From VC endorsement to on-chain games, the value migration under the liquidity crisis of the crypto market.

Recently, some new coins in the Secondary Market have collectively fallen, seemingly reflecting the market's rise against the current cycle of "first narrative, then financing, and finally TGE" in the VC industrialized coin creation path? It is worth pondering why retail investors would rather participate in high-risk PVP conspiracy coin games on-chain, while keeping their distance from new coins backed by VCs? Next, let me share my thoughts:

1. First of all, it must be acknowledged that the previous round of VC-led industry innovation-driven models has evolved into an industrial assembly line of "financing, issuing coins, and launching." For a period of time, the glamorous white paper narrative + top-tier luxurious investment lineup + seemingly dazzling huge financing numbers + king-level expectations for easy gains have become liquidity harvesting weapons pushing towards the market, severely overdrawing the trust of the market.

Although it cannot be generalized, when a large number of projects that rarely deliver on promises and have no wealth effect are pushed into the market, the market irrationally generalizes them as VC scams.

2. The main fatal problem of VC coin is its pricing mechanism, when the project completes multiple rounds of financing, the valuation of TGE has been raised layer by layer, which leads to two inevitable results: first, the cost of retail investors is too high; Second, early investors have a strong incentive to sell. In fact, this undoubtedly designs a "death trap" for new coins, according to this logic, some projects will have a greater probability of downside space after TGE, and the unilateral downside will be wrapped in the negative sentiment of shorting the market, which will form a vicious circle.

In contrast, although there are significant unknown risks associated with those on-chain coins that start with zero and have low market capitalization, many retail investors are still reluctant to touch those VC coins that have high downward expectations and certainty.

3. A market environment with exhausted liquidity will deal a more fatal blow to VC coin. Imagine, when all participants know that selling off immediately after the TGE is the optimal strategy, and all believe that shorting is a rational choice, all VC coins going live will face significant market sell-off dilemmas. In the case of overall market liquidity exhaustion, it is highly likely that VC coins will also become the "sacrificed" objects.

This is like a "prisoner's dilemma"; if the project team generously airdrops, it will face selling pressure, while if they hold back and do not release, they will be criticized by public opinion. Either way, it leads to one result: a lack of sufficient buying support.

4. The problem is clear to everyone, how can we break the trust crisis of VC coins? The core issue lies in how to reconstruct the balance of interests between project parties, VCs, and the community, for example:

1. Start with a low valuation, leaving enough room for growth: The project party and the VC should accept a lower starting valuation, so that TGE can become the starting point of the real value of the project rather than the apex, and give the market sufficient growth expectations; (Recently, I have seen that a lot of financing is still very large, which shows that the problem is far from intensifying)

2. De-VC in some links: Introduce community participation in some special links, and reduce the dominance of VC in token distribution and increase the weight of the community 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 the participants and builders of the project ecology, rather than short-term speculators, which requires further upgrading of the airdrop mechanism;

4. Transparent operation: The project team should pick up the transparent accountability mechanism that regularly discloses the development progress and the use of funds, rather than simply unilaterally publicizing the market before and after the TGE;

Above.

In fact, VC has made outstanding contributions in the development process of the maturity of the Crypto industry, and talking about VC currency color change does not mean that it has to be completely de-VC, and the rampant cabal behind the industry without VC will also be another disaster that the industry cannot bear.

At present, the financing ecology of the Crypto market still needs to be reconstructed, and VC should transform from a passive "arbitrage intermediary" to a positive "value enabler".