Written by: Haotian

In the past few days, some new coins in the secondary market have collectively declined, which seems to reflect the market's uprising against the current cycle's "narrative first, financing second, TGE later" VC industrialized coin-minting path? It is worth pondering why retail investors would rather participate in high-risk PVP conspiracy coin trading on the chain, but stay far away from new coins endorsed by VCs. Here are my thoughts:

1) First, we must admit that the industry innovation-driven model led by VCs in the previous round has evolved into an industrialized assembly line of "financing, issuing tokens, and launching". For a period of time, glamorous whitepaper narratives + top-tier luxurious investment lineups + seemingly impressive massive financing numbers + expectations of token farming have become liquidity harvesting weapons pushed to the market, severely overdrawing market trust.

Although we cannot generalize, when a pile of projects that rarely fulfill promises and have no wealth effect are pushed to the market, the market now irrationally labels them as VC scams;

2) The main fatal problem with VC coins lies in their pricing mechanism. After a project completes multiple rounds of financing, the valuation at TGE has been repeatedly raised, which leads to two inevitable results: first, retail investors' entry cost is too high; second, early investors have a strong motivation to sell. This undoubtedly designs a "death trap" for new coins. Following this logic, some projects are more likely to have downward space after TGE, and unilateral downward trend will bring negative short sentiment, forming a vicious cycle.

In comparison, although on-chain coins starting from zero with low market value have high unknown risks, many retail investors are still unwilling to touch VC coins with high downward expectations and certainty;

3) A market environment with liquidity drought will cause a more fatal blow to VC coins. Imagine when all participants know that selling first after TGE is the optimal strategy, and everyone thinks short is a rational choice, all VC coins will face extreme market selling difficulties. Encountering an overall market liquidity drought, VC coins will likely become "sacrificial objects".

This is like a "prisoner's dilemma". Project parties' generous airdrops will be met with selling pressure, and reluctance to release tokens will be criticized by public opinion. No matter what, the result is: lack of sufficient buying support;

4) Everyone is aware of the problem, so how to solve the VC coin trust crisis? The core issue is how to reconstruct the interest balance point among project parties, VCs, and communities, such as:

1. Start with low valuation and leave enough room for growth: Project parties and VCs should accept lower initial valuations, making TGE the true starting point of project value rather than its peak, giving the market sufficient growth expectations; (Recently seeing many financings are still large shows the problem is far from intensifying)

2. Partially de-VCize: Introduce community participation in specific stages through DAO governance, IDO, fair distribution, etc., reducing VCs' dominance in token allocation and increasing community weight;

3. Differentiated incentive mechanism: Design additional incentives for long-term holders, truly returning value to project ecosystem participants and builders, rather than short-term speculators, which requires further upgrade of airdrop mechanisms;

4. Operational transparency: Project parties should pick up the initial mechanism of regularly disclosing development progress and fund usage transparently, rather than simply conducting one-sided market promotion before and after TGE;

In conclusion.

In fact, VCs have made outstanding contributions in the process of Crypto industry's maturation. Talking about VC coins with color change does not mean completely de-VCizing. An industry without VCs would also be an unbearable disaster with conspiracy groups running rampant.

Currently, the Crypto market financing ecosystem still needs to be restructured, and VCs should transform from passive "arbitrage intermediaries" to active "value enablers". Essentially, the current predicament of VC coins only reflects an overly involution market and is a manifestation of Crypto market's increasing maturity, which raises higher requirements for ordinary investors on how to identify quality projects and invest rationally.