Crypto tokens are growing faster than their value, creating a bubble. “existential” Michael Ippolito is the co-founder and CEO of Blockworks.
A series of posts Ippolito stated that while the crypto market’s total capitalization is still relatively high, its average price per token tells a completely different tale. “The average coin is only slightly higher than where it was in 2020 (!) and down ~50% since 2021,” He wrote.
The median token return has also declined sharply. Ippolito said that most tokens have fallen by about 80% since their peak, indicating gains concentrated on a small set of high-capitalization assets while the market as a whole has underperformed.
The rapid growth in the token supply, he argued, appears to be driving this apparent imbalance. “We created a TON of new assets and STILL total market cap is flat,” He wrote that the value of tokens is effectively diluted by this growing number.
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The fundamentals of token prices are not the same as those in other markets
Ippolito claimed as well that fundamentals have weakened the link between price and value. In 2021 token prices were closely tied to onchain revenues. The latest data indicates that prices are not following protocol revenue despite the resurgence.
He claimed that it signals a lack of trust in tokens to represent value. “The token problem is existential for this industry,” He said that the industry risks losing its appeal if fundamentals are not better aligned with prices.
Arthur Cheong is the founder and CEO at DeFiance Capital. said He has agreed “with the urgency to fix the current situation of tokens in the crypto industry,” The crypto-ecosystem could lose relevance if it continues to be dominated by a few assets, such as Bitcoin and Ether.
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Capital shifting from tokens into stocks
Demand for investors is increasing moving away from newly launched tokens DWF Labs’ research in February found that tokens are not holding value for most launches. Over 80% of tokens trade at prices below the TGE price. Losses of up to 70% are typical within three months.
This pattern seems to be structural, not cyclical. Andrei Grachev of DWF says that most tokens reach their peak in the first month, before falling under persistent selling pressure. The supply of tokens is exacerbated by factors such as early investor unlocks, airdrops, and other promotional activities. This leads to a downward trend in prices even when projects have products or protocols.
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Source: cointelegraph.com
