In recent days, some new coins in the secondary market have collectively declined, seemingly reflecting the market's uprising against the current cycle of 'narrative first, then financing, and finally TGE' as a path of VC industrialized coin creation? It is worth contemplating why retail investors are willing to participate in high-risk PVP schemes on-chain, yet keep their distance from new coins endorsed by VCs?
1) First, it must be acknowledged that the previous round of VC-led industry innovation-driven models has evolved into an 'industrial assembly line' of 'financing, issuing coins, and launching.' For a while now, the glamorous white paper narratives + top-tier luxurious investment lineups + seemingly impressive massive financing numbers + king-level expectations of profit-taking have become liquidity harvesting weapons pushed into the market, severely overdrawing market trust.
Although we cannot generalize, when a pile of projects that rarely deliver on promises and have no wealth effect are pushed into the market, it leads to an irrational market that broadly categorizes them as VC scams.
2) The main fatal issue with VC coins lies in their pricing mechanism. After completing multiple rounds of financing, the valuation at TGE has already been inflated layer by layer, leading to two inevitable results: first, retail investors face excessively high buying costs; second, early investors have a strong motivation to sell. This undoubtedly creates a 'death trap' for new coins. According to this logic, some projects are more likely to face downward pressure post-TGE, and unilateral downward trends will also drag the market into negative sentiment, forming a vicious cycle.
In contrast, those community coins that start from zero on-chain and have low market values, despite having significant unknown risks, many retail investors still hesitate to touch those VC coins with high downward expectations and certainty.
3) A market environment with depleted liquidity will deal a more fatal blow to VC coins. Imagine when all participants know that selling off immediately after TGE is the optimal strategy, and everyone feels that shorting is a rational choice; all VC coins will face significant market sell-off dilemmas. In scenarios of overall market liquidity depletion, it is highly likely that VC coins will also become the 'sacrificed' objects.
This is like a 'prisoner's dilemma'; if the project team generously airdrops tokens, it will face sell pressure, while withholding tokens will be criticized by the public. Regardless of the approach, it leads to one result: a lack of sufficient buying support.
4) Everyone understands the issue; how can we break the trust crisis of VC coins? The core problem lies in how to reconstruct the balance of interests among project teams, VCs, and the community, such as:
1. Starting with low valuations, leaving room for growth: Project teams and VCs should accept lower initial valuations, allowing TGE to be the true starting point of the project's value rather than its peak, providing the market with sufficient growth expectations; (Recently, I've seen that many financings are still quite large, indicating that the problem has not worsened.)
2. Decentralizing some segments: Introduce community participation in certain key segments through DAO governance, IDOs, and fair distribution methods, reducing VCs' dominance in token allocation and increasing the weight of the community.
3. Differentiated incentive mechanisms: Additional incentives should be designed for long-term holders, genuinely returning value to participants and builders in the project ecosystem, rather than short-term speculators, which requires further upgrading and transformation of the airdrop mechanism.
4. Transparent operations: Project teams should pick up the initial transparent accountability mechanism of regularly disclosing development progress and fund usage, rather than merely engaging in one-sided market promotion before and after TGE.
Above.
In fact, VCs have made significant contributions to the maturation process of the Crypto industry. The fear associated with VC coins does not mean a complete move away from VCs; the absence of VCs could lead to a conspiracy of groups that the industry cannot afford to bear.
The current funding ecology of the Crypto market still needs reconstruction; VCs should transform from passive 'arbitrage intermediaries' to active 'value enablers.' Essentially, the current dilemmas faced by VC coins can only reflect the excessive internal competition in the market, which is also a sign of the Crypto market maturing, posing greater demands on ordinary investors regarding how to identify quality projects and how to invest rationally.
