Original Author: haotian, Crypto Researcher

In the past few days, some new coins in the secondary market collectively experienced a pullback, seemingly reflecting the market's reaction to the current cycle of "Narrative first, Fundraising second, TGE later," a path of VC industrialized coin minting. It is worth pondering why retail investors are more willing to participate in high-risk P2P conspiracy coins on-chain but are reluctant to engage with VC-endorsed new coins. Here are my thoughts:

1) First and foremost, we must admit that the previous VC-led industry innovation-driven model has evolved into a "Funding, Coin Launch, Release" industrialized assembly line. For some time, the gorgeous whitepaper narrative + a top-tier luxurious investment lineup + seemingly glamorous large fundraising numbers + celebrity-level hype have become lethal liquidity harvesting tools that have severely eroded market trust.

While it is unfair to generalize, when a pile of projects that rarely fulfill their promises and have no wealth effect are pushed into the market, the market now irrationally equates VC projects with scams;

2) The main fatal flaw of VC coins lies in their pricing mechanism. After the project completes multiple rounds of fundraising, the valuation at TGE has already been inflated layer by layer, leading to two inevitable outcomes: first, retail buyers enter at a high cost; second, early investors have a strong selling incentive. This undoubtedly sets up a "death trap" for new coins. Following this logic, some projects are more likely to experience a downward trend post-TGE, which will in turn drag the market sentiment into a bearish direction, forming a vicious cycle.

In comparison, although community coins starting from zero on-chain with low market cap entail significant unknown risks, many retail investors are still reluctant to touch VC coins with high downward expectations and certainties;

3) A market environment facing liquidity depletion will inflict a more fatal blow to VC coins. Imagine this: when all participants know that front-running sell-offs post-TGE is the optimal strategy and shorting is the rational choice, all VC coins upon listing will face significant market sell-off challenges. In a scenario of overall market liquidity depletion, VC coins will likely become sacrificial objects.

This is akin to a "Prisoner's Dilemma" where generous airdrops from the project team will face selling pressure, and hoarding without releasing will face public criticism, ultimately leading to one conclusion: a lack of sufficient buying support;

4) It is clear to everyone that the trust crisis of VC coins needs to be addressed. How can this be resolved? The core issue lies in how to reconstruct the equilibrium of interests among project teams, VCs, and the community, for example:

1. Starting with a Low Valuation to Leave Room for Upside: The project team and VCs should accept a lower initial valuation, allowing the Token Generation Event (TGE) to be the true starting point of the project's value rather than the peak, providing the market with sufficient growth expectations. (Recently, many fundraisings were still substantial, indicating that the issue is far from being resolved.)

2. Decentralizing Some Aspects to Reduce VC Dominance: Introducing community participation in certain specific aspects through DAO governance, IDOs, fair distribution, and other means to decrease VC dominance in token allocation and increase community influence;

3. Differentiated Incentive Mechanisms: Additional incentives for long-term holders should be designed to truly reward participants and builders of the project ecosystem with value, rather than short-term speculators. This requires further enhancement and transformation of airdrop mechanisms;

4. Transparent Operations: Project teams should pick up the initial transparent accountability mechanism for regularly disclosing development progress and fund utilization, rather than solely engaging in one-sided market promotion before and after the TGE;

Above.

In fact, in the process of the maturation of the Crypto industry, VCs have made remarkable contributions. Discussing the changing colors of VC coins does not necessarily mean complete de-VC-ization. The industry cannot withstand another disaster if conspiracy groups run rampant behind an industry without VCs.

Currently, the fundraising ecosystem in the Crypto market still needs restructuring. VCs should transition from being passive "arbitrage intermediaries" to active "value enablers." Fundamentally, the dilemma of current VC coins can only reflect the market's excessive insularity. It is also a sign of the increasing maturity of the Crypto market, placing greater demands on ordinary investors on how to identify high-quality projects and make rational investments.

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