with the project parties and exchanges. Only by fairly passing on benefits of the Token to the community and continuously advancing the construction of the technology roadmap can the value growth of the project be achieved.