Author: Nancy, PANews
Valuation is both an art and a science. The current crypto market is full of high FDV. Although exchanges have made adjustments to their listing strategies to deal with community disputes, they are ultimately "treating the symptoms but not the root cause." While the logic of high valuations of projects urgently needs to be reconstructed, MEME dominates the trading list, and even FOMO phenomena such as institutions, celebrities and politicians entering the market have emerged.
The valuation of listed companies is at a very high premium compared to private equity, reducing VC profit margins to break the deadlock
In recent years, there have been more and more projects in the crypto space that have received tens of millions or even hundreds of millions of dollars in financing. According to RootData data, the total amount of financing in the crypto market in the past year was $10.161 billion, with an average financing amount of $9.6871 million. Among them, crypto projects that raised more than $10 million accounted for nearly 40.2%, and these projects were mainly seed round financing.
In addition to the generally large financing scale, the valuations of listed projects on mainstream exchanges are all high. For example, according to data analysis released by RootData earlier this month, since 2021, Binance Launchpool has announced the valuations of 20 projects, totaling approximately US$5.94 billion, with an average of approximately US$297 million per project, and the overall valuation trend has remained stable; during the same period, OKX Jumpstart announced the valuations of 10 projects, totaling approximately US$5.01 billion, with an average of approximately US$501 million per project.
Valuation level is often used as one of the important indicators for judging potential value. In particular, high-financing projects have become the "hot cakes" of investors, and even slogans such as "chasing high is buying at the bottom" and "people who are afraid of heights are miserable" were shouted at one time. However, judging from the price performance of tokens of high-valuation projects today, the market's "fear of heights" sentiment is spreading, and it seems that it is no longer "welcomed" by investors. In particular, under the pressure of huge sell-offs, criticism of high valuations is prevalent.
CoinList, a well-known public offering platform, tweeted today (May 28) that high FDV itself is not a problem, but the problem is that after the project conducts private financing at a certain FDV, it will be issued to retail investors at a FDV 20 times higher. For example, the average FDV of some recent high-profile airdrop projects DYM, STRK, ARB, and W when they were listed was US$14.7 billion, which is 13.3 times higher than the average valuation of the private market.
"For founders, this practice is destructive in the long term because their short-lived unicorn status is subsequently destroyed due to reasons such as 'airdrop participants selling tokens as quickly as possible' and 'constant selling pressure in the private market'." CoinList believes that if retail investors can participate at a price close to the last VC round, everyone will be happier.
CoinList took itself as an example and said that the retail selling price of its first five token issuances this year was only 1.04 times the premium of the previous VC round, and there was no lock-up period and the release cycle was shorter.
The market competition has intensified the popularity of MEME, and the chaos of hacking and shouting orders has emerged.
As the conflict between VC and retail investors intensifies, MEME has become a mainstream investment target. For example, according to the latest data shared by Zaheer Ebtikar, co-founder of Split Capital, four of the top 10 largest cryptocurrencies in terms of open interest are MEME coins, namely PEPE, DOGE, BONK and WIF. Among them, PEPE's open interest reached US$812.6 million, half of SOL (US$1.78 billion).
For example, Robinhood's first-quarter revenue also showed the market's love for MEME coins. Its users held Dogecoins worth $7.6 billion, exceeding Ethereum's $5.63 billion.
At the same time, large institutions are also paying attention to and planning in the MEME field. For example, MarketVector under VanEck launched the Meme Coin Index, which can track the six major MEME tokens: DOGE, SHIB, PEPE, WIF, FLOKI and BONK, and Franklin Templeton has also published a number of reports related to MEME coins.
MEME has also become a means of bargaining among politicians. In addition to US presidential candidate Trump’s announcement that his campaign will accept donations from cryptocurrencies including Dogecoin and Shiba Inucoin, and Biden’s campaign team’s plan to hire Meme managers to win the support of young voters, this trend has also led to a recent general rise in PolitiFi-related MEME tokens. Coingecko data shows that as of May 28, the market value of PolitiFi tokens exceeded US$1.35 billion.
However, we need to be vigilant. With the rise of MEME, there have also been many chaos. Recently, the X accounts of multiple crypto KOLs/media celebrities have been hacked to falsely promote MEME coins. For example, the hacker who attacked the account of the well-known trader GCR was also related to the MEME token team CAT. There were even radicals who took extreme actions to promote their own MEME coins, resulting in third-degree burns. Of course, this also reflects to a certain extent the importance of VCs with endorsement value in playing the role of "information filter".