TGE Debate: Make Your Holders Rich
Binance Research Report | Elfa Social Smart Alpha
Marco Manoppo & Karon Pangestu
May 20, 2024
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Good Morning.
The weekend was relatively uneventful compared to the usual crypto shenanigans. Markets are still mixed, with no clear sectors winning or losing. Not surprising at all as the entire timeline is filled with comments about the high FDV low float token launches.
Which… is also the focus of today’s issue.
In Today's Email:
What Matters: Cobie comments on TGE 🧑🏼🎸
Product: Social data for alpha 🧿
Charts: Low float, locked tokens 📉 📈
Narratives: SOL outperforms majors, but the cop city continues.
We are now publishing airdrop alphas on our telegram!
You read and share. We listen and improve. Send us feedback at [email protected].
TOGETHER WITH
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WHAT MATTERS
Cobie on Low Float High FDV Launches
State of play: In his latest Substack post, Cobie examines the shift from public ICOs to private market activities in new token launches, highlighting misconceptions about low float and high FDV.
Cobie finds that this transition largely impacted retail investors' potential gains.
Current private market activities concentrate the financial returns in the hands of early private investors.
His analysis serves as a comprehensive critique and guide on the evolving landscape of token launches, highlighting the increasing divide between private gains and public opportunities.
Here are the key takeaways from his latest post:
Shift from ICOs to Private Funding: Regulatory pressures have shifted token fundraising from public ICOs to private rounds. Ethereum was able to do an ICO because the regulatory landscape was less clear back then.
Private Market Capture: The rise of private market crypto investors resulted in price discovery happening in private instead of public, often at inflated valuations before publicly trading. This private capture contrasts starkly with the public and inclusive nature of early ICOs.
High FDVs and Low Floats: High FDVs and low float rates have become problematic, as they often do not reflect the actual market demand and can lead to market manipulation.
What’s next: Cobie predicts a possible adjustment in market strategies as projects and founders respond to the changing dynamics and perceptions around new token launches.
Our take: Sooner or later this needs to change as it will also hurt private market investors, especially those who entered at a later round and are less savvy in their negotiations.
For builders and investors: Never underestimate the financial populism culture in crypto.
Making your holders wealthy in a genuine way, with as much transparency as possible, is the key to operating a sustaining project.
The entire crypto game is "can you make your community rich"
If you try to launch at max FDV you are only enriching insiders
That's how you get thought pieces, not users
Great take from @cobie
— Jason Choi (@mrjasonchoi)
4:50 AM • May 17, 2024
Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 500 crypto VC individuals 👇
PRODUCT OF THE WEEK
Elfa is a social data infrastructure that tracks smart activity on Twitter, Telegram, and Farcaster. Its proprietary social graph of 10K+ smartest CT chads tracks the collective smart mentions of tokens.
Elfa tracks 100M+ tweets and 20M+ telegram calls across 10K+ smart accounts to recommend tokens with surging positive sentiment amongst smart accounts and relatively low mentions in the recent 7 days.
Users can combine on-chain data and social data to create their own robust trading signals.
Elfa tracks Chinese, Korean, and English Twitter.
Other cool products:
Orna, a marketplace for Lens Protocol.
autonom.me, a web3 collaboration tool.
Bonzo Finance, a non-custodial lending protocol on Hedera.
Carchain, an all-in-one on-chian vehicle management mobile app.
BitEscrow, a non-custodial Bitcoin escrow and smart contract service.
CHARTS OF THE WEEK
Decreasing Token Float at TGE Over the Years
State of play: The chart highlights growing disparities between market caps and FDVs for token launches over the past three years, with FDVs in mid-2024 nearing the total for 2023, indicating a trend toward high valuations.
According to the chart, the MC/FDV (float) in 2022 is 41.2%, decreasing to 26.7% in 2023 and 12.3% in 2024.
However, Doug Colkitt notes that it seems implausible that the average token launched in 2022 had a 40% float at its TGE. He provides the data of % float at TGE of major tokens launched in the past:
OP, SUI, and DYDX - 5% float.
Aptos - 13% float.
Safe - 16% float.
SOL - 12.5% float.
LDO - 25% float.
UNI - 15% float.
PENDLE - 16% float.
He then claims that the 12.3% float percentage for new tokens in 2024 aligns well with historical averages.
Our take: Private market actors (CEXs, MMs, Funds, Founders) are getting more sophisticated in fleecing retail’s capital — but the more we do this the more jaded the primary markets will become, supporting memes instead of actual project.
Recently Launched Tokens Supply
State of play: According to Binance Research’s report, recently launched tokens have low circulating supplies. The data shows that recently launched tokens have circulating supplies as low as 6% and none exceeding 20%.
The average circulating supply of those newly launched tokens is 13%.
Given scarce liquidity, low circulating supplies contribute to higher initial token prices, thereby driving higher FDVs.
At their peaks, some recently listed tokens had valuations similar to those of the largest tokens in the market, which have been around for years.
Our take: Sooner or later this dynamic needs to change — the longer we wait, the more severe the snap back will become.
QUICK BITES
Point72 also owns BTC via spot ETFs.
Turkey tables crypto bill in parliament.
ZkSync hints airdrop by the end of June.
Binance Exec denied bail by a Nigerian court.
Genesis is set to return $3B of customer assets.
PumpFun exploiter reportedly arrested in London.
Hong Kong allows residents to set up E-CNY wallets.
Miners eye the Middle East as the next region for growth.
Eclipse Labs names new leader in week of CEO updates.
Dolce & Gabbana sued for messing up delivery of its NFTs.
LayerZero announces pause of Sybil bounty-hunter process.
Kraken considering whether to end Tether support in the EU.
NOTEWORTHY READS & MEME
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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.