Analyst AB Kuai Dong stated in an X post that he has advised all projects that are going to issue tokens to be ready for a drop of over 80% following listing on exchanges.
This means that a project with a US$2 billion initial offering might drop to US$300 million, and a project with a US$700 million initial offering might drop below US$100 million. During this year’s summer, this tendency is anticipated to persist, given the rise in listing of new tokens.
AB Kuai Dong Explains Drop in Value after Listing of Coins
AB Kuai Dong stated that the industry’s overall liquidity is currently insufficient, with the exception of Bitcoin, and it is approaching the time prior to the crypto hype. Also, because there are so many high-market-value demand projects that are waiting to issue coins, the pressure is actually much stronger than it was in 2019.
Because of the excessive valuation in the previous round and the excessive cost price when selling nodes or tokens to the community, these projects are compelled to issue coins with high market value. As a result, they had to open the market at a price higher than this cost price in order to keep the community happy.
Also Read: Crypto Market Shifts from Greed to Fear for First Time Since Oct 2024, Will Prices Fall Further?
Why Do Most Coins See Value Drop After Listing
A number of variables cause the majority of cryptocurrencies to see sharp price declines following their listing on exchanges. There may be a sell-off at first as early investors or insiders who bought tokens at a discount sell them to protect their gains.
Furthermore, the excitement around a project prior to listing frequently results in exaggerated expectations, which are challenging to sustain after the token is put on the open market.
Price instability is also exacerbated by speculative trading, market volatility, and a lack of liquidity. Furthermore, some investors may lose faith in the project when they reevaluate its fundamentals after listing, which could result in further value decreases.
AB Kuai Dong Blames VC Funding For Price Drops
AB Kuai Dong adds that one issue in the market is that the cryptocurrency venture capital industry is still quite popular today. Prior to the rise in crypto hype, the majority of funds were either the miners’ or the employers’, making labor and pay extremely challenging.
The majority of investment managers at the time were paid just 10,000 yuan per month. However, VCs have gained extraordinary fund management regulations because of the excess investment returns brought about by the pandemic in 2020 and 2021, as well as the vast number of possible investors who are eager to contribute a significant amount of money to the fund without giving it much thought.
It is anticipated that this phenomena will cease after the five-year fund expires in late 2025 or early 2026. The inability to generate money for the next round and the low actual returns on investments will cause many funds to face the issue of dissolution. Many investment managers will lose their jobs or see their pay cut during this time.
Also Read: Crypto Venture Capital Investments Soar by 26.1% in 2024 After Previous Downfall