Author: @BlazingKevin_, the Researcher at BlockBooster

CEX is facing a consensus shift where users lose confidence 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 unilateral downward trend. Once this consensus is further strengthened, gradually shifting from two to three months to a complete bull-bear cycle, the user retention rate and user growth of CEX may be severely impacted.

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 at launch has become the norm due to the large proportion of VC lock-ups. The combination of the two inevitably leads to TGE prices exceeding the psychological expectations of retail investors.

The high FDV and low MC strategy was acceptable in previous bull-bear cycles because the "Buy and Hold" consensus would ultimately reward the diamond hands. But this consensus began to weaken after BTC's entry into ETFs, 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 the US dollar assets, being the first to decouple from the four-year cycle; the three-pronged approach of the animal kingdom, agents, and celebrity coins has catapulted Memecoins to the pantheon and then plummeted them, 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 early on. The high FDV is extremely unsuitable for retail investors who are used to the Memecoin valuation method.

• 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 depressed and pessimistic.

• With their own shares locked up, they can only recover their early costs by dumping the small circulating volume of chips, so they can only ignore the market sentiment and choose to open high.

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 expected to have only 10M, the result of pricing at 1B after launch is that the funding cost reaches -2%, and there will be no miracle before the expectation is met. And the poor price performance will cause the price to fall even below 10M without stopping. Such projects are increasing, and even if there are some exceptions due to reflexivity in the middle, the probability of successfully shorting VC coins at launch may still be far greater than 50%. When long-term thinking disappears and short-term thinking prevails, the prosperity brought by the lack of regulation will also make the bubble burst and everything will be in vain.

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 instead accelerate the depletion of the industry's vitality. Therefore, from now on, we need to return to long-term thinking.

Myshell encounters 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 then plummeted sharply after the Binance 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. During these three stages, the sentiment of retail investors underwent a dramatic transformation. 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 believe 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. Corresponding to an FDV of only 20 million, it naturally obtained over 100 times the 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 were 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, with over 50% of airdrop addresses choosing 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 on the 13th, with a trading volume of $3.2 million and a circulating market cap of $420 million; the second hour saw the highest price drop to $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 points and showed a trend of shrinking volume and rising. 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 perception was good and the market sentiment was relatively positive. At the same time, the on-chain low opening and the Binance contract following up must have washed away a large amount of the profit-taking positions, 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 pumping and dumping were all in place. 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 growing pains 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 under the nourishment of 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

Opening low to benefit users and kick-start the community is a reasonable direction, but the balance between expectations and the actual roadmap needs to be properly controlled. Attracting users with expectations, and then having the product fundamentals support the price floor after the expectations are realized, the price management range of the token should be around the reasonable highest market cap and the actual product floor value.

Project parties returning to long-term thinking cannot rely solely on IDO concessions 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 launching tokens through IDO, the project parties no longer rely on listings, which can solve the transparency issues 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 dilemma faced by traditional CEX is that the token price often crashes after issuance, causing the trading volume to gradually decline, while through the transparency of on-chain data, the exchange and market participants can more accurately assess the real situation of the project.

Projects with low openings on the 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 warehouse. Only by winning the trust of users and the market on the chain can it be the basis for the currency price to rise in a positive spiral.

Kaito's Doctrine of the Mean Fits the Transition Period of Industry Change

Kaito's airdrop distribution continues the "unwritten rule" of VC coins: reducing the amount for top users and increasing the number of claimable users, that is, long-tail distribution. According to the personal weight algorithm, 1 Yap can be exchanged for 5-20 $KAITO, and Ecosystem yappers, Partners and Yappers received 96 million $KAITO, but the detailed proportion was not disclosed. This strategy can allow the project party to hide and recover the chips to the greatest extent in the airdrop, and due to the large number of airdrop addresses, the opening pressure is greatly reduced - compared to the concentrated airdrop to the top KOLs. Pricing at the 1 B price point where both bulls and bears are hesitant has facilitated a smooth handover of floating funds.

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. The price of Kaito NFT kept rising before the airdrop snapshot, with a peak floor price of 11 ETH, about $30,000. After the snapshot, the price dropped, and the TGE price was $5,800, and the current floor price has gradually rebounded to 2.5 ETH. A single NFT received 2,620 $KAITO, about $4,700 (average price of $1.8 on February 21), and a total of 1,500 Kaito NFTs received nearly 4 million $KAITO.

The weight of sKAITO is positively correlated with the amount of staking, the length of staking, 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 50% Yappers + 50% Holder[sKaito, NFT].

• 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 changes dynamically, depending on the relationship between the total market value of NFT and the total market value of 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 decision-making. 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 gain nor loss, which is understandable. Because returning to long-termism and letting the product support the market value 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 Memecoin stage collapse, Kaito has the tendency to take over the market attention distribution leader, competing for the Mindshare of a single time period, and Mindshare is actually responsible for dissemination by KOLs, KOLs work for Kaito, and Kaito pays yaps. As the importance of Mindshare increases, more and more projects will join Kaito and pay fees. The continuous increase of KOLs, users and projects is the foundation of Kaito's positive spiral, and the success of this spiral depends on the degree of market penetration of Mindshare.

Observing the market acceptance of Mindshare is relatively difficult. Therefore, Kaito has provided tools such as 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, attracting more KOLs to join.

Summary

Whether the project party chooses Myshell's pioneering transformation, or the token issuance model driven by both community and VC, or like Kaito, recognizes its own track positioning and realizes 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 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 it may be the only lifeline. If you don't trust any narrative and are hostile to any technology, then this industry may not be able to let you continue to grow.

We need to wait, patiently wait, wait for the moment of qualitative change in Crypto, which may be opened up by AI Agents, or may be by other tracks. But before that, we need to adhere to long-termism, and in this process, break the long-standing pus, adapt and face the pain caused by the return to long-termism.

About BlockBooster

BlockBooster is an Asia-based Web3 venture studio supported by OKX Ventures and other top-tier institutions, committed to becoming a trusted partner for outstanding entrepreneurs. Through strategic investment and in-depth incubation, we connect Web3 projects with the real world and help quality startups grow.

Disclaimer:

This article/blog is for reference only, representing the author's personal views and not the position of BlockBooster. This article does not intend to provide: (i) investment advice or investment recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; or (iii) financial, accounting, legal or tax advice. Holding digital assets, including stablecoins and NFTs, is extremely risky, with large price fluctuations, and may even become worthless. You should carefully consider your financial situation and whether trading or holding digital assets is suitable for you. For specific issues, please consult your legal, tax or investment advisor. The information provided in this article (including market data and statistics, if any) is for general reference only. Reasonable care has been taken in compiling these data and charts, but no responsibility is accepted for any factual errors or omissions.