Interpretation of VC coins and the operational logic of exchanges, where is the market capital flowing?
Where did the funds actually go? Why don't exchanges like your coin?Author: shaqima, Crypto KOL
"Where does the money really flow? Why do exchanges not like your coin? Arrogance is not without solutions; we can find ways to break the deadlock from past lessons."
Recently, this topic has sparked various opinions. I have conducted a comprehensive analysis from the perspective of the overall capital market flow as well as the business models of exchanges and VCs.
Here, I will share using simple logic and examples.
The current situation is not without solutions, as history tells us.
The content is divided into several major categories:
Current market capital distribution and crowd distribution
VC model coins and the operational logic of exchanges
Why do exchanges not like your coin?
How to break the deadlock in the future? Let's look at past lessons.
To understand why exchanges do not like your coin, one must first understand the operational model of exchanges and the role they play in the crypto ecosystem (capital market).
1. Market Capital Distribution and Crowd Distribution
In broad categories, the capital market can mainly be divided into primary and secondary markets. If we delve deeper, we will see various ecosystems, sectors, and different forms of capital products (NFTs, Tokens, inscriptions, runes…).
From the crowd perspective, it can be generally divided into two major categories: domestic and overseas.
Since the implementation of policies, the options for domestic users regarding exchanges have become extremely limited. Therefore, for domestic users, exchanges currently do not have an attitude of seeking you out; rather, it is a stance of "if you don’t come, you have nowhere else to go." Moreover, with the emergence of wealth creation effects, people will naturally come.
Of course, there is not just one exchange, but each exchange has found its unique core competitiveness in the market.
Some focus on security, some on building and promoting new ecosystems, while others choose to let certain lesser-known assets survive that top exchanges overlook. Some even compete for the primary market's cake…
Thus, disregarding the form of assets, from the perspective of exchanges, we can classify them as:
C: Ordinary assets in the primary market (risk is uncertain, requires research, understanding, and then decision-making)
B: Good assets in the primary market (have potential but still carry risks; analyze their benefits before making a decision)
A: Excellent assets in the primary market (have an outstanding backing, lower risk, and guaranteed returns)
Therefore, A-class assets are what everyone is scrambling for, B-class assets are selected by top exchanges, and C-class assets are generally overlooked; one can just play in the primary market.
To summarize with an example:
Here, A, B, and C are like students, with exchanges categorized into top universities, regular universities, and vocational schools.
Outstanding students can bring benefits to schools, so naturally, everyone likes them.
If you are not outstanding but have connections that can bring value to the school, you are also welcome.
Those with average grades who can pay can also be accepted. After all, schools need to make money. However, spots are limited; don’t be discouraged, as there are other schools that welcome you more than we do.
For those who perform poorly, even if you pay, there is a risk of disrupting the school's atmosphere. If you tarnish the school's reputation, it would be counterproductive. It’s better for you to fend for yourself or go to a vocational school; there will always be schools that are not afraid of risks and want to make money off you.
Thus, the threshold is formed. Therefore, project parties also need to take exams.
Of course, these are the obvious aspects; what about the behind-the-scenes operations?
If you have an "overseas identity," even if your grades are average and your strength is mediocre, if you come to me, I can make you famous in the overseas market. Naturally, you are also welcome.
Thus, in the current capital market, projects led by domestic users need to rely on strength to compete. If you don’t want to compete, you need to consider your background and connections. After all, the domestic market is already saturated; I am not afraid if you don’t choose me, as you have nowhere else to go.
The overseas market, on the other hand, is a primary target for exchanges to increase revenue.
Projects that are popular overseas can bring in overseas users once accepted. If they can be retained, it can continuously expand their revenue.
At this point, the crowd and capital become clear.
If we delve deeper, when a new narrative emerges, we should first look at the proportion of the crowd involved.
If it is primarily overseas users, privileged channels can be offered first, and the threshold can be lowered for you. If it doesn’t work out, it’s fine if it doesn’t make money, as long as you can bring people in. I can earn back from them later.
If it is primarily domestic users, it depends on your capabilities and strength.
If the narrative is novel enough, we are not rigid people; we should praise when it’s due, but the conditions must not be overlooked. When your ecosystem is large enough and profits are substantial, we can talk about "cutting" matters.
Thus, under the condition of having a hold without fear, "better to be picky than to be wasteful" becomes everyone's expectation.
Having discussed the external environment, let’s look at the internal structure.
2. VC Model Coins and the Operational Logic of Exchanges
To keep it simple, let’s not talk about those born with a golden key. Let’s start with ordinary projects.
Once a narrative is constructed, what is needed is to survive in the market, which means traffic. When there is no popularity at the beginning, data is needed to support one's "face," so during the period of potential, everyone starts from the same starting line.
With some achievements, naturally, capable people will extend an olive branch. If your own conditions are not strong enough, it will be difficult to go it alone. You need to band together for warmth.
At this point, your basic traffic will start to expand through these olive branches.
When the traffic expands to an ideal stage, you will qualify for prestigious schools.
Then it’s time to talk about returns, as after all, who would talk nonsense without money?
From the beginning, when you owned 100%, you gave a portion to the olive branches and another portion to the prestigious schools. At this point, when you check your pockets, oh no, there isn’t enough left to share with those who supported me when I had no fame!
What to do? The witch is a good thing.
"Recently, the so-called witch incidents have frequently occurred; those who can endure in the crypto race are truly a joke."
So, in the above logic,
The project party plays the role of technical conception and implementation. (Of course, there are those who made money purely from conception, but that was in ancient times.)
VCs play the role of matchmakers. They must help you create momentum, give you money when you lack it, and use their connections to help you build your voice.
Exchanges act as traffic amplifiers (liquidity).
The project party earns their entrepreneurial returns through technology and concepts. VCs earn their low-cost chips through their connections and resources. Exchanges exchange their traffic for low-cost chips.
Once the chips are allocated, the next step is how to sell them better. (We won’t delve into market makers here; the logic is the same.)
Having discussed VCs, let’s look at exchanges:
Exchanges are, after all, the earliest entrepreneurs who built a convenient trading environment through technology, avoiding the complexities of the primary market while reducing perceived risks.
Once the technology is in place, people are needed. In the initial survival phase, various project parties need to bring people in and conduct subsidy activities to attract and retain users, making their venue lively.
One day, when you find that everyone in the village is playing in your venue, and there are no other venues within hundreds of miles, you naturally won’t need to promote it vigorously anymore.
Next, you need to think about how to attract more distant visitors to your venue.
Thus, essentially, everyone is based on the entire market to circle their own pool. When their wings are fully developed, they will naturally cherish their feathers. In other words, how can the crops you planted be taken away by others at will?
3. Why Do Exchanges Not Like Your Coin?
The perspective that one's own children are always good is often a viewpoint that needs to be abandoned.
Many times, most projects have met the traffic requirements but have not fulfilled the profit requirements.
As the old saying goes, "A teacher must have a name." Exchanges also need a good letter of recommendation to accept you.
Let’s examine a project from the perspective of exchanges:
- Is the traffic large enough? If your traffic is substantial and fits what I want, it can be discussed.
If it’s just a small amount of traffic, then we’ll look at other factors.
- Can you bring benefits? The profit from trading volume is the final choice for exchanges and is the bottom line reserved for high-traffic projects.
Direct profits are the most real; if there’s no visible money, why should exchanges provide traffic to you in exchange for liquidity? If you take the money and leave, exchanges are left with nothing.
Thus, giving chips or money is what truly matters.
"Mr. Huang, without money, how can we fight the bandits?"
So, no matter how much noise a project makes, exchanges can increase your dreams with free support. Why should they invest their own hard-earned money to support your dreams?
Everything ultimately boils down to profit. The rules on the surface are always used to control people, while the rules behind the scenes are meant to get things done.
You may think that the child you chose has met those so-called requirements, but in reality, it’s just a big dream. Moreover, more often than not, one needs to objectively assess the advantages of a project. It’s not just because you see a foreigner that you think they are all foreigners. That’s self-deception.
4. How to Break the Deadlock in the Future? Let’s Look at Past Lessons
The market is a product formed by buying and selling behavior, and exchanges only simplify the path of this buying and selling behavior, thus taking a share. When the crowd is large enough, the profits naturally increase.
However, the market is never an infinitely large cake, so exchanges cannot monopolize the entire market. This is the norm.
When things develop to a certain stage, they will always face challenges of the current phase.
I am not concerned about the reasons behind Binance's current style, but indeed, Binance has encountered a bottleneck.
Exchanges cannot achieve all three options of innovation, profit, and security simultaneously.
At the current height, in a difficult predicament, even Binance cannot completely monopolize all market groups.
On one side is risk, on the other is the upward profit game, and on the other is the downward traffic competition. There must be trade-offs.
From the current perspective, compliance and security may be Binance's primary choice, which has led to a loss of vitality and innovation.
Recently, emerging MEME projects focus on fairness and strive to align with decentralization, but this also means that they have kicked many roles out of the original ecological food chain.
This chain can no longer operate under the previous model, which signifies innovation.
This is not the first time such a thing has occurred. In 2021, BYAC emerged as a new NFT product, where exchanges played more of a promotional role in the first half and followed in the second half.
Thus, under this emerging market, other trading scenarios like Opensea have also appeared.
The laws of the market cannot be completely controlled by individual entities.
Therefore, whether it’s pump or unisat at this stage, the emergence of these platforms plays a significant role in the new cycle.
In the future, more emerging assets will shine and thrive outside these so-called leading platforms. When they have sufficient traffic, token assets will also emerge and return to these platforms to jointly promote the entire ecological market.
Currently, Binance is no longer a small boat with strong maneuverability; since the giant ship needs to be stable, it does not diminish the existence value of small boats.
Thus, at this stage, whether it’s MEME or other emerging entities, they all provide opportunities for more small boats.
This opportunity will lead to the emergence of more giant ships. Ultimately, even if the MEME track deprives certain conventional VC model tokens of their roles and cannot become the preferred choice of these VC-favored exchanges, it does not mean that there won’t be exchanges belonging to MEME.
Everyone has different standards for evaluating excellence. In a market with a thousand faces, when the demand is sufficiently large, more opportunities will emerge.
Whether it’s NFTs, pump, Brc20, or runes, they will not stop growing just because Binance rejects them.
In the grand torrent of history, exchanges are merely one of the passersby. Binance has achieved its current feats within a few years, which also means: there will be successors.
The current problem is a predicament, but for those exchanges and teams with ideas, it is also an opportunity.
The fall of any giant ship is a heavy blow to the industry, and everyone needs to pay for it. There’s no need to destroy it; it can only be said that with upgrades and developments, many people are no longer its clientele.
But that does not mean this market has ceased to exist.
For large capital outflows and security, Binance still possesses core competitiveness.
When it cannot meet everyone’s expectations for "promoting the industry," other rising stars will naturally emerge.
The catfish effect can sometimes stimulate industry development after all.
From an ecological perspective, Binance cannot block the operation of cycles. From the perspective of individual investors, maintaining a trading logic consistent with exchanges can still yield the desired returns.
We look forward to the emergence of a bright breakthrough method.
