Original | Odaily Planet Daily
Author | Nanzhi
Recently, amid the general market decline, the view that the excessive listing of "VC tokens" on exchanges has drained market liquidity has become popular. Anti-VC rhetoric has been around since the inscription era, becoming a banner and slogan during the meme boom, and this decline has intensified this contradiction to a new level.
Odaily will explain in this article whether VC coins have sucked blood from the market, whether exchanges have facilitated this process, and what users’ demands are for listing coins.
“VC tokens” siphoning market funds?
Regardless of the impact of whether the exchange launches "VC tokens" or not, the core way for users to enter Crypto is still to purchase USDT or USDC. The total amount of stablecoins represents the total amount of on-site liquidity to a certain extent. Therefore, we simply make a preliminary comparison between the "stablecoin increase" and the "VC token market value increase".
Where did the incremental funds go?
A year ago, USDT’s circulating market value was $83.2 billion, and now it is $112.7 billion, an increase of $29.5 billion. USDC rose from $28.4 billion to $32.6 billion, an increase of $4.2 billion. The total increase of the two in one year is $33.7 billion.
The following are ten VC tokens that have been launched in the past six months, with a total market value of 5.47 billion (all units below are in US dollars): PYTH (1.1 billion), ENA (950 million), STRK (900 million), ZRO (670 million), ZK (600 million), ETHFI (360 million), DYM (270 million), ALT (270 million), ATH (250 million), and EZ (100 million).
In the second half of 2023, there are also giant tokens such as TIA (1.17 billion) and SEI (1.05 billion). And this circulating market value is calculated based on a drop of at least 20%-30% in recent weeks. Therefore, we can draw a preliminary conclusion that at least 50% of the incremental funds are captured by dozens of "VC tokens".
Existing tokens suck blood together
ARB was launched in March 2023, with an initial circulation of 1.275 billion. Calculated at a price of 1.25 USDT, the initial circulation market value was 1.02 billion. The current circulation market value of ARB is 2.5 billion, but the token price has fallen by about 40%. If the increase in the circulation market value is understood as a net inflow of funds, but the holders are still losing money, then the funds can only flow to the unlocked part.
Exchange Role
In the previous section, we concluded that “VC tokens” do have a clear siphoning effect on funds, so have exchanges contributed to this process?
Regarding this issue, Binance co-founder He Yi expressed his views on the X platform: "The cryptocurrency industry is a free market, and the liquidity and trading volume of various trading platforms are shared. Even if Binance does not list new projects, these projects will still exist, and funds will be diverted to the entire industry. In addition to the unlocking of VC-invested projects, Meme coins, on-chain local dogs, wool-pulling, and Ponzi schemes will all be diverted. After the ETF is approved, the traditional financial market will also divert funds that flow directly to the cryptocurrency industry."
To briefly summarize, their views can be transformed into "VCs can also dump tokens that are not listed on exchanges in other places" and "fund diversion cannot be attributed solely to VC unlocking." We have already proved who the main role of fund diversion is through data in the previous section. As for the former view, Odaily Planet Daily believes that it ignores two important factors: "user attributes in different scenarios" and "leverage ratios in different scenarios."
In the on-chain scenario, except for users who focus on DeFi Farming or masturbating, most traders have a "disgusting" mentality towards high market value projects due to the low profit-loss ratio and the characteristics of fast shipping through the AMM feature. If a project has a circulating market value of hundreds of millions, and FDV is even higher than the sky, there will be no difference between the 90% reserved SCAM tokens in the eyes of users on the chain, and the willingness to undertake it will decrease significantly.
On the other hand, the exchange provides a leverage function that is far higher than that on the chain, with the maximum leverage being dozens of times, providing sufficient counterparty liquidity for "shipping". The on-chain capacity is far inferior to the centralized trading market after leverage.
Therefore, "user attributes" and "leverage ratio" in different scenarios significantly affect the willingness and ability of VCs to unlock tokens. If the project's transactions are conducted outside CEX, the price is more likely to return to a reasonable range quickly rather than randomly. As the unlocking slowly declines, perhaps the situation where the circulating market value increases and the token price drops will not occur. It cannot be said that centralized exchanges have no impact on the VC unlocking process.
Can exchanges do better?
For exchanges, there is no possibility that "king-level" projects such as ZKsync and LayerZero will not be put online as long as the project owners have not run away and hackers have not robbed the projects. However, for other currencies, users have many demands, and exchanges still have many better options.
Give “value” projects a chance
Some valuable projects can generate extremely high profits and cash flows. For example, the recent popular project Pump.fun has an annualized revenue of $219 million, and many users are looking forward to its token issuance and are willing to buy it. Or projects such as BananaGun and Whales Market, whose market capitalizations have reached $160 million and $40 million respectively.
The data of these projects are not constructed by VCs or freeloaders who interact and inflate the volume. Instead, they are truly needed by users and have grown step by step from small-cap projects to large-cap projects. In the last bull market, SOL and MATIC were able to develop further after listing on exchanges with a market value of tens of millions of dollars. However, we have not seen these projects have the same opportunities and treatment this time.
Compared with projects that are deserted after issuing coins, giving more opportunities to valuable projects is one of the fundamental demands of the majority of users.
Establish clearer standards
How to determine valuable projects? Judging by financial data is a very direct and effective method. The financial data here does not refer to indicators such as the number of addresses and the number of interactions that are easy to inflate, but more realistic data such as TVL and project revenue. Some users question that this may lead to entrepreneurship for exchanges. However, traditional markets such as US stocks will not decline due to clear standards, but will allow truly valuable projects to gain more opportunities, rather than some AI projects, group games, and inflate projects.
Furthermore, it is even possible to establish delisting standards for these projects, so as to “leave liquidity to those in need” and guide the healthy development of the market.
More transparent information disclosure
There is no way to query the token operation data, how much and when it will be unlocked in the exchange. Of course, the current market generally believes that this is not the obligation of the exchange.
The power to open a long or short position lies entirely in the hands of the trader. However, if the exchange has clearly informed users that operating data is declining and large amounts of unlocking are imminent, but users still choose to take over the operation, then there is no way to "pass the buck".
Conclusion
It is certainly not a completely correct statement to blame the exchange for the market decline, but it is not the best way to think that you are completely right and educate users. As the party with the most voice and traffic in the industry, exchanges may still have many better options to guide the healthy and rapid development of the industry and projects.
