In the past two days, some new coins in the secondary market have collectively fallen back, which seems to reflect the market's rebellion against the VC industrialized coin-making path of "narrative first, financing second, and TGE later" in the current cycle? It is worth thinking about why retail investors would rather participate in high-risk PVP conspiracy coin games on the chain, and stay away from new coins endorsed by VCs? Next, let me talk about my thoughts:
1) First of all, we have to admit that the last round of VC-led industry innovation-driven model has evolved into an industrial assembly line of "financing, issuing coins, and launching". For some time, the gorgeous white paper narrative + the top-level luxury investment lineup + the seemingly glamorous huge financing figures + the king-level expectations of making money have become a killer weapon for harvesting liquidity that has been pushed to the market, seriously overdrawing the market's trust.
Although we cannot generalize, when a bunch of projects that rarely deliver on their promises and have no wealth effect are launched into the market, the market now irrationally generalizes them as VC scams;
2) The main fatal problem of VC coins lies in their pricing mechanism. When a project completes multiple rounds of financing, the valuation at the time of TGE has been raised layer by layer, which leads to two inevitable results: one is that the purchase cost of retail investors is too high; the other is that early investors have a strong motivation to sell. This undoubtedly designs a "death trap" for new coins. According to this logic, some projects are more likely to have downward space after TGE, and the unilateral downward movement will engulf the negative sentiment of the market to short, forming a vicious circle.
In contrast, although community coins that started from scratch on the chain and had low market capitalization have great unknown risks, many retail investors are still reluctant to touch VC coins with high downside expectations and certainty.
3) A market environment with depleted liquidity will deal a more fatal blow to VC coins. Imagine that when all participants know that selling first after TGE is the best strategy and think that short selling is a rational choice, all VC coins will face great market selling difficulties when they go online. When the overall market liquidity is depleted, VC coins will most likely become the object of "sacrifice".
This is like a "prisoner's dilemma". If the project party airdrops generously, it will be sold off. If it is reluctant to release the funds, it will be criticized by the public opinion. No matter what, it will lead to the same result: lack of sufficient buying support.
4) Everyone knows the problem. How to solve the trust crisis of VC coins? The core problem lies in how to reconstruct the balance of interests between project owners, VCs, and communities, such as:
1. Start with a low valuation and leave enough room for growth: Project parties and VCs should accept a lower starting valuation, making TGE the starting point of the project's true value rather than its apex, and giving the market enough growth expectations; (Recently, we have seen that many financing rounds are still very large, which shows that the problem is far from being intensified)
2. De-VC in some links: Introduce community participation in some special links, reduce the dominance of VC in token distribution and increase community weight through DAO governance, IDO, fair issuance, etc.;
3. Differentiated incentive mechanism: Additional incentives should be designed for long-term holders to truly return value to the participants and builders of the project ecosystem, rather than short-term speculators. This requires further upgrading and transformation of the airdrop mechanism;
4. Transparent operation: The project party should pick up the initial transparent accountability mechanism of regularly disclosing the development progress and fund use, rather than simply conducting unilateral market promotion before and after TGE;
above.
In fact, VC has made outstanding contributions to the development of the Crypto industry towards maturity. Being afraid of VC coins does not mean that we must completely de-VC. The rampant conspiracy groups behind the industry without VC will be another disaster that the industry cannot bear.
The current financing ecology of the Crypto market still needs to be reconstructed. VC should transform from a passive "arbitrage intermediary" to an active "value enabler". In essence, the current predicament of VC coins can only reflect that the market is too inward-looking and is also a manifestation of the increasing maturity of the Crypto market. This puts greater demands on how ordinary investors can identify high-quality projects and how to invest rationally.
