Public Sales are the New Airdrops

Once upon a time, airdrops were the preferred way for token generation events (TGE). Projects hurled free coins at users hoping to spark a loyal community of hodlers and shillers. And for a while, it worked. The allure of “free money” created viral hype loops — Discords were buzzing, Twitter threads pumping, and users were depositing TVL to untested smart contracts for that extra juice in additional yield.

However, there is no free lunch. Airdrop farming became efficient, sybil farmers gained notoriety, and airdrops became an exit liquidity event from farmers to day-1 buyers of the token at TGE. Projects realized they weren’t building communities; they were feeding locusts.

The Public ICO Meta

Instead of tossing tokens into the crowd, teams discovered a new method. They realized they can raise more money from retail/funds at a suspiciously “generous” valuation. The new pitch? “We’re giving you the chance to buy early — practically free!” It’s the same dopamine hit of an airdrop, just wrapped in a paywall and dressed up as “fair launch.”

In theory, this makes sense. People tend to value things they pay for more, a phenomenon driven by psychological factors like the endowment effect. So maybe they won’t dump the token on day 1. In addition, this “generous ICO” allows teams to raise more money for their treasury, instead of giving away tokens for free. In return, retail at least has access to a somewhat liquid trade that has high odds of turning a profit.

Examples

$PUMP raised ~$600M at a $4B valuation. Though it dipped lower, it still trades ~$4.4B and presalers did have the ability to sell at a 75% profit at TGE.

$XPL did an LP campaign that allowed farmers to get in at a $500M FDV, raising $50M. Farmers received an insane ROI when CT aped this thing to a $16B FDV for whatever reason. Presalers are still up ~6x despite the token being down only.

Looking Forward

Now, we have two very anticipated ICOs ahead of TGE: MegaETH and Monad. MegaETH raised ~$50M at a $900-999M FDV and Monad is looking to raise almost $200M at a $2.5B FDV. Both before the product is live.

Though there is no such thing as a sure thing, the market believes that these are going to be good trades. The market reflects this view, as the MegaETH raise was oversubscribed by 27.8x.

But where is the money coming from? Whoever buys these things at TGE (same with airdrops). As long as people ape these things at TGE, it will be a fruitful trade for most.

I expect this trend to continue, but I do want to share some words of caution. We’re likely to see more teams TGE this way, and not all of them will be great opportunities. Markets become more efficient over time, and these arbs will not last forever. Public ICOs are not going to be a “free money machine.”

Since Coinbase acquired Echo/Sonar, it’s somewhat probably that the future $BASE token will be done via an ICO, not an airdrop.

In addition, this new “meta” may act as a headwind for the altcoin market as a whole. The marginal buyer for these ICOs are existing alt holders, and as more capital enters these ICOs, there will be less and less liquidity to support high FDV vaporware projects. Many of them got carried out on October 10th, and it’s only going to get more PvP from here.

We’re likely to see continued dispersion between good coins and bad coins. Coins with monetary premium and cashflow good, coins based on narrative/hype bad. Be careful with your money.

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