VC Coins vs. Meme Coins: Why Are Retail Investors No Longer Buying VC Coins?

Why is this cycle so painful and everyone is so distressed? We can attribute all the problems to the fact that retail investors can no longer make money under the current market structure. This article will bring some unsystematic ideas around returning to the basics.

The answer to why retail investors have a hard time in this cycle is very simple: because “trades” like infrastructure tokens no longer see 500x growth in the crypto market . And there is a more interesting playground with better memes not far away.

We are essentially recreating what happened in the VC/IPO market.

In these markets, companies stay private longer, which means more of the upside is “private” (e.g. VC funds) and simply out of reach for retail investors.

Crypto has been turning this around and democratizing access to asymmetric upside. But now it’s changed! L1 and L2 are raising much more money from VCs! There are no public token sales, VCs are making a lot of money, and retail investors are suffering. Maybe the collapse of the retail dream in this cycle is not so surprising.

One big reason companies are staying private longer is that VC funding is five times larger than it was a decade ago. Companies can now raise more than $1 billion in private markets while avoiding the overhead associated with public markets.

Unsurprisingly, the same trend is happening in the crypto VC space — crypto VC funding is much larger than it was five years ago .

Crypto was supposed to solve this problem! ICOs were meant to democratize capital formation and thus risk-reward. They have completely succeeded in doing just that… unless you are lucky enough to have a US passport.

ETH was priced at 30 cents during the ICO in 2014, and is now priced at $3,000. That’s a 10,000x return in 10 years, easily beating any venture capital investment during that time. It’s awesome that anyone in the world can participate !

Now that the industry is clearly growing, the entry price will naturally rise, but the opportunity has not disappeared. In 2020, SOL was issued at $0.22, and four years later, the price was $140, which is a 636-fold return in four years, which is likely to exceed almost all venture capital returns in the past five years.

We have moved away from this market structure this cycle. Now, the chances of retail investors buying pre-launch tokens or buying tokens at low prices on the open market are close to zero.

Airdrops are definitely an improvement over the existing venture model where early adopters have no financial advantage. But they are a worse financial transaction than a token sale because you can only make so much from an airdrop.

The original uncapped upward market has brought us to the market cap, and the transactions during this period must be huge. The SOL ICO with a $1,000 investment in the last cycle has now become $636,000. In this cycle, the Eigen with a $1,000 investment can only become $1,030. Even if it grows 10 times, it is only $10,300.

In the last cycle, you controlled your own destiny, but this time you are waiting for charity from Eigen's father.

Financial anarchism means recognizing that these markets have always been about money. Yes, the money is invested in technology, but it is money that keeps the wheels of development turning. Without money, the wheels fall off.

There are things we can do to improve the current distribution structure. It all comes down to creating uncapped upside for early adopters and the community.

That said, there are larger structural issues with the market. These massive L1 and L2 rounds have resulted in multi-billion dollar pre-coin valuations. This creates two problems: huge sell-side pressure, and too high a FDV.

In my opinion, a big part of the structural problem with most altcoins in this cycle is that VC selling pressure has not been offset by retail money flowing in. If you raise $500 million pre-launch, the ultimate selling pressure will be $500 million (and theoretically more if the token price rises).

ARB fell back to the bear market low in the bull market due to heavy selling pressure

Private placement financing at a higher FDV means the final FDV will be higher, which will definitely lead to a downward trend.

Price trend of high FDV representative token ICP

The relationship between venture capital and retail investors is not necessarily antagonistic. Everyone makes money through SOL.

But it’s harder if you try to put too much risk money into illiquid markets.

We point fingers and argue about meme coins, but that’s absolutely not the point. Meme coins are not the problem, the problem is our current market structure.

We must break through the current market fog and return to our democratic roots.