- A Keyrock study shows that 88% of airdropped projects crashed in 2024, most within 15 days of launching.
- The fully diluted valuation (FDV) was the common thread tying all these disasters together. Developers overestimated the FDV and had insufficient liquidity to support it.
- Winning airdropped projects had a well-established background, a proven product, and a thoughtful, modest launch.
Let’s admit it. Many crypto projects go belly-up soon after their airdrops hit the market. Around 88% of tokens launched with airdrops suffered significant losses, with most crashing in 15 days.
But is it because of the airdrop event? Or is it a bit more complex than that? A study by crypto market maker Keyrock may answer that question.
Let’s see what it found.
Why Are Airdropped Crypto Tokens Dropping Like Flies?
Keyrock found a worrying trend – the vast majority of airdropped projects fall, never to recover. After three months, only a minority have a positive performance.
Here’s a summary of the study’s findings:
- Most airdrops crash within 15 days.
- Airdrops that distribute over 10% of the total supply performed better, while those under 5% saw a quick sell-off post-launch.
- Inflated FDVs are often the reason for a project’s crash. They slow down liquidity and growth.
- Liquidity is essential to avoid selling pressure post-launch.
- Successful airdropped projects had smart distribution, strong liquidity, and realistic FDVs.
The highlight of the study was the low life span of airdropped projects, as you can see in the graph below. Only a handful recovered, and after three months, seven projects had a positive performance.
So, what’s the primary reason for this crash? Is it the percentage of airdropped tokens, with a higher percentage indicating a worse performance?
Not according to Keyrock.
Contrary to popular belief, larger airdrops don’t always lead to dumps.“A token with 70% airdrop allocation saw positive gains, highlighting that FDV management is more important.Keyrock
The FDV is the capital sin. It’s the predicted total market value if all of a project’s tokens were in circulation.
Keyrock identified two reasons why airdropped tokens with high FDVs crash:
- They can’t maintain momentum.
- They lack the liquidity to support the valuations.
Who’s Winning and Losing in the Airdrop Arena?
Keyrock also found the biggest winners and losers in the airdrop arena.
Solana trading platform Drift tripled its launch price. The reasons for its success? A modest market cap, fair launch, thoughtful distribution, and long-term approach.
It had a well-established history, a proven product, a staggered release structure (which minimized sell-off pressure), and a realistic valuation.
In a few words, Drift succeeded because it didn’t bite off more than it could chew.
At the other end of the spectrum lies ZkLend, which crashed by 95%, falling from a $300M market cap to a $400K daily trading volume.
It committed multiple cardinal sins:
- Failed to vet participants, attracting reward hunters who sought short-term rewards. This led to low retention and quick cashouts.
- Relied on Starknet’s momentum to build hype rather than provide value to investors.
- Had no brand recognition and loyalty from participants, leading to insufficient genuine engagement.
Could it be that overhyping a project, attracting short-term speculators, and offering low value aren’t enough to succeed in crypto?
To Conclude – Prioritize Real, Genuine Value to Over-Inflated Hype
Keyrock’s study shows a familiar pattern – unsuccessful airdropped projects encouraged participants to maximize their returns instead of investing in the ecosystem’s long-term growth.
This led to the only logical conclusion: quick sell-offs once the project launches. After all, if you attract speculators, expect them to speculate.
But by far, the most gross mistake is overestimating the FDV. With insufficient liquidity to ‘walk the walk’ of the larger-than-life FDV, your project is doomed from the start.
References
- Airdrops in the Barren Desert: Surveying the traits behind 2024’s 11% success rate (Keyrock)
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
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