The distribution of tokens in crypto projects has remained relatively consistent, with venture capital (VC) allocations typically ranging from 10% to 30%. While airdrops are a popular method for community distribution, they often lead to immediate sell-offs. Users, wary of hidden token reserves, tend to dump their airdropped tokens, creating significant selling pressure post-Token Generation Event (TGE). This pattern has persisted for years, contributing to poor price performance for VC-driven tokens, which often enter a downward spiral shortly after launch.
A notable exception is $SHELL, which allocated 4% of its tokens through an Initial DEX Offering (IDO) at a modest $20 million market cap. Meanwhile, projects like Soon and Pump Fun are pioneering a new approach by allocating over 50% of their token supply through fair launches, complemented by limited VC and KOL involvement. This community-centric model not only fosters greater acceptance but also allows for locked community funds, enabling projects to buy back tokens at lower prices and signal long-term commitment.
The Memecoin Bubble: Liquidity Drain and Market Collapse
The shift from VC-backed projects to pure "pump" schemes has created a zero-sum game where only a few profit while most retail investors suffer. This trend exacerbates the breakdown of market structures, requiring extended periods for recovery and accumulation.
Memecoin enthusiasm has waned as retail investors recognize the dominance of insider groups—DEXs, capital providers, market makers, VCs, KOLs, and celebrities—in controlling these assets. The lack of fairness in distribution, coupled with rapid losses, has led to disillusionment. Despite the initial hype around AI-driven memecoins, many projects were merely superficial innovations by Web2 developers or Web3 opportunists.
Community-driven tokens, once supported by niche communities or religious fervor, are now often manipulated by insiders for quick gains. This "pump and dump" mentality harms long-term viability and drives liquidity away from the crypto market, especially when external teams withdraw profits without reinvesting in the ecosystem.
The VC Token Death Spiral: Inertia and Short-Selling Consensus
Outdated strategies from previous cycles continue to plague VC-backed projects. Small token allocations to VCs, combined with centralized control, leave retail investors bearing the losses. This approach is no longer effective, yet inertia prevents change.
VC tokens struggle at TGE due to perceived unfairness—users assume that projects and exchanges hold large reserves, creating an uneven playing field. With declining VC returns and reduced investment amounts, these tokens face mounting challenges.
Listing on exchanges often backfires, as token prices plummet immediately. Negative funding rates encourage short-selling, and even projects with good intentions may succumb to market pressures. The cycle reinforces itself: as more projects fail, retail investors turn to retaliatory short-selling, further depressing prices.
The Dual-Driven Model: Transparent Blockchain Solutions
Why combine VC and community approaches? Pure VC models amplify pricing discrepancies, while pure fair launches are vulnerable to manipulation. A hybrid model offers balance: VCs provide early-stage resources and planning, reducing the need for large fair launches that might sacrifice too much equity.
In response to changing conditions, teams are adopting new strategies. By partnering with KOLs and limited VCs, projects can launch with high community allocations and low valuations. This method builds consensus through FOMO, locks in early收益, and enhances liquidity. Projects like Soon and Pump Fun exemplify this shift, launching with valuations as low as $10 million and raising millions through community participation.
Myshell’s IDO on BNB Chain demonstrates transparency in action. With 4% of tokens sold at a $20 million valuation, all transactions are recorded on-chain, ensuring fairness. This approach reduces reliance on centralized exchanges and mitigates conflicts of interest.
👉 Explore transparent token strategies
The core issue between users and projects revolves around pricing and fairness. Fair launches and IDOs align user expectations with token valuation. VC tokens fail due to post-listing lack of demand, rooted in mispricing. The solution lies in community-focused distributions and relentless pursuit of technological milestones.
Movemaker, a decentralized community organization backed by Aptos Foundation, embraces this dual-driven model. With millions in funding, it aims to support Chinese-speaking developers and advance areas like DeFi, AI-blockchain integration, and real-world assets (RWA).
Frequently Asked Questions
What is a VC token?
VC tokens are cryptocurrencies funded primarily by venture capital firms. They often face selling pressure post-launch due to large insider allocations and perceived unfairness.
How do fair launches benefit communities?
Fair launches distribute tokens directly to users, promoting decentralization and trust. This approach reduces the risk of manipulation and encourages long-term holding.
Why do airdropped tokens often drop in value?
Recipients frequently sell airdropped tokens immediately, fearing that projects hold hidden reserves. This behavior creates sudden selling pressure and price declines.
What is the dual-driven model?
This model combines VC support with community distribution. VCs provide early resources, while fair launches ensure broad token ownership, balancing innovation with inclusivity.
How does blockchain transparency help?
On-chain transactions for IDOs and token unlocks make processes verifiable, reducing insider advantages and building trust among participants.
What role do KOLs play in token launches?
KOLs help build consensus and excitement, driving community participation. Their involvement can enhance visibility and legitimacy for new projects.