When the hair-beating party begins to dislike VC project: How to break the situation

Author:Haotian

In the past two days, some new coins in the secondary market collectively declined, which seems to reflect the market's rise in the current cycle of VC industrial coin making paths such as "narrative first, refinancing, and then TGE"? It is worth thinking about why retail investors would rather participate in the high-risk PVP conspiracy currency game on the chain, and stay away from the new coins endorsed by VCs? Next, let me talk about my thoughts:

1) First of all, it has to be admitted that the industry innovation-driven model dominated by VC in the last round has evolved into a set of industrial assembly lines of "financing, issuing coins, and launching". For some time, the gorgeous white paper narrative + Top-level luxury investment lineup + seemingly glamorous huge financing numbers + the king-level hair-fighting expectations have become liquidity harvesters to be pushed into the market one by one, seriously overdrawing the market's trust.

Although it cannot be generalized by any means, it is introduced to the market as a pile of projects that rarely fulfill their promises and have no wealth effect, so that the market now irrationally outlines it with VC scams;

2) The main fatal problem of VC coins is its pricing mechanism. After the project completes multiple rounds of financing, the valuation 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 selling motivation. This undoubtedly designed a "death trap" for the New Coin. According to this logic, some projects will have a higher probability of downward space after TGE, and the unilateral downward trend will induce negative sentiment of shorting in the market, which will form a vicious cycle.

In contrast, although the community coins that start at zero and start at low market value on the chain have great risks, many retail investors are still unwilling to touch those VC coins with high downward expectations and certainty;

3) The market environment with exhausted liquidity will cause a more fatal blow to VC coins. Just imagine, when all participants know that TGE is the best strategy to sell first, they all think that shorting is a rational choice. All VC coins will face great market selling difficulties when they go online. When the overall market liquidity is exhausted, it is highly likely that VC coins will become the target of "sacrifice".

This is like a "prisoner's dilemma". The project party will be sold and put into a sell-off pressure, and if it is not released, it will be criticized by the public. No matter what, it will bring a result: lack of sufficient buying support;

4) Everyone knows the problem, how to solve the VC currency trust crisis? The core problem is how to reconstruct the balance of interests between 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 starting valuations, so that TGE will become the real starting point rather than the peak of the project, and give the market sufficient growth expectations; (I saw a lot of financing still very large recently, which means that the problem has not intensified)

2. DeVCization in some links: introduce community participation in some special links, reduce the dominance of VC in token allocation 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 ecology, rather than short-term speculators, which requires further upgrade and transformation of the airdrop mechanism;

4. Transparent operation: The project party should pick up the transparent accountability mechanism for the initial regular disclosure of development progress and fund use, rather than simply conducting unilateral market promotion and distribution before and after TGE;

above.

In fact, VC has made outstanding contributions in the development process of the Crypto industry's tendency to mature. Talking about VC's coin changes does not mean that it has to be completely de-VC. Behind the industry without VC, the rampant cabals will also be another disaster that the industry cannot bear.

The current Crypto market financing ecosystem still needs to be reconstructed. VCs should transform from negative "arbitrage intermediaries" to positive "value enablers". In essence, the current dilemma of VC currency can only reflect that the market is too inclined, and it is also a manifestation of the increasingly mature Crypto market. This puts forward greater requirements for ordinary investors how to identify high-quality projects and how to invest rationally.