Recent airdrop projects have all performed poorly – is the time of airdrop tokens over?

Although April was extremely busy with a series of token airdrop projects, the price performance when listing was not positive. Have investors gradually turned away from "free" tokens like this?

Token recent airdrops have all performed poorly

April 2024 has seen many large and small token airdrop events in the market. It can be said that the past month has been extremely busy with the debut of Ethena, Wormhole, Parcl, Tensor, Omni Network, Renzo, Kamino,... Upcoming EIGEN by EigenLayer - one of the largest DeFi projects today; Avail - blockchain forked from Polygon; or friend.tech - the leading SocialFi application on layer-2 Base.

Unfortunately, when the token opened for trading, the result was that the price started to dump sharply.

As account Blur below reshares the price charts of recent airdrop tokens and they all point to a fall trend:

Solana lending platform Kamino launched its governance token on April 30. Within an hour of going public, KMNO fall more than 63% as airdrop recipients rushed to withdraw funds.

Or Renzo's REZ token launched at the same time also suffered the same fate, fall 40% in just 1 day.

The reason for the airdrop token fall price is quite easy to understand. Most people "airdrop" just hope to get "free" tokens then sell them for a profit. Therefore, the bridge hold of this group is not available, once the token is received, it is "sold immediately".

Meanwhile, other investors, although evaluating the potential project, will not buy tokens at this stage. They of course see that the price is being heavily discharged by "airdrops", so they will wait until this exhaust pressure is over before they can consider buying.

Another reason is that the valuations of these projects are too high.

Overpricing

Wormhole (W) TGE with 18% of the total supply, or Ethena's ENA with only 9.5%. But according to CoinGecko, W is FDV more than 6 billion USD, ENA is 11 billion USD.

Low circulating supply can easily push up the price in the moment, but over time as more and more tokens are unlocked into circulation, the token price will only continue to fall.

Investors in today's market are all "seniors", it is difficult to convince them to buy tokens of a project with a FDV of up to 10 billion USD.

Marc Weinstein, investment partner at Mechanism Capital, is blunt:

"Investors do not believe that a project launched at an 11-figure valuation will have the potential to gainer."

The high valuation is partly due to the hype surrounding newly launched projects. The upcoming Ethena, Wormhole, Tensor or EigenLayer are all promoted with beautiful "keywords", which are FOMO,... by investors and speculators

It is the objective factor that comes from the market. Good projects, too hype at the time of launch will of course have a higher valuation than the general level. But there is also a subjective factor coming from the project team itself...

Intentional project?

An unnamed source told DL News that for some projects, the high-FDV debut may be intentional.

"The most optimistic assumption is that they want to use their tokens as currency and that high FDV means they hold more valuable assets."

But for some projects, there are even more condemnable reasons.

"The project team and investment funds can sell tokens at a cheaper price through the OTC route before the token goes public, thereby pocketing a decent amount of money."

Weinstein speculated on another reason:

"If you start at USD 20 billion and fall 95% during the bear market, then you're still a USD 2 billion project."

Not to mention the tokenomics controversy that EigenLayer, Renzo or Starknet encountered at the time of the token announcement, attracting a lot of mixed opinions from the investment community and making airdrops.## Airdrop will it ever run out?

Investors are never just "white sheep" just waiting for the project to "feather", they are wise enough to recognize these "tactics".

And the results are clearly reflected on the price chart. Token just one mainstream fall trend, it is difficult to move forward. The recipient of the airdrop is also just attentive to selling off tokens, there are enough reasons not to "hold to die" with the project.

However, airdrop tokens are still the mainstream of new projects that want to attract users. It is difficult to develop long distances without the support of the "air plowing" community. This is a mutually beneficial imperative relationship to maintain the balance of the crypto market.

Coin68 Synthesis***

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