Binance released a report that explored the "culprit" of the bull market - VC coins. The report is pertinent, pointing out that according to the current market value, the entire market will unlock $155 billion in funds by 2030, forming an extremely terrifying selling pressure. The main reason is the extremely high opening FDV (Fully Diluted Value) and extremely low initial circulation. The Binance report pointed out that before the TGE (token generation event), VC had pushed the valuation to a very high price. I have also discussed this topic and response strategies on Twitter. If you are interested, you can check out the relevant content. There is indeed a phenomenon of false prosperity in the current market. On the one hand, everyone resists VC coins, and on the other hand, a large number of VC friends complain that they can't make money. Due to the lock-up period, project parties and investors are forced to sell tokens at extremely low prices and look for buyers through OTC (over-the-counter transactions).
Let's sort out this logic: the project needs financing, VC pushes up the valuation, TGE reaches a peak as soon as it opens, retail investors are cut off, and VC sells coins at a discount through OTC. This phenomenon is very magical: for projects with valuations of billions or even tens of billions of dollars, no one in the entire industry chain seems to really benefit, and everyone is busy "cutting meat". As the "originator", VC coins are both blamed and hit, and at this time, one can't help but ask: "What are you trying to do?"
I myself have participated in some "VC coin" projects, and some of them got very low-priced chips in the seed round. Do you ask me if I am happy? Of course I am happy to see the book assets rising round by round, but what is the use if I can't sell them? In the end, after a few years, it is good to unlock 10% of the assets. So, I also want to ask: "What are you trying to do?"
If VCs don’t “spoil” entrepreneurs into accepting such high valuations at the beginning, if TGE is not so expensive, and takes an upward curve, unlocking more tokens, then in the end 10% will be retained anyway. What’s the difference between that and peaking at the opening and enduring for three years?
As a victim (being cut off from the secondary market) and beneficiary (participating in the primary market) of VC coins, I have also been thinking about this issue recently, and gradually found that this is at least a dead end for now. The reasons for the dead end are:
1. The prosperity of the Web3 capital market is extremely mismatched with the scarcity of high-quality projects.
2. The prosperity of the Web3 capital market is extremely mismatched with the value it actually creates.
The first point
I discussed on Twitter a few days ago that more than 1 million tokens have been issued in the past two months alone. Because of the extremely low threshold for issuing assets in Web3, the threshold for issuing tokens for projects is also very low, and most tokens eventually return to zero. In the short term, due to the economic downturn in traditional industries and the "wealth-making effect" and exit speed of Web3, a lot of funds have poured into it. There is a lot of money and a lot of projects, but there are very few good projects. Funds are concentrated in a few projects, pushing up valuations. We can see that the projects that can really get tens of millions of dollars in super financing in this round are usually led by executives of large companies or professors of famous universities, and supported by top VCs. These projects "must" be listed and traded, which eventually leads to the current situation. Many entrepreneurs who have just entered Web3 are deceived by appearances and think that starting a business in the currency circle is easy, but in fact good projects are overestimated, and a large number of bad projects are also hyped.
Second point
In this round of bull market, few people have mentioned Mass Adoption, and value coins have become a "funny word". Blockchain, as a revolutionary technology, was once expected to change the old world. In the last bull market, everyone expected everything to be assetized; in the last bull market, everyone expected a fair, trustworthy, and tamper-proof world. What do you expect in this bull market? What I see is a world where everyone wants to launch a chain but can't explain why they must launch it. The lack of innovation and external value has created a PVP (player vs. player) world of speed competition. Once there is no positive value, people start to compete to see who can run faster. Even teams that want to work seriously will only think about starting over when they encounter an irreversible drop in the price of the currency. Anyway, the threshold for issuing coins and listing is not high. In the traditional world, Apple, Google, and Amazon cherish the hard-won listing opportunities. Even if they experience a downturn, they will persist in development and eventually change the world, which will be reflected in their stock prices.
Many factors have contributed to this embarrassing deadlock. How can it be solved? Who will solve it? It is still unknown. It seems that VC is the culprit of the bull market, but VC is just a member of this deadlock. Me too, and you too.
