Author: @BlazingKevin_, the Researcher at BlockBooster
The consensus is changing, with users losing confidence in CEX after the listing of new Altcoins. Although a few projects can buck the trend and rise, most projects cannot escape the gravitational pull of the downward trend. Once this consensus continues to strengthen, gradually shifting from two to three months to a complete bull-bear cycle, the user retention rate and user growth rate of CEX may be severely hit.
The core contradiction is the divergence in pricing between users and project parties. Project parties need to recover their early costs from retail investors, and the high FDV due to a large proportion of VC lock-up has become a norm at the time of listing. The combination of the two inevitably leads to a TGE price that exceeds the psychological expectations of retail investors.
The high FDV and low MC strategy was acceptable in the previous bull-bear cycle because the "Buy and Hold" consensus would ultimately reward the diamond hands. But this consensus began to weaken after BTC went through the ETF, and was completely destroyed by the Memecoin frenzy in the past year. BTC is deeply tied to the US stock market and has become a reservoir of US dollar assets, being the first to decouple from the four-year cycle; the triple whammy of the animal kingdom, Agent, and celebrity coins has put Memecoin on a pedestal and then caused it to plummet, and retail investors can no longer adapt to the market-making cycle of VC coins. The market has undergone earth-shaking changes, but the VC coins are still sitting on the death train of inertia without realizing it. The death spiral is caused by the following three points:
Due to the large lock-up of VC and team shares, only a small portion can circulate in the early stage. The excessively high FDV makes retail investors who are used to Memecoin valuation methods extremely uncomfortable.
For this small circulating volume, the project parties are still unwilling to let go, secretly recovering a large amount of chips through airdrops and ecological incentives. The profit experience of retail investors in airdrops is very poor, making the pre-issuance community atmosphere gloomy and pessimistic.
Their own shares are locked up, so they can only recover the early costs by dumping the small circulating volume of chips, so they can only ignore the market sentiment and choose a high opening.
The essence of the death spiral is the lack of long-term thinking, the complete collapse of the "Buy and Hold" consensus on Altcoins. Once the price breaks through the key support level, it will plummet like mercury, and the new coins that are launched have no support level, and the psychological support level is the valuation and pricing expectations of the project. For a project with an expected market cap of only $10M, the pricing at $1B will result in an opening cost of -2%, and there will be no miracle before the expected market cap is reached. And the poor price performance will cause the price to fall even below $10M and not stop. Such projects are increasing, and even if there are some exceptions due to reflexivity in the middle, the probability of successfully short-selling VC coins at the opening may still be far greater than 50%. When long-term thinking disappears and short-term prosperity brought by lack of regulation is muddied, the bubble bursts and it's only a matter of time before the party is over.
Compared to other industries, Crypto is still in its early stages, but the pessimism of practitioners is like the twilight of the gods, because short-term thinking will not bring faith and value, but will only accelerate the depletion of the industry's vitality. Therefore, starting from now, we need to return to long-term thinking.
Myshell encountered resistance in its pricing strategy when returning to long-term thinking
Going back to the opening point, when VC coins are hit, CEX is the biggest victim. Binance took the lead in self-rescue, conducting some experiments on Myshell, for better or worse, this is a signal that the leading exchange has chosen to change. This experiment maintained a good momentum before February 27, but plummeted sharply after Binance's listing. Let's review the key time points and corresponding market sentiment from the airdrop snapshot on February 12 to the Binance listing on February 27.
Two reversals of market sentiment
Myshell's market sentiment went through three stages before the Binance Listing: airdrop, IDO and Binance Listing. In these three stages, the sentiment of retail investors underwent a dramatic change. First, after the airdrop snapshot was taken and distributed, retail investors felt that the airdrop proportion was too low and the airdrop token amount was too small. 30% of the huge proportion was allocated to community incentives, but the total number of airdrop addresses and the proportion allocated to users or ecosystem projects were not clearly stated, leaving a lot of room for operation. At this time, the market had a negative attitude towards Myshell.
However, in the IDO stage, Myshell managed to reverse the market sentiment. The pricing divergence is what we consider to be the core contradiction between current retail investors and project parties. Myshell allocated 4% of the total supply to the IDO, benefiting Binance Wallet users. The corresponding FDV of only $20 million naturally obtained over 100 times oversubscription. The FUD sentiment of retail investors was weakening, but due to the current cycle's change in consensus on project airdrops - distrust, many retail investors are still bearish, so the vast majority of airdrop addresses chose to sell at TGE, as can be seen from the increase in on-chain holding addresses, more than 50% of the airdrop addresses chose to sell immediately.
On the TGE day, according to the $SHELL pool data on dexscreener BSC, the price reached a high of $1.64 in the first hour after TGE, with a trading volume of $3.2 million and a circulating market cap of $420 million; the second hour saw the price pull back to a high of $0.9, with a trading volume of $17 million and a circulating market cap of $240 million. The closing price on the 13th was $0.37, with a circulating market cap of $100 million.
Between the 13th and 27th, the price remained between $0.36-$0.6, corresponding to a market cap of $100 million to $160 million. During this period, $SHELL had support at the low point and showed a trend of volume contraction and price increase. The chips sold by the airdrop addresses were absorbed by the top holding addresses, further increasing the concentration of chips.
Overly high expectations and concentration led to a rat race
Before the Binance listing, Myshell's market evaluation was not bad, and the project's market mindset was slightly positive. At the same time, the on-chain low opening and the Binance contract following up must have washed away a large number of profit-taking investors who were not firm, and the market makers recovered a large amount of airdrop chips. The low pre-Binance listing pricing, the concentrated chips, and the inherent conditions for pulling up and pushing up the price were all there. But if you add the expectations of "Myshell is the new AI leader on BSC", "Binance invested", and "secondary listing", the on-chain low opening became the biggest weakness. The rat race that rushed in after the TGE became the most steadfast holders before the listing, laying the groundwork for the unilateral trend after the listing. The joint dumping of the rat race and market makers completely destroyed Myshell's efforts to benefit users in the IDO.
This is the pain that Myshell and more VC coins will face in the future when they return to long-term thinking and try to support their market cap with roadmaps and products. The rat race that has existed since the birth of Crypto has become rampant after being nurtured by short-term thinking. When a project has strong expectations, whether it opens low or high, the trading is centered around the expectations, and once the expectations are realized, it will collapse.
Balancing expectations with the roadmap is Myshell's current homework
The low opening and user benefits, community launch, are reasonable directions in themselves, but the balance between expectations and actual roadmap needs to be properly controlled. Relying on expectations to attract users, with the product fundamentals supporting the bottom after the expectations are realized, the price management range of the token should be around the reasonable highest market cap based on expectations and the actual product bottom market cap.
Project parties returning to long-term thinking cannot rely solely on IDO user benefits to gain market trust, this is just the first step. In the future, they should also focus on the contradiction between project parties and VCs in terms of transparency. After the project party launches tokens through IDO, they no longer rely on listings, which can solve the transparency conflict between the two parties. The token unlocking process on the chain becomes more transparent, ensuring that the past conflicts of interest are effectively resolved. On the other hand, the traditional CEX often faces the dilemma of price plummeting after token issuance, which leads to a gradual decline in trading volume, while the transparency of on-chain data allows the exchange and market participants to evaluate the real situation of the project more accurately.
Projects that open low on-chain must be prepared for a period of time when they cannot be listed, otherwise they are very likely to encounter the dilemma of Myshell's rat race. Only by winning the trust of users and the market on the chain can they lay the foundation for the token price to spiral upwards.
Kaito's Middle Way Fits the Transition Period of Industry Transformation
Kaito's airdrop distribution continues the "unwritten rule" of VC coins: reducing the amount for top users, increasing the number of claimable users, i.e., long-tail distribution. According to the personal weight algorithm, 1 Yap can be exchanged for 5-20 $KAITO. 96 million $KAITO are distributed to Ecosystem yappers, Partners, and Yappers, but the detailed proportions are not disclosed. This strategy allows the project party to hide and recycle chips to the greatest extent in the airdrop, and due to the large number of airdrop addresses, the selling pressure at the opening is greatly reduced - compared to concentrated airdrops to top KOLs. Pricing at the $1B price point, where both bulls and bears are hesitant, has facilitated a smooth turnover of floating capital.
Splitting the Plate Becomes the Flywheel Foundation
Secondly, Kaito has designed a positive spiral around NFT, Yaps, and skaito in the early stage, using the characteristics of the split plate to constrain the token price when necessary. Kaito NFT prices have been rising continuously before the airdrop snapshot, with a peak floor price of 11ETH, about $30,000. After the snapshot, the price dropped, and at the TGE, the value was $5,800. The current floor price has gradually rebounded to 2.5ETH. A single NFT receives 2,620 $KAITO, about $4,700 (average price of $1.8 on February 21), and a total of 1,500 Kaito NFTs receive nearly 4 million $KAITO.
The weight of sKAITO is positively correlated with the amount of staking, the staking duration, and the 7-day voting activity, and negatively correlated with the weight of Yappers voting pool and NFT holders.
Source: Kaito
The voting weight is composed of Yappers (50%) + Holder [sKaito, NFT] (50%).
1 Genesis NFT ≈45,980
1 sKAITO ≈11.79
The voting power of each NFT = 3,900 $KAITO
The voting power of NFT and sKAITO dynamically changes, depending on the relationship between the total market value of NFT and sKAITO, and the voting power gradually tends to the side with the higher market value
Simple calculation shows that holding NFT is less costly than using sKAITO.
By staking Kaito tokens, users can obtain voting rights for governance and project decisions. Currently, each Kaito NFT provides 45,980 voting rights, and the voting rights of each NFT are equivalent to 3,935 $KAITO.
The arbitrage space between NFT, Yaps, and skaito allows Kaito's price performance to be controlled to a certain extent through the NFT market value.
Choosing a Growth Path Suitable for One's Own Track is More Critical
In terms of pricing strategy, Kaito's choice is neither good nor bad, which is understandable. Because returning to long-termism is a much more arduous journey than ever before. Kaito's chosen approach is to continuously output long-term value, allowing the current market value to gradually return to the product strength.
After the cyclical collapse of Memecoins, Kaito has the tendency to take over the market attention distribution leadership, competing for Mindshare in a single time period, and Mindshare is actually responsible for dissemination by KOLs, with KOLs working for Kaito and Kaito paying yaps. As the importance of Mindshare increases, more and more projects will join Kaito and pay fees. The continuous increase of KOLs, users, and project parties is the foundation of Kaito's positive spiral, and the judgment of whether this spiral is successful depends on the degree of Mindshare's market penetration.
Observing the market acceptance of Mindshare is relatively difficult. Therefore, Kaito has provided tools like the Yapper Launchpad, which is a toc product and also a tob evaluation indicator. In general, the higher the NFT market value and the higher the sKAITO staking rate, the higher Kaito's market share. And the corresponding yaps will also rise with the tide, attracting more KOLs to join.
Summary
Whether the project party chooses Myshell to lead the transformation, or chooses the token issuance model driven by both community and VC, or like Kaito, recognizes its own track positioning and achieves value return through continuous long-term value output, both are signs of industry innovation towards long-termism.
Returning to long-termism is like going from extravagance to frugality, which is difficult for an industry without regulation, and even more difficult is that the valuable innovations in Crypto seem to be only in DeFi, and the long-termism of tracks like NFT, Gamfi, and Metaverse has given users a very poor experience. Therefore, with the "wolf" of long-termism completely failing in the past and the "tiger" of short-termism batch-speeding through the plate in the future, returning to long-termism in the present is an anti-human path, but may be the only lifeline. If you do not trust any narrative and are hostile to any technology, then this industry may not be able to continue to grow for you.
We need to wait, patiently wait, wait for the moment of qualitative change in Crypto, which may be opened by AI Agents, or may be other tracks. But before that, we need to adhere to long-termism, and in this process, break the long-standing boils, adapt to and face the pain caused by the return to long-termism.
