Taking Myshell as an example, we analyze the dilemma faced by projects when they return to long-termism

Author: @BlazingKevin_ , the Researcher at BlockBooster

CEX faces a consensus shift of users losing confidence after new coins are listed. Although one or two projects can rise against the trend, most projects cannot escape the gravity of the unilateral downward trend. Once this consensus continues to strengthen and gradually shifts from two or three months to a collective consensus of a complete bull-bear cycle, CEX's user retention rate and user growth rate may be severely hit.

The core contradiction is the disagreement between users and project parties on pricing. Project parties need to recover the initial costs from retail investors. At the same time, because of the large proportion of VC lock-in, high FDV has become a standard when going online. The combination of the two will inevitably lead to TGE prices exceeding retail investors' psychological expectations.

The strategy of high FDV and low MC was acceptable in previous bull-bear cycles because the consensus of "Buy and Hold" would eventually reward diamond hands. However, this consensus began to weaken after BTC passed the ETF and was completely destroyed by the Memecoin craze in the past year. BTC is deeply tied to US stocks and has become a reservoir of US dollar assets, taking the lead in decoupling from the four-year cycle; the three tricks of Zoo, Agent and Celebrity Coin have made Memecoin ascend to the altar and then fall at the speed of light. Retail investors can no longer adapt to the market-making cycle of VC coins. The market has obviously undergone earth-shaking changes, but VC coins are still sitting on the death train of inertial situation without knowing it. The death spiral is caused by the following three points:

• Due to the large number of VC and team shares locked, only small shares can be circulated in the early stage. The excessively high FDV makes retail investors who are accustomed to the Memecoin valuation method extremely uncomfortable.

• For this part of the small share circulation, the project party is still unwilling to let go, and secretly recovers a large number of chips in airdrops and ecological incentives. Retail investors' profit experience in airdrops is very bad, which makes the community atmosphere before the coin issuance depressed and pessimistic.

• Since their own shares are locked, they can only recover their early costs by dumping chips in a small share of the circulation, so they can only ignore market sentiment and choose to open high.

The essence of the death spiral is the lack of long-termism and the complete collapse of the consensus of "Buy and Hold" on altcoins. Once the price falls below the key support level, it will be like mercury pouring down the ground. When a new coin is launched, there is no support level. The disguised psychological support level is the valuation and pricing expectations of the project. For a project with an expected amount of only 10M, the result of pricing after 1B is that the funding fee will reach -2% after the opening. There will be no miracles before the expectations are met. And the poor price performance will not stop even after the price falls to 10M. Such projects are increasing. Even if there are some exceptions due to reflexivity in the middle, the winning rate of opening short-selling VC coins may still be far more than 50%. When long-termism disappears, the prosperity brought by the prevalence of short-termism is also made a mess by interest groups that lack supervision. When the bubble bursts, people will leave and the tea will be cold.

Compared with other industries, Crypto is still in its early stages, but practitioners’ pessimism is like the twilight of the gods, because short-termism will not bring faith and value, but will accelerate the overdraft of the industry’s vitality. Therefore, from now on, we need to return to long-termism.

Myshell encounters resistance when returning to long-termism in pricing strategy

Back to the point at the beginning of the article, when VC coins are frustrated, CEX is the most hurt. Binance took the lead in saving itself and conducted some experiments on Myshell. Whether good or bad, this is a signal that the leading exchange has chosen to change. This experiment maintained a good momentum before February 27, but it took a sharp turn after Binance listed the coin. The following is a review of the key time points and corresponding market sentiment from the airdrop snapshot on February 12 to the Binance listing on February 27.

Two reversals of market sentiment

Myshell’s market sentiment went through three stages before Binance Listing, namely airdrop, IDO and Binance Listing. In these three stages, the sentiment of retail investors has undergone drastic changes. First, after the airdrop snapshot was issued, retail investors believed that the airdrop ratio was too low and the number of airdropped tokens was too small. A huge proportion of 30% was allocated to community incentives, but the total number of airdropped addresses and the proportion allocated to users or ecological projects were not clearly stated, which left a lot of room for maneuver. At this time, the market was negative about Myshell.

However, during the IDO stage, Myshell achieved a reversal of market sentiment. Pricing divergence is what we believe is the core contradiction between retail investors and project owners. Myshell allocated 4% of the total supply to IDO, giving benefits to Binance wallet users. The low price of only 20 million FDV naturally received more than 100 times of over-subscription. Retail investor Fud's sentiment is weakening, but due to the current cycle's consensus shift towards project airdrops - distrust, many retail investors are still bearish, so most of the airdrop addresses chose to sell at TGE. From the increase in the number of on-chain currency holding addresses, it can be seen that more than 50% of the airdrop addresses chose to sell at the first time.

On the day of TGE, according to the $SHELL pool data on dexscreener BSC, the price reached a maximum of $1.64 in the first hour after TGE on the 13th, with a trading volume of $3.2 million and a circulating market value of $420 million; the highest price in the second hour fell back to $0.9, with a trading volume of $17 million and a circulating market value of $240 million. The closing price on the 13th was $0.37, with a circulating market value of $100 million.

Between the 13th and the 27th, the price remained between $0.36 and $0.6, corresponding to a market value of 100 million to 160 million. During this period, $SHELL had support at the low point and showed a shrinking upward trend. The chips sold by the airdrop address were absorbed by the head holding address, and the concentration of chips further increased.

Expectations are too high and concentrated to attract rat warehouses

Before Myshell was listed on Binance, the market evaluation was good, and the market mentality of the project was positive. At the same time, the TGE chain opened low, and Binance contracts followed suit. These two chain operations must have washed out a large number of unsteady profit-taking orders, and market makers recovered a large number of airdropped chips. The low price before listing on Binance and the chips were not scattered, which itself had the conditions for pulling the market up. However, if we add the expectations of "Myshell is the new AI leader of BSC", "Binance investment", and "secondary listing", the low opening on the chain becomes the biggest weakness. The rat warehouses that swarmed in after TGE became the most determined holders before listing, which laid the groundwork for the unilateral market after listing. The joint dumping of rat warehouses and market makers completely destroyed Myshell's efforts in IDO profit sharing.

This is the pain that Myshell and more VC coins will face when their value returns, when they practice long-termism, and when they let the roadmap and products support the market value. Rat warehouses that have existed since the birth of Crypto have become unscrupulous after being nourished by short-termism. When a project has strong expectations, whether it opens low or high, it is traded around expectations. When expectations are realized, it will collapse.

Combining the roadmap to reasonably control expectations is Myshell's current homework

Opening low to benefit users and launching the community is a reasonable direction in itself, but it is necessary to reasonably allocate the balance between expectations and the actual roadmap. Relying on expectations to attract users, the fundamentals of the product can play a bottoming role after the expectations are implemented. The price management range of the token should be based on the reasonable expected maximum market value and the actual product guaranteed market value.

The project party returning to long-termism cannot rely solely on IDO to benefit users to gain market trust. This is only the first step. In the future, attention should also be paid to the contradiction between the project party and VC on transparency. When the project party launches tokens through IDO, it no longer relies on the exchange, which can resolve the contradiction between the two parties in terms of transparency. The token unlocking process on the chain becomes more transparent, ensuring that the conflicts of interest that existed in the past are effectively resolved. On the other hand, the dilemma faced by traditional CEX is that the price of tokens often plummets after issuance, which makes the trading volume of the exchange gradually decline. Through the transparency of on-chain data, exchanges and market participants can more accurately evaluate the true situation of the project.

Projects that open low on the chain must be prepared for a period of time when they cannot be listed on the exchange, otherwise they will easily encounter the dilemma of Myshell's insider trading. Only by winning the trust of users and the market on the chain can the price of the currency go on a positive spiral.

Kaito's golden mean fits the transition period of industry change

Kaito's airdrop distribution continues the "unspoken rules" of VC coins: reducing the quota of top users and increasing the number of users who can apply for it, that is, long-tail distribution. According to the personal weight algorithm, 1 Yap can be exchanged for 5-20 $KAITO. Ecosystem yappers, Partners and Yappers share 96 million $KAITO, but the detailed proportion has not been announced. This strategy allows project parties to hide and recover chips to the greatest extent in the airdrop, and because there are many airdrop addresses, the selling pressure at the opening is reduced a lot-compared with the concentrated airdrop to the top KOLs. Pricing at the 1B price point where both long and short parties are more hesitant has facilitated the smooth turnover of floating chips.

Split disk becomes the cornerstone of the flywheel

Secondly, Kaito designed a positive spiral around NFT, Yaps and skaito in the early stage, and used the characteristics of the split disk to constrain the token price when necessary. The price of Kaito NFT continued to rise before the airdrop snapshot, with the highest floor price of 11ETH, about 30,000 US dollars. After the snapshot, the price dropped, and the value was 5,800 US dollars at the time of TGE. The current floor price has gradually recovered to 2.5ETH. A single NFT received 2,620 $KAITO, about 4,700 US dollars (average price of $1.8 on February 21), and a total of 1,500 Kaito NFTs received nearly 4 million $KAITO.

The weight of sKAITO is positively correlated with the number of pledges, the length of pledges, and the 7-day voting enthusiasm, and is negatively correlated with the Yappers voting pool and the weight of NFT holders.

Souce: Kaito

The voting weight is composed of Yappers (50%) + Holder [sKaito, NFT] (50%).

• 1 Genesis NFT ≈45,980

• 1 sKAITO ≈11.79

• Voting rights per NFT = 3900 $KAITO

• The voting rights of NFT and sKAITO change dynamically, depending on the relationship between the total market value of NFT and the total market value of sKAITO, and the voting rights gradually tend to the party with higher market value

A simple calculation shows that holding NFTs is cheaper than using sKAITO.

By staking Kaito tokens, users can obtain voting rights for governance and project decisions. Currently, each Kaito NFT provides 45,980 voting rights, and the voting rights of each NFT are equivalent to 3935 $KAITO.

The arbitrage space between NFT, Yaps and skaito allows Kaito's price performance to be regulated to a certain extent by the NFT market value.

It is more critical to choose a growth method suitable for your own track

In terms of pricing strategy, Kaito's choice is neither good nor bad, which is understandable. Because returning to long-termism and allowing products to support market value is a more difficult journey than ever before. Kaito's choice is to allow the current market value to return steadily to product strength through continuous long-term value output.

After Memecoin fell in stages, Kaito tended to take over the market attention distribution leader and compete for Mindshare in a single time period. Mindshare is actually spread by KOLs. KOLs work for Kaito and Kaito pays yaps. As the importance of Mindshare increases, more and more project parties will join Kaito and pay fees. The continuous increase in KOLs, users and project parties is the basis of Kaito's positive spiral. Whether the spiral is successful depends on the degree of market penetration of Mindshare.

It is relatively difficult to observe the market acceptance of Mindshare. Therefore, Kaito has provided a tool such as Yapper Launchpad, which is both a product of toc and an evaluation indicator of tob. In general, the higher the market value of NFT, the higher the sKAITO pledge rate, and the higher the market share of Kaito. And the corresponding yaps will also rise, attracting more KOLs to join.

Summary

Whether the project party chooses Myshell to take the lead in reform, or chooses the community + VC dual-driven token issuance model, or like Kaito, recognizes its own track positioning and realizes value return through continuous long-term value output. Both are signs of industry innovation moving towards long-termism.

Returning to long-termism is like going from luxury to frugality. This is difficult for an industry without supervision. What is even more difficult is that the only valuable innovation in Crypto seems to be DeFi. The long-termism of tracks such as NFT, Gamfi, and Metaverse brings users a very bad experience. Therefore, with the "wolf" of the complete failure of long-termism in front and the "tiger" of short-termism in batches and fast-forwarding in the back, returning to long-termism at the moment is an anti-human path, but it may be the only way to survive. If you don't trust any narrative and are hostile to any technology, then this industry may not allow you to continue to grow.

We need to wait, wait patiently, wait for the moment of qualitative change belonging to Crypto, this moment may be opened by AI Agent, or it may be other tracks. However, before that, we need to adhere to long-termism, squeeze out the long-standing abscesses in the process, and adapt to and face the pain caused by returning to long-termism.