阿爾伯特·愛因斯坦說過：“You do not really understand something unless you can explain it to your grandmother.”
Global Crypto Gold Rush已經膨脹了幾個月，但現在它的下降速度甚至超過了上升速度，並且現在已經停滯不前。
Albert Einstein: “You do not really understand something unless you can explain it to your grandmother.”
The Global Crypto Gold Rush swelled for a couple of months, but it went down even fasterthan it went up, and has stagnated to where we are now.
Global IC0 Raised Value by Month
Traditional Angel Investors and VC funds usually work together with the projects to create value by connecting resources, providing consultancy, etc. The reason behindthis is to make sure the project can properly grow in value, allowing funds toexit in later equity rounds throughout the months or years to come. In this long-term co-operating process, theseed round investors don’t fully exit in Pre-A or A rounds, but wait for a coupleof rounds before they can fully exit, in order to maximize the amount of valuecaptured. The key lesson here is that it’s a uni-directional and long-termprocess, as displayed in the following figure:
One of the reasons for the sudden growth of Crypto projects is due to its “Global” fundingnature: a hyper crowd funding mechanism allowing for global investments andliquidity. Fast moving token funds saw the opportunity at hand and took theirchance and did earn a good piece of the pie.
The following triangle displays the typical process of the Crypto investment:
Step 1: Teams/ projects with a great idea look for 1st tier funds to invest asthe early investor with better prices and conditions.
Step 2: With 1st tier fund names backing the project, the teams are now in acomfortable zone to find further investment from 2nd or 3rdtier funds.
Step 3: The team continues to do global road shows, PR, marketing campaigns to create a belief among global retail investors about the project’s value proposition andits future growth, premised on real user adoption and usage need. Projects typicallylimit the amount of tokens available for private sale so as to induce FOMO fromretail investors upon listing, providing the necessary liquidity for presaleinvestors to safely exit.
Step 4: The last part of the pyramid is the supposed product users that will join the ecosystemby using the product and that best displays tokens true value.
With in the pyramid, the following part are buying the bills of the previous ones andas long as there are more retail Crypto investors coming in, then the hypegenerator has worked and the mechanism can continue to propel itself. Since investorsare seeking for a fast in and fast out for the highest possible return, theteams are usually busy with fund raising and marketing instead of the projectitself, aka “air token” projects without real users and real projects.
It is not surprising that the pyramid collapsed soon after. Since there are no users atthe bottom and retail crypto investors don’t want to be the base of pyramid topay the bills of previous funds. After being repeatedly dumped on by funds andlosing a certain amount of funds, these retail investors learned their lessonsand have since become investment passive.
The new bottom base are the 2nd and 3rd tier funds, as they don’tget the same price offers as the first one. These funds can’t afford to pay forthe bills and learned their lesson as well soon after, and have since becomeinvestment passive.
Now at this stage, there are only 2 players left: the projects and first tier funds. The projects are aware that afterreleasing the promised tokens to the investors, the first tier funds with thelowest discounts will most likely dump in the market hoping to sustain its highreturn, where the projects will then need to buy out at a higher cost tostabilize market prices. Hence, the projects try all excuses it can find to notrelease the tokens.
The fundamental process of investors supporting projects back in traditional investingwas unsustainable in most cases in crypto. Instead, the projects and funds spentmuch more energy fighting over price and quota, and as a result, became enemyof each other. The wheels for such agame have stopped, and the pyramid has collapsed.
Perhaps,it’s an evolution cycle for the bubble to burst so as to allow all participantsto rethink and come back to the core value of existence. The Core value is indeedthe need of the product for the users, and that’s where it shall all restart.
Besides that, 1st tier funds ought to be more patient and should providemore valuable resources and consulting as in traditional investments; theprojects shall refocus on delivering its promises first and target the verybottom of pyramid: the users. With the growth of the user base, then pyramidwould reconstruct from base again and retail Crypto investors will have the opportunityto buy from the secondary market for its investments, whereas 2ndand 3rd tier funds can buy a larger piece of the total token poolfrom projects at more reasonable negotiated prices and lock up terms.
The final lesson learned is to create a product with accurate consumer needs and todesign correct token economics to leverage its growth, which will be continuedin the next article.