Dropped tokens experience a significant drop within 15 days

A recent study by cryptocurrency market maker Keyrock shows that 88% of tokens issued through airdrops this year experienced a decline after three months, with the majority experiencing a significant drop within 15 days of the airdrop.

Keyrock wrote in the report:

In the first few days after the airdrop, the price fluctuates the most. After three months, only a few tokens can achieve positive returns, and only a very small number can break this trend later

The practice of token airdrops was initially intended to reward users who contributed to the early success of the protocol, but in recent years, airdrops have been increasingly used as a means of attracting users and drawing attention to the protocol. With the listing of spot Bitcoin ETFs in early 2024, Bitcoin soared to a historic high, and the market's enthusiasm for airdrops reached its peak, causing prices of other cryptocurrencies to rise as well.

Despite the high market atmosphere, the price performance of most airdrop tokens this year has been unsatisfactory. However, a small number of airdrops have still been successful.

What kind of airdrop can be successful?

The market generally believes that the more tokens a project airdrops, the worse its market performance will be. This viewpoint is not difficult to understand, as airdrops often result in lucky users receiving tokens worth thousands of dollars, and most users are eager to cash out this unexpected windfall. In addition, many "witch attackers" with multiple accounts are lurking in these airdrop projects, resulting in a sharp increase in the number of tokens being sold. However, the actual data does not fully support this common view.

Keyrock states:

Contrary to common belief, large-scale airdrops do not always lead to selling. One project airdropped 70% of its tokens but still achieved positive returns, indicating that FDV management is more important

FDV (fully diluted valuation) refers to the total value of all tokens in circulation, including tokens that have not yet been unlocked or distributed. Keyrock pointed out that there are two reasons for the poor performance of high FDV airdrop token prices.

Firstly, projects with excessively high FDV often struggle to maintain growth momentum due to limited expected upside potential. In addition, high FDV tokens often lack sufficient liquidity to support their valuation, and once liquidity is insufficient, the price becomes extremely sensitive to selling pressure. This year, many projects have been criticized for issuing tokens with excessively high FDV. Marc Weinstein, a partner at crypto investment firm Mechanism Capital, once said in an interview with foreign media:

Only those short-term arbitrageurs will see low liquidity supply (overvalued low liquidity) as an opportunity for quick profit

winners and losers

Keyrock also identified the most successful and failed airdrop cases in their research. Among them, Solana trading platform Drift is one of the biggest winners. Keyrock believes that the key to its success lies in moderate issuance value and fair and carefully considered token distribution. Currently, the trading price of DRIFT tokens is nearly three times the issue price.

In addition, Keyrock further stated that Solana is the best performing memory blockchain on average for airdrops in 2024, with successful tokens such as WEN and JUP.

In contrast, the lending protocol ZkLend and the Ethereum layer 2 network Starknet performed the worst. According to Keyrock's analysis, ZkLend's ZEND token has fallen by 95% since its issuance price. Keyrock attributed the poor performance of ZkLend token to its high issuance value and the project's failure to establish sufficient influence for its brand. Keyrock states:

The situation of ZkLend is a strong warning that even if airdrops and hype can attract users, they cannot truly create value, practicality, or sustainable communities

Reference source

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