Cobie: When low circulation high FDV tokens are rampant, the profits from the rise have long been privately divided

Author: Cobie

Compiled by: Deep Tide TechFlow

This article will discuss the topic of new token launches, focusing on common questions and misconceptions about new tokens in the market, which are often referred to as "low circulation, high FDV."

Before we begin------if you find the content of this article confusing, you can refer to an article I wrote in 2021: “The Myth of Market Caps and Unlocks”, which may be helpful.

As always, please remember: I am not a financial advisor, I am a biased and flawed person, I have been brainwashed, I am an idiot, my mind has surpassed its peak and entered my twilight years, I am stumbling around the world trying to understand everything, but rarely succeed. I am actually a participant in the crypto industry, which means my IQ might not even be double digits. I try not to write about tokens I hold, but I will disclose my holdings in the article. Have you heard that RoaringKitty (the legendary figure who profited from the GME stock event) is back and has released fifty super cool Avengers clips? Well, anyway, let's get started.

Three years ago, when I wrote that article, I thought it would be my last discussion on circulation, FDV, and market cap games. Maybe I was naive, thinking that market participants would become more astute about these important dynamics.

However, the reality is that they have chosen these new tokens as "best long-term hold tokens," citing "locked for a year" and other novel reasons, such as the charts of new coins and the concentration of attention on new coins.

Worse yet, other market participants have become more astute about these dynamics. Teams, exchanges, market makers, and financiers have adapted to these market mechanisms and often capitalize on them to gain a significant advantage.

Therefore, in my view, most new token launches in the market are actually non-investable, and market participants' understanding of these issues is extremely immature, as they mostly spend their time blaming the surface phenomena of the problems.

In this series of articles, I will explore some issues in the current new token launch market and discuss why I generally choose to completely avoid new token launches------unless you know what you are doing and are willing to do thorough research and analysis.

The Profits Have Long Been Divided Privately

In the modern market, almost all asset "price discovery" occurs off-market, and these prices have often been privately divided long before the tokens actually exist. Due to the dynamics of private markets, much of the price discovery is actually exaggerated.

Looking back to 2024, people will actually reminisce about the era of ICOs (Initial Coin Offerings). When you look at the differences in opportunities then and now, it's hard to disagree with their perspective: in some ways, the ICO era was much fairer than the current market dynamics.

Reviewing ICOs: The Downsides

To avoid misunderstanding, I must emphasize that ICOs also had many downsides. It is easy to look back at successful ICOs, but in reality, hundreds of projects raised eight-figure sums only to either run away or slowly collapse. (Moreover, most major jurisdictions may consider ICOs illegal.)

Retail investors wasted hundreds of millions of dollars funding unrealistic junk projects that were able to raise capital due to the ICO craze.

Even those successful products had their ICOs that caused losses for investors. Many companies that should have succeeded ended up with tokens that were worthless, while the companies received non-dilutive funding in the process and gradually ignored the existence of these tokens.

(This even happened with Binance's ICO------investors raised $15 million to build Binance but received no equity in Binance. Of course, investors who participated in the Binance ICO are certainly not complaining now, as each BNB is priced at $0.15, making it one of the best-performing ICOs in history.)

The Benefits of ICOs

Alright, we know that ICOs have their downsides, but they also have some benefits that are easier to showcase.

• Ethereum raised $16 million in its ICO, selling 83% of its supply (60 million ETH) at a price of $0.31 per ETH.

• The effective valuation of this public token sale was about $26 million (considering mining and staking issuance, the valuation is a bit more complex, but roughly so).

• Investors who bought ETH in the ICO have received about 10,000 times their dollar return at today's prices (about 70 times the Bitcoin return).

• If you missed the ETH ICO, the cheapest ETH purchase price in the market was $0.433 in October 2015, only 1.5 times higher than the public sale price. At that time, Ethereum's valuation was about $35 million.

Although it is now almost impossible to find projects in crypto investment with a similar $26 million valuation as Ethereum, even the seed rounds of the most foolish ideas struggle to find such valuations. The key is that the price discovery and upside potential at that time were open to all participants.

The price discovery from $26 million to $350 billion was done in the public market, where ordinary people could participate. There were no KOL rounds, no unlocks and vesting schedules, and buying at the cheapest price in the market was very similar to the returns from buying in the ICO.

The Shift to Private Financing

After global major regulators enforced laws against ICOs, crypto token issuers stopped raising funds from the public and turned to venture capital for private financing.

If you compare Solana's first funding round in 2018 with Ethereum's ICO, you will find some interesting contrasts.

• Solana raised about $3.2 million in this funding round, selling about 15% of its supply at a price of $0.04 per SOL. The effective valuation of this funding round was about $20 million, similar to the valuation of the ETH ICO.

• Investors who bought SOL in the seed round have received about 4,000 times their dollar return at today's prices. (Considering annual staking returns, their actual returns may be even higher.)

• If you couldn't participate in the limited funding round, the cheapest SOL purchase price in the market was $0.50 in May 2020, about 12 times higher than the seed round price.

• Buying at the cheapest price in the market yielded about 300 times the return. At that time, Solana's valuation was about $240 million, with less than 5% circulation. Solana actually had about 10 months of low circulation------they quickly unlocked from very low circulation, with most tokens unlocked all at once in January 2021.

The initial few rounds of privilege allowed investors to privately gain 10 times the price increase of Solana (from $0.04 to $0.5).

(Solana also had some other privileged/private funding rounds at prices around $0.20. Additionally, there was an "auction-style" limited public token sale on CoinList, which I remember was also priced at $0.20.)

The Frenzy of 2021

Solana launched in 2020, almost right at the low point of BTC and ETH prices after the COVID crash. Their massive unlocks coincided perfectly with a new wave of users entering the crypto space. This pattern succeeded across various tokens, with the "bullish unlock" phenomenon leading to significant increases in private market valuations.

Both ETH and SOL had initial sale valuations of about $20 million. By 2021, seed rounds became highly competitive, with large venture capital firms often engaging in bidding wars. Seed round prices reached hundreds of millions.

(I remember the first time I was recommended a $100 million seed round, I disgustedly declined. Later, the project opened with a $4 billion FDV, and I missed out on 40 times the return. After learning my lesson, I bought into the next $100 million seed round project. The result failed, and the project went to zero, becoming inactive.)

As private market valuations soared, crypto traders in the liquid market claimed that "FDV is a joke," while almost all charts were green.

Axie Infinity's valuation reached about $50 billion, while only about 20% of the tokens were in circulation. FileCoin's FDV reached about $475 billion, but its market cap was only $12 billion. The supply increase of high FDV tokens was masked by the influx of many new entrants.

As fully diluted valuations reached larger figures, venture capital firms became increasingly willing to pay higher prices in private rounds------"If this project's trading valuation is $15 billion, then bidding $300 million for it is reasonable; the risk of missing out is greater!"

Founders were, of course, happy to accept these bids------they could raise more funds while giving away fewer tokens. They used to have to sell 10% of their tokens at a $20 million valuation to raise $2 million. Now, they could sell 1% to raise $2 million and keep the extra tokens for incentives, the community, or (… surprise!) themselves.

If a well-known venture capital firm funded a promising project at a $100 million valuation, many less reputable venture capital firms would try to follow suit. If a project's last funding round valuation was $100 million, these follower venture capital firms without clear investment theories would quickly aim for new funding rounds at $300 million to $500 million valuations. Slightly worse entry prices didn't matter to them, as these projects' trading valuations had already reached billions.

Founders easily accepted these deals. Without market forces, their personal wealth "water level" rose, and they added new team members to help their products succeed. Of course, most of these team members ultimately proved to be net negatives, but the founders did not know that at the time.

Through this model, over time, more value and price discovery were privately divided.

Private Division

If we compare the previously mentioned examples of Ethereum and Solana with projects launched in recent years, I would choose two comparable projects: Optimism and Starknet.

Consider the following metrics: initial sale valuation, market's lowest valuation, percentage of circulation at the time, market vs. private returns.

ETH ICO Valuation: $26 million

• ETH's Market Lowest Valuation: $35 million FDV

• Market Lowest Valuation Date: October 2015

• Circulation at the Time: 100% of supply in the market------market cap $35 million

• Public Sale Return: 10,000 times

• Market Return: 7,500 times

SOL Seed Round Valuation: $20 million

• SOL's Market Lowest Valuation: $240 million FDV

• Market Lowest Valuation Date: May 2020

• Circulation at the Time: 2% of supply in the market------market cap $4 million

• Seed Round Return: 4,000 times

• Market Return: 300 times

OP Seed Round Valuation: $60 million

• OP's Market Lowest Valuation: $1.7 billion FDV

• Market Lowest Valuation Date: June 2022

• Circulation at the Time: 6% of supply in the market------market cap $95 million

• Seed Round Return: 183 times

• Market Return: 6 times

STRK Seed Round Valuation: $80 million

• STRK's Market Lowest Valuation: $11 billion FDV

• Market Lowest Valuation Date: Today

• Circulation at the Time: 7.5% of supply in the market------market cap $800 million

• Seed Round Return: 138 times

• Market Return: None

If you look at these metrics, a few things are clear. First, seed valuations have significantly increased over time.

• Ethereum's ICO valuation was about $26 million.

• Solana's seed round valuation was about $20 million FDV.

• Optimism's seed round valuation was about $60 million FDV.

• StarkNet's seed round valuation was about $80 million FDV.

• Currently, seed funding amounts for comparable projects have exceeded $100 million FDV.

As seed valuations rise, teams can gain this multiple benefit because they still own the entire supply until the first funding round. If StarkNet's valuation were the same as Ethereum's, the initial investors would still have worse financial returns because their initial entry price would be four times higher.

Honestly, I think this is somewhat acceptable.

I believe it is reasonable for founders to have better fundraising options as cryptocurrencies become more mainstream and the financial returns of Bitcoin and Ethereum prove their value over time. The demand for early cryptocurrency investments is enormous, so prices will naturally adjust.

But the most obvious trend in the data above is that there is a significant difference between the financial returns in the public market and those in the private market.

• Ethereum's ICO returns are 1.5 times higher than the returns available in the market.

• Solana's seed round returns are 10 times higher than the returns available in the market.

• OP's seed round returns are 30 times higher than the returns available in the market.

• STRK's seed round returns are infinitely high because today is the lowest price STRK has ever had, meaning all public market buyers are losing money, but the seed round return is 138 times.

As you can see, returns are increasingly being privately divided.

To visualize, consider the private fundraising rounds of the tokens I mentioned earlier:

• Ethereum had an ICO that sold 80% of its tokens, with no other funding rounds.

• Solana's seed round sold 15% of its tokens, along with some other private rounds that reached about $80 million FDV before the TGE.

• OP's seed round valuation was about $60 million, followed by private fundraising rounds of about $300 million and about $1.5 billion FDV before the TGE.

• STRK's seed round valuation was $80 million FDV, followed by fundraising rounds of about $240 million FDV, about $1 billion FDV, and about $8 billion FDV before the TGE.

If you imagine the price charts of each asset and try to visualize the private market prices on the charts simultaneously. (Valuations represented on a logarithmic scale.)

All the charts start at roughly the same point (in the $2-8 billion range), but increasingly more of the upward trends are captured by private markets.

OP and STRK currently have similar market caps ($11 billion), yet OP must achieve a 6-fold increase in the public market to reach $11 billion, while STRK has dropped 50% to get here.

To reach $11 billion, SOL must achieve a 50-fold increase in the public market, while Ethereum must achieve a massive 450-fold public market return.

Opportunities for cryptocurrency token investments similar to Ethereum's ICO are still very common, but they are now almost entirely occupied by private markets.

The High FDV Part is Due to Natural Market Demand Growth

Expecting the issuance FDV to align with the FDV issued four years ago is an unrealistic expectation.

The capital scale in this field has grown 100 times, the supply of stablecoins has grown 100 times, the demand for new quality cryptocurrency tokens has grown 100 times, and so on. New tokens will be issued at higher prices because market demand is now higher, and the valuations of comparable projects are also much higher.

When looking at FDV, consider whether their prices align with other parts of the market.

• Solana's issuance FDV was about $500 million.

• At that time, Solana's valuation placed it among the top 25 cryptocurrencies.

• Its value was equivalent to 1/4 of BNB's valuation, while BNB was among the top 10 cryptocurrencies at that time.

• It launched when Ethereum was $150 per ETH.

• It launched when the ETHBTC ratio was 0.02.

I use the ETHBTC ratio here to show the market's confidence and demand for Ethereum and smart contract chains, both of which were at historical lows. There was even greater skepticism about "Ethereum-killer alt L1s." There had been a series of unsuccessful "ETH killers."

Since then, ETH has risen 20 times, BTC has risen 10 times, and SOL has risen 138 times, with the general market significantly rising, and confidence in smart contract chains as alternatives to Ethereum reaching all-time highs.

Today:

• A top 25 cryptocurrency would have a market cap of over $5 billion, about 10 times higher than when Solana launched.

• 1/4 of BNB's valuation is now about $9 billion market cap, about 20 times higher than when Solana launched.

• ETH is $3,100, about 20 times higher than when Solana launched.

• The ETHBTC ratio is 0.046, more than double what it was when Solana launched.

If Solana were to launch today, using these comparable metrics as alternative indicators of demand, the FDV at launch might be around $10 billion - this might even be an underestimate, as these alternative metrics do not account for the popularity of alt L1s.

Similarly, when Avalanche launched in September 2020:

• Avalanche's issuance FDV was about $2.2 billion.

• At that time, it ranked AVA among the top 15 cryptocurrencies.

• Its value was equivalent to 1/2 of BNB's valuation, while BNB was among the top 5 cryptocurrencies at that time.

• It launched when Ethereum was $350 per ETH.

• It launched when the ETHBTC ratio was about 0.03.

Recalculating the issuance FDV using modern prices, Avalanche's issuance would be $15-20 billion.

Prices After the Crisis

Another way to consider is Solana's undervaluation at the 2022 lows, which was after the FTX collapse and the collapse of investor confidence.

In a severely depressed market, Solana's valuation hit a low of about $5 billion. This valuation was one of the best liquid investment opportunities in recent years, achievable only through the absolute expulsion of fraud and leverage in the market.

Since then, the market has rebounded significantly. If an Ethereum ICO were held today, it would not only raise $16 million. If Solana's seed round financing were held today, there would be billions of demand.

It's nice to want to buy things at prices from 5-10 years ago, but it's a bit like saying, "I want to buy Ethereum for $150." Yes, who wouldn't want that?

The earlier rounds and previous issuance FDVs were priced relative to the amount of risk taken, the level of confidence in these assets, and the entire cryptocurrency. The demand for those earlier funding rounds was much lower, so their pricing was also to meet that demand.

Even at the end of 2020, the projects I invested in struggled to fill their $2-3 million funding rounds. Now, seed rounds for unrealistic projects are oversubscribed simply because they call themselves "gamefi."

Imagine this: if Solana's founders launched a new blockchain tomorrow, what price would you be willing to pay? Would you at least pay a quarter of the current Solana valuation ($25 billion FDV)? Perhaps even half of Solana's valuation ($50 billion FDV)?

Of course, even 10% of Solana's current valuation would yield a very high FDV because market demand is very high. So yes, FDV is higher now because the overall market value is much higher than before, and demand is much greater. Of course, high FDV does not always indicate market demand for a specific asset. High FDV is not always reasonable or deserved.

Especially recently, this is often not the case. Market participants have found ways to leverage these dynamics to keep valuations at inflated levels.

One of the bigger problems in the market is not that FDV is generally higher, but that many new projects have high FDV that is disconnected from the actual state of the assets; they are simply trying to fit into other high FDVs.

Launching projects at billion-dollar valuations has become the norm, even if this valuation cannot be substantiated by any real data, and for many market participants, it may never be proven that these valuations are clearly no different from better projects.

Low Circulation is Not the Only Culprit

Low circulation itself is not a bad thing; low circulation alone does not lead to an unhealthy market or represent a state of bad behavior - it is just a variable that investors must consider. Many low-circulation tokens have good launches and healthy market dynamics.

Bitcoin's issuance schedule is very well-known, halving every four years, reducing the supply of new coins in the market every four years. Bitcoin's "circulation" was less than 10% for a whole year after the genesis block.

Solana's floating amount in the first year was also very small, unlocking only after 10 months.

It needs to be clear that I am not defending low circulation.

I believe that higher circulation is always healthier for tokens, and I respect those projects that try to reach 100% circulation quickly. (Currently, there seems to be no good way to bring more circulation into the market, and those that succeed in doing so often do not act in their best interest in the short term.)

I am merely suggesting that low circulation alone is not an obvious problem if you evaluate other important factors and the results are good. Similarly, higher circulation does not immediately symbolize a green flag, nor does it mean it will be a "better investment."

When low circulation combines with other issues, the dynamics of low circulation can indeed become tricky. Unsubstantiated and exaggerated FDV, improper agreements with other market participants, or active manipulation by bad actors.

When misused by bad actors, low circulation markets are more susceptible to manipulation and distortion - for example, the lower the circulation, the lower the dollar demand required to price the token at an inflated valuation.

Yes, low circulation can also lead to a disconnection between valuations and reality when circulation or FDV is misunderstood or overlooked by uninformed token buyers. I believe the likelihood of buyers being independent of valuations is very low. The more likely scenario is that token buyers simply do not review or consider these metrics.

To protect and inform themselves, token buyers need to assess the balance between circulation, FDV, and the demand for unlocking tokens. They should consider: what is the cost basis of the locked supply, what is the demand for locked tokens in the private market, and how willing are existing holders to sell these locked tokens.

Finally, reported high circulation may itself be low circulation.

I think a recent example that proves this point might be a very popular token issuance:

From this chart, it can be seen that about 15% of the circulation has been unlocked.

Upon closer inspection, you will find that only about 2% is attributed to "community sales." The remaining unlocked circulation is attributed to the "ecosystem growth fund," which is specifically reserved for growth incentives (such as airdrops) and contributors to the project's ecosystem (including developers, educators, researchers, and strategic contributors).

As outsiders, we cannot know how this portion of ecosystem tokens will be allocated. We do not even know if this portion has already been allocated. The actual (sellable) circulation of this token may only be about 2-3%, even though it reports that 15% has been unlocked. This could mean that due to inactive supply and off-market tokens being included in the circulation, the market cap is almost 90% lower than reported.

This indicates that simply assessing the percentage of unlocked circulation is not enough. In fact, from the perspective of bad actors, obscuring and exaggerating the scale of actual (tradeable) circulation may be a more effective tactic, especially if market participants default to thinking "low circulation = bad."

Token buyers should research who holds the unlocked supply, how they are being used, and whether they can allocate this supply.

This "private price discovery" occurs in a manipulated market, resulting in deceptive valuations

In my view, one of the core issues of the low circulation/high FDV debate lies here. The problem people have with "low circulation" or "high FDV" is actually that price discovery occurs in a manipulated, delusional private market, or both.

Let me introduce------the ghost market. (I originally wanted to call it the shadow realm, but I am trying not to get too obsessed with the manga Yu-Gi-Oh). Imagine a market where one person, whom we will call Kain, controls all the supply of new tokens. In this market, anyone can bid, but only Kain can sell.

Kain sells some tokens to a new investor, Adam, at a valuation of $50 million. Adam's tokens are locked and non-transferable. Kain sells more tokens to another new investor, Eve, at a valuation of $300 million. Eve's tokens are also locked and non-transferable.

Adam and Eve have good reputations as investors (perhaps due to their fame in the "Bible"?), so other investors also become interested in Kain's tokens. Kyle, Bob, and Taylor Swift are all bidding for the next round at a $1 billion valuation------Kain decides Bob is the best investor here, and Bob also buys the locked tokens. After being rejected, Kyle is unwilling to miss out on this great new token and bids $2.5 billion, and Kain sells some locked tokens to him.

At this point, Adam's investment has increased by 50 times. He is eager to sell. He has been writing Twitter posts for years, and now he finally has a big harvest. In fact, even at the previous round's $1 billion valuation, he would be willing to sell.

Eve's holdings have increased by about 10 times, and she is also willing to sell at any price above a $1 billion valuation.

But since these holders cannot sell, and the only one who can sell, Kain, has no reason to sell at a lower price, this is a manipulated market that only goes up.

This pre-token issuance "ghost market" is an illusion. It does not discover a natural price based on supply and demand dynamics; it merely finds the highest price that venture capital investors are willing to pay. This dynamic pushes valuations to prices that the market cannot bear, as seen in the graveyard of tokens from 2020 to 2022, whose trading prices were far below private market valuations.

When Kain's tokens reach Binance or Coinbase, the ghost market does not stop but rather evolves slightly. Suppose Kain's tokens are now trading at a $5 billion valuation. Even the late panic buyer Kyle has doubled his investment. Every investor is now willing to sell their tokens------perhaps Kain is now accused of doing something shady privately, or a newcomer has designed a better version of Kain's product.

These investors are eager to sell but cannot sell their locked tokens in the market. They can only wait until the unlock/vesting period arrives. Therefore, these investors again try to find off-market demand at a 60% discount to the market price.

Now, the real market price is $5 billion. But in the ghost market, the tokens are trading at $2 billion. The real problem with low circulation tokens is that the price of circulating tokens is disconnected from the price of locked tokens. If the ghost market price is significantly lower than the real price, then the unlock will be extremely painful.

(On the other hand, if the ghost market price is close to the real price, then low circulation and impending unlock may not mean much. I was told that at certain times before major unlocks, locked Solana traded only about 15% lower than unlocked Solana, and almost all locked SOL tokens were bought by MultiCoin, Jump, Alameda, or others.)

Public market price discovery creates healthier markets. The large unlock amounts of certain tokens are due to the fact that price discovery has never truly occurred; it has only been testing what the possible highest bid is.

Ghost market prices are vastly different from real prices. Most market participants cannot track ghost market prices, which means they find it difficult to assess the expected pain of any asset's unlock.

Choosing to Exit

Parts 2 and 3 of this series will explore the incentive structures of other market participants and leverage these to further explain the dynamics of new issuances. Specifically, who benefits and why new issuances can maintain such high valuations.

These sequels will also discuss ideas and solutions that well-meaning actors can use to create healthier markets------and will also discuss why doing so is in their best interest.

However, in the meantime, I can recommend a simple suggestion for readers who do not have the power to change structural dynamics at the infrastructure level.

Buying inflated FDV is your choice------you can choose to exit, and you probably should

Of course, this seems obvious, but the slogan "invest first, investigate later" does not seem to apply to many of you. Either that, or perhaps you skipped the investigation part.

Token market cap information and FDV information are always public------unlocks are usually also made public somewhere, as long as the project is somewhat decent. Token economics typically shows who owns the supply. It is difficult to find the prices of private rounds, but it is possible.

If any of this basic information is missing------that is a dangerous sign! If any of this basic information looks confusing or is obscured------that is an important danger sign.

Even if you think the project is great, you do not have to buy these tokens.

In fact, choosing to exit and express protest by not participating seems to be the right response to recent token issuances.

If existing strategies fail or are rejected by the market, projects, founders, exchanges, and other market participants will have to adjust their market strategies.

I have seen some projects adjust their issuance and fundraising token plans due to the popularity of memes and the rejection of recently issued metaverses. Valuations should be researched before purchasing, and if they do not like the valuations, they should refuse to participate.

If you think a new project is the greatest idea in the world and you want exposure to it, it is still important to assess the valuation and unlock timelines. Even great projects may have poor token dynamics before full dilution, or the valuation may be too high to invest at that moment.

It is currently impossible to "early" participate in new token issuances, as we have seen, the behavior of privately dividing the rising profits occurs in a way that is difficult to access.

Rather than trying to participate early, it is better to maintain discipline and patience. Identifying projects you are interested in and assessing them within an attractive valuation range will be better than following the latest CEX-associated Twitter influencers to chase after tokens 30 minutes after they list.

The good news is that for most of these tokens (good projects but with many unlocks or venture capital hangovers, or possibly years of poor token dynamics), market participants may draw incorrect conclusions about these assets and completely abandon them during their early volatility------potentially providing you with a better entry opportunity than expected.

Conclusion

Newly issued tokens have become non-investable primarily due to the privatization of price discovery and venture capital markets ignoring supply and demand high valuations. These market dynamics can be exploited by dishonest actors, and increasingly mature market participants are also leveraging them.

While FDV is higher than in previous years, the FDV of newly issued tokens that are popular and hyped is always set at the highest valuation range of the market. This has been the case for at least the past five years------primarily due to the privatization of price discovery.

The "upward" portion of Avalanche and Solana since their issuance is:

1. Partially driven by overall market returns.

a. Avalanche has performed about 7 times since its public market debut, while Ethereum has performed about 9 times during the same period.

2. But also driven by its repricing in the market.

a. Solana moved from the top 25 to the top 5, with significant repricing relative to ETH and other parts of the market.

b. Avalanche moved from the top 15 to the top 10 and then fell back, causing a temporary repricing relative to ETH (and other parts of the market) during the bull market, which was subsequently erased.

When assessing the upside potential of new tokens, one should consider the FDV of new tokens relative to other parts of the market, but also consider the trajectory of the overall market.

If the new issuance valuation places it among the top three of all existing tokens, then for this investment to perform well, investors need a massive market expansion and the project to maintain its position in the top three, as it does not have much upside relative to the market.

If the new issuance valuation places it in the top 30 and investors believe it is a top 10 project, then when assessing the token, low circulation and higher FDV may be less important.

While a $1 billion issuance price may seem expensive today------if Solana reaches $1,000 each and a $1 trillion valuation in a few years, looking back, that $1 billion may seem cheap, and people will complain that new issuances are all at $80 billion.

Judging new token issuances based on performance over the past few months can also be misleading------Solana dropped 50% from its listing price and failed to recover to its initial price within months. New capital inflows are needed in a bull market to reprice its position in the market.

Significant early market repricing is unlikely to occur without a sustained market trend because:

a) Private markets have drained the upside potential.

b) In high-demand markets, it is difficult to counter market forces to push prices down.

c) If circulation is very low, projects, exchanges, and market makers can counter market forces to drive prices up.

Market participants should expect that the valuations of new projects will remain high when market demand is strong. In the privatization of profits model, it is no longer possible to "enter early"------investors should focus on finding forgotten or mispriced value in the market. When purchasing, they should become more adept at assessing the valuation and supply-demand dynamics of new tokens, discerning which high FDVs (fully diluted valuations) are based on supply-demand realities and which are extremely disconnected "ghost markets." Choosing not to participate in these markets is a vote with capital.

Good founders want to build successful projects; they know that market dynamics will affect the perception of their projects. The overperformance of memes and the poor performance of new token issuances have led future founders to adjust their fundraising and issuance plans.