The Dilemma of Industrialized Coinage: VC Coins Face Market Doubts

Author: Haotian

Some new coins in the secondary market have collectively fallen back in the past two days, 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 VC? Next, let me talk about my thoughts:

1) First of all, we have to admit that the industry innovation-driven model led by VC in the last round has evolved into an industrialized 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 liquidity harvesting that has been pushed to the market, seriously overdrawing the market's trust.

Although we cannot generalize, when a pile 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. After the project has completed 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 has undoubtedly designed 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 trend will engulf the negative sentiment of the market to short, forming a vicious circle.

In contrast, although the unknown risks of those community coins that started from scratch and had a low market value on the chain are very large, many retail investors are still unwilling to touch those VC coins with high downside expectations and certainty;

3) The market environment with exhausted liquidity will cause a more fatal blow to VC coins. Imagine that when all participants know that selling first after TGE is the best strategy, they all 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 exhausted, there is a high probability that VC coins will 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 public opinion. In any case, it will bring one 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 parties, 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, so that TGE becomes the starting point of the real value of the project rather than the apex, and give the market enough growth expectations; (Recently, I have seen that many financings are still large, which shows that the problem is far from intensifying)

2. De-VC some links: Introduce community participation in some special links, and 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 for long-term holders should be designed to truly give back value to participants and builders of the project ecosystem, rather than short-term speculators. This requires further upgrading and transformation of the airdrop mechanism;

The above.

In fact, VC has made outstanding contributions in the development process of the Crypto industry towards maturity. Talking about VC coins does not mean that it is necessary to completely de-VC. The rampant conspiracy groups behind the industry without VC will also be another disaster that the industry cannot bear.

The current Crypto market financing ecology 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 involuted, and it is also a manifestation of the increasingly mature Crypto market. This puts forward greater requirements on how ordinary investors can identify high-quality projects and how to invest rationally.