According to Haseeb Qureshi, Managing Partner at Dragonfly Capital, the recent decline in token prices on Binance over the last six months may not solely stem from venture capital dumping. Instead, it could be attributed to a complex interaction of market forces.
In an article released on May 19th, Qureshi expressed reservations about the data shared by @tradetheflow_. The data highlighted that tokens newly listed on Binance, labeled as “high FDV, low float,” have seen notable drops despite early positive outlooks.
The tokens, with substantial fully diluted valuations but limited circulating supply at launch, have sparked discussions about potential market manipulation.
Among the current hypotheses are worries about venture capital (VC) and Key Opinion Leaders (KOLs) selling off tokens to retail investors, a trend of retail interest shifting towards memecoins, and difficulties stemming from insufficient supply for significant price discovery.
Yet, Qureshi disputes these claims, stating that virtually all prominent venture capitalists impose a one-year cliff and require multi-year vesting before receiving their tokens.
“So here’s why this story doesn’t make sense: every single one of these tokens are less than a year from TGE, meaning VCs with 1-year cliffs are still locked!” – Haseeb Qureshi
Qureshi, emphasizing that his opinions don’t necessarily reflect those of Dragonfly Capital due to differing viewpoints among the firm’s staff, proposed an alternative interpretation. He observed that the stability of these tokens endured until mid-April, coinciding with a broader market downturn, influenced in part by geopolitical tensions in the Middle East.
“So what is the best explanation of why these coins are still down? My explanation: these new projects have all been mentally basketed as ‘risky new coins.’ Appetite for the ‘risky new coins basket’ went down in April, and didn’t recover. The market decided they didn’t want to buy them back.” – Haseeb Qureshi
He also addressed the idea that retail traders transitioned from tokens to memecoins, rejecting it as unfounded. He noted that the peak of memecoin frenzy was in March, but the market downturn occurred in April, approximately six weeks later.
In a post on May 17, a crypto researcher at SwissBorg using the alias @tradetheflow_ disclosed that 80% of tokens listed on Binance in the last six months have depreciated since their introduction. The analyst highlighted that many of these tokens, witnessing declines, were supported by prominent venture capital firms like Coinbase Ventures, Pantera Capital, Paradigm, and Dragonfly.
The researcher emphasized that only two memecoins and one token, not affiliated with any major VC firm, demonstrated positive returns post-listing. This underscores the necessity for enhanced transparency and stronger mechanisms in token listings.
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