Token Distribution and Market Performance Analysis

Recent token distribution situations of multiple projects show that the VC share is typically between 10% and 30%, which has not changed much compared to previous cycles. Most projects choose to distribute tokens to the community through airdrops, but the actual effect is not ideal. Users tend to sell the airdropped tokens immediately, leading to enormous selling pressure in the market. This phenomenon has persisted for years, and there has been no significant change in the token distribution methods. From the perspective of token price performance, tokens dominated by VCs generally perform poorly, often exhibiting a one-sided downward trend after issuance.

It is worth noting that some projects have adopted different strategies. For example, one project allocates 4% of its tokens through an IDO, with an IDO market value of only $20 million, which appears unique among VC-led projects. Additionally, there are projects that choose to distribute over 50% of the total token supply through a fair launch method, while also combining a small number of VCs and key opinion leaders for large-scale community fundraising. This community-friendly approach may be more likely to gain recognition, and the proceeds from community fundraising can be locked in advance. Although the project team no longer holds a large number of tokens, they can buy back chips in the market through market making, conveying a positive signal to the community while also recovering chips at a lower price.

The Decline of the Memecoin Craze

The atmosphere in the Memecoin market has dropped to a low point. As retail investors gradually realize that Memecoins are essentially still controlled by various forces, the issuance of such Tokens has lost its fairness. The massive losses in the short term have quickly affected users' psychological expectations, leading to the near phase-end of this Token issuance strategy.

In the past year, retail investors have made relatively the largest profits in the Memecoin space. Although the AI Agent narrative has driven market enthusiasm with a focus on innovation from open-source communities, it has proven that this wave of AI Agent hype has not changed the essence of Memecoins. A large number of Web2 individual developers and Web3 shell projects have quickly occupied the market, leading to the emergence of many AI Memecoin projects disguised as "value investments."

Community-driven tokens are controlled by a minority group and are manipulated for "quick cashing out", which severely impacts the long-term development of the project. When the Memecoin community is no longer hidden behind a specific group, it means that market sensitivity has decreased. Retail investors are still looking for opportunities to get rich overnight, eager to find tokens with certainty, and expect projects to have deep liquidity right from the opening. However, this is precisely the opportunity for certain groups to deliver a fatal blow to retail investors. Bigger bets mean richer returns, which begins to attract the attention of teams outside the industry. Once these teams profit, they will no longer use stablecoins to purchase cryptocurrencies, as they lack faith in Bitcoin. The liquidity that is withdrawn will never return to the cryptocurrency market.

The Dilemma Facing VC Coin

The strategies from the previous cycle have become ineffective, yet many project teams still rely on the same strategies out of inertia. A small share of tokens is released to VCs and highly controlled, allowing retail investors to buy in the exchanges. This strategy has become ineffective, but the inertia of thought prevents project teams and VCs from making easy changes. The biggest drawback of VC-driven tokens is the inability to gain early advantages during the token generation event (TGE). Users no longer expect to achieve ideal returns by purchasing tokens, as they believe that project teams and exchanges hold a large number of tokens, creating an unfair position for both parties. At the same time, the return rate for VCs has significantly decreased during this cycle, leading to a decline in the amount of VC investments, coupled with users' unwillingness to take over in the exchanges, making the issuance of VC tokens face enormous difficulties.

For VC projects or exchanges, listing directly may not be the best choice. Once the VC coin is listed on the exchange, the contract fee rate will quickly turn into -2%. The team will have no motivation to pump the price, as the goal of listing has already been achieved; the exchange will also not pump the price, as shorting new coins has become a market consensus.

When a Token is issued and immediately enters a one-sided downward trend, the frequency of this phenomenon will increase, and the market users' perception will gradually be reinforced, leading to the situation of "bad money driving out good money." Assuming that in the next TGE, the probability of projects that dump right after issuing coins is 70%, and those willing to support the market is 30%. Under the influence of the continuous appearance of dumping projects, retail investors will engage in retaliatory short selling, even knowing that the risk of shorting immediately after 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 short selling ranks to make up for the target revenue that cannot be achieved through dumping. When the 30% of the teams see this situation, even if they are willing to market make, they are reluctant to bear such a huge price difference between futures and spot. Therefore, the probability of projects that dump right after issuing coins will further increase, while the number of teams that create beneficial effects after issuance will gradually decrease.

The unwillingness to lose control over the chips has resulted in a lack of progress or innovation for a large amount of VC coins during the TGE compared to four years ago. The constraints of inertia thinking on VCs and project teams are more powerful than imagined. Due to the dispersed liquidity of projects, long unlocking periods for VCs, and the constant turnover of project teams and VCs, despite the ongoing issues with this TGE approach, VCs and project teams exhibit a numb attitude. Many project teams may be establishing projects for the first time, and when faced with difficulties they have never encountered, they often tend to exhibit survivor bias, believing they can create different value.

Emerging Dual-Drive Model

Why choose the VC+ community dual-drive model? A model driven purely by VC increases the pricing discrepancy between users and project parties, which is detrimental to the price performance of Token issuance in the early stages; while a completely fair launch model can easily be maliciously manipulated by certain groups behind the scenes, resulting in a loss of a large amount of low-priced tokens and 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 enter at the early stage of a project, providing reasonable resources and development planning for the project party, reducing the team's financing needs during the early stages of development, and avoiding the worst outcome of losing all chips due to fair launches while only obtaining low certainty returns.

Over the past year, more and more teams have realized that traditional financing models are failing—giving small shares to VCs, high control, and waiting for the market to rise has become unsustainable. VC funding is decreasing, retail investors refuse to take over, and the listing thresholds for large exchanges are rising. Under these three pressures, a new approach that adapts better to bear markets is emerging: collaborating with key opinion leaders and a small number of VCs to promote projects through a large proportion community launch and low market cap cold start.

Some projects are paving new paths through "large-scale community launches"—endorsed by leading key opinion leaders, distributing 40%-60% of tokens directly to the community, launching projects at valuations as low as $10 million, and achieving millions of dollars in financing. This model builds consensus FOMO through the influence of key opinion leaders, locking in profits early while exchanging high liquidity for market depth. Although it sacrifices short-term control advantages, tokens can be repurchased at low prices during bear markets through compliant market-making mechanisms. Essentially, this is a paradigm shift in power structure: from the VC-dominated game of hot potato (institutional takeover - selling off - retail holding the bag) to a transparent game of community consensus pricing, forming a new symbiotic relationship between project parties and the community in the liquidity premium.

Recently, a certain project can be seen as a breakthrough attempt between the exchange and the project party. Its 4% Token was issued through IDO, with an IDO market value of only 20 million USD. To participate in the IDO, users need to purchase specific Tokens and operate through the exchange wallet, with all transactions being directly recorded on the chain. This mechanism brings new users to the wallet while allowing them to gain a fair opportunity in a more transparent environment. For the project, the operation through market makers ensures a reasonable price increase. Without sufficient market support, the price of the Token cannot be maintained within a healthy range. As the project develops, the gradual transition from low market value to high market value, 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. Once the project party issues Tokens through IDO, they no longer rely on the exchange, thus resolving the conflict regarding transparency between both parties. The unlocking process of Tokens on the chain becomes more transparent, ensuring that past conflicts of interest are effectively resolved. On the other hand, traditional centralized exchanges face the dilemma of frequent 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 a fair launch or IDO is to meet users' expectations for Token pricing. The fundamental issue with VC coins is the lack of buying support after listing, with pricing and expectations being the main reasons. The breakthrough point lies with the project parties and exchanges. Only by fairly distributing Tokens to the community and continuously advancing the construction of the technological roadmap can the project's value growth be achieved.