In recent times, I've observed hundreds of different token economies in fresh, newly-public crypto projects. Allow me to present an intriguing model of what a good token economy should look like in the current market phase.
Up to 15% of tokens in circulation within the first six months post-listing: This amount is sufficient to demonstrate the project's viability and maintain the token price within a certain range.📊
Unlocking of fund and team tokens in Q4 of this year or later: This acts as a buffer to prevent excessive downward pressure on the order book.⚖️
Linear unlocking of marketing tokens over 1-2 years from the time of listing: These tokens are the fuel for growth.📈
Funds acquiring tokens at up to five times the current price: This indicates that the project still has room for maneuvers before the fund tokens are unlocked.👁️
Linear token unlocking across all aspects without sudden influxes into circulation: This helps in maintaining market stability.🫰
Community airdrop immediately upon project listing: This builds hype, recognition, authority, and a good reputation.🫡
Moreover, if the project's roadmap includes exciting updates for Q3-Q4 that can be marketed effectively on social media, it’s an ideal scenario.
Based on my experience, regardless of how reputable a project is, how much funding it has received, or the size of its social media following, I advise against investing immediately upon listing. It is crucial to observe the price behavior over a few months to ensure there is no manipulation to push the price down and shake out "paper hands" who bought at listing. Patience is key— a good crypto project is like fine wine; let it mature before indulging, as "young wine can be very sour."😁
The phenomenon I described above is a standard form of manipulation that fuels a project’s subsequent pump. Let me illustrate it for you.
A hypothetical project, X, lists on an exchange at $1. According to the tokenomics, there was a community token distribution "for testnet participation," for instance. These tokens will flood the order book as farmers usually sell their tokens at such moments to recoup their investments and gain the expected profit over approximately one year (in the best case scenario).😁
During the listing, a marketing campaign is launched to balance the sell pressure from the community token distribution. The project may also sell some of its tokens to acquire resources in stablecoins. "This step is optional if investors have already heavily funded the project."
After about a week to a month (depending on agreements with the exchange), the price is allowed to drop, usually by 60-75% from the peak. At this point, the project starts buying back tokens from "paper hands" who bought them at $1, now for $0.25-$0.40. Eventually, the sell pressure diminishes, and there’s no one left to sell. Most tokens in circulation are now held by the project itself.
At this juncture, even small market purchases will positively impact the token's price. This is when the project's price starts to rebound, achieving 2x-6x from the "local bottom" chosen by the project. Voilà, the project has already profited, while fund tokens are still locked.
Retail investors then jump onto the skyrocketing token, now priced at $2-$5, though panic sales occurred at $0.40.
I hope this explanation clarifies the model. It may vary slightly in different scenarios, but the core principle should be clear.👌