Author: DeFi^2, crypto researcher

Compiled by: Felix, PANews

Worldcoin (WLD) has experienced significant price gains recently, rising by approximately 45.1% over the past week. However, according to an article published by encryption researcher DeFi^2 on the Below are the content details.

Worldcoin, which is expected to begin internal unlocking in seven days, has one of the lowest circulating coins ever in the crypto industry, with only about 2.78% of coins in circulation. With this in mind, it makes sense to take a closer look at how your project achieves this state. This article reveals how the Worldcoin team secretly controls the price in order to still maintain around $30 billion in FDV when the internal unlock begins.

First some background. When Worldcoin was first launched, the Foundation’s circulating supply was 1.4%, or 140 million WLD. While there were concerns that such low circulation would cause it to launch at an extremely high FDV, the team has allocated 100 million of the WLD to market makers and provided them with call options, allowing them to end the contract at slightly higher FDV. Buying back large amounts of tokens at prices above $2 is intended to prevent prices from surging too high. Allocating supply to market makers to create favorable prices is not uncommon in the industry.

The old Worldcoin white paper from 2023 describes the price suppression formula provided to market makers As one would expect, WLD is unable to significantly exceed the call price during the contract period because market makers "suppress" the price. Worldcoin CEO Alex Blania also posted a video discussing the special need for this contract to prevent prices from disrupting the market:

Worldcoin CEO explains their technique to suppress price to avoid WLD from surging to $10. Later that year, they refused to renew the contract and WLD surged to $10. (Image source: The Scoop Podcast) Note his rhetoric, he aims to avoid the price "shooting to $10" and goes on to say that such a scenario would be "terrible".

Nonetheless, on December 16, with just 1.2% of circulating supply, Worldcoin decided not to renew the market maker contract, canceled the price-suppressing call options, and even further removed an additional 25 million WLD from circulation. With minimal market maker participation and a market capitalization of just $98 million at the time, the price predictably surged 100% in a matter of hours, which is exactly what Blania claims they were trying to avoid.

Apparently, the team realizes that it would be unwise to publicly describe how they control the price, so when asked at Token2049 in Dubai if they pay attention to the price, the Worldcoin CEO claimed that they have no control over the price and that it is driven by the market: The CEO of Worldcoin said that although their actions to change policies and token economics have a clear impact on prices, they have little to do with prices. But this is not the case. Eleven-digit (tens of billions of dollars) valuations are only possible due to the team’s tokenomics design, and the daily price movements of the tokens are in many cases influenced by the team’s proactive commitment to unlocking Changes to volume, market maker contracts, and pre-unlock announcements. This begs the question: Why do they act this way?

Back to where this article started - at the time of the insider unlock, the float was just 2.7%, which is probably the lowest rate ever seen in crypto history for a major VC-backed unlock. As a reminder, this may also be the only thing keeping WLD afloat at a staggering $30 billion FDV, a price that insiders could soon be selling for. But why is circulation so low? According to Blania in 2023, they have to keep the circulating supply low because "it would be completely unfair to release 10% of the supply all at once" for UBI (Universal Basic Income): Worldcoin CEO defends low circulation, claiming it’s for UBI. Confusingly, the token economics designed by the team resulted in most of the issuance going to insiders a year later, rather than UBI. (Image credit: The Scoop Podcast) But that’s exactly what the team did with the unlocking, and those tokens ended up in the pockets of insiders, not UBI recipients. Even with the new unlocking schedule, over a year from now, nearly 1 billion tokens will have been sent to teams/VCs, and extrapolating from the current pace of UBI grants, only 600 million tokens have been allocated to UBI recipients . This means that within a year, the WLD received by insiders is expected to account for more than 60% of Worldcoin's entire circulating supply (note: 10 divided by 16, approximately 62.5%). 60% is a large percentage and basically means the ecosystem is purely for VC firms to sell. This seems to directly contradict the current excuse for keeping the circulation low to benefit UBI.

There are many other sources adding to circulation, and these supplies are also not targeted at UBI recipients. Operators like Orb sometimes earn more than 20,000 WLD per week by collecting biometric data from vulnerable people and sending it directly to Binance:

When the WLD price surged to $12 in March, Orb players were sending nearly $150,000 of WLD to Binance every 3 days. Circulation is so low, who currently holds nearly $30 billion in FDV, and remains high as it unlocks A victim of valuation? Data shows that a large part of them are Korean retail investors, and many of them may not even be able to read English, let alone understand the situation. At the time of writing, Bithumb holds nearly 25% of circulating supply:

As the internal unlock approaches, the number of WLD held by Korean retail investors on Bithumb continues to grow. Most of these assets have lost 70-80% of their value in recent months as the Worldcoin Foundation aggressively sells tokens (Source: Arkham Intelligence) With this in mind, it’s probably no coincidence that Worldcoin waited until a week before the unlock to release positive news. Although this was just a small change to release selling pressure, the news proved to be very effective, forcing retail investors to unknowingly offer higher prices and more liquidity, allowing insiders to exit within a week. To make matters worse, it seems possible (but unconfirmed) that someone within the team or venture capital capital used insider information to buy in before the announcement was made public.

Chart shows a coincidental price spike in the 24 hours leading up to news of the unlock extension While behavior like this is not uncommon in the crypto space, many market participants still don’t understand the secrets. This article aims to shed light on a project that seems intent on supporting a supposedly lower token price, and many of the reasons listed are why the author intends to short WLD in the months after the unlock begins.

(The above content is excerpted and reprinted with the authorization of our partner PANews, original text link )

Statement: The article only represents the author's personal views and opinions, and does not represent the objective views and positions of the blockchain. All contents and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions, and the author and Blockchain Client will not be held responsible for any direct or indirect losses caused by investors' transactions.

"Worldcoin's "Money Stealing" Plan: Price Manipulation, Misleading and Unexpected Victims" This article was first published on "Blocker".