Selling Airdrops on Launch Day: Why It’s Usually the Best Move
When it comes to cryptocurrency, airdrops are a big deal. But data shows that selling airdrops on launch day is almost always the best strategy. According to Aylo, a user on X, most airdropped tokens lose value after their launch day. Let’s dive into why selling airdrops early is usually the smart move.
Airdrop Performance: The Numbers
Aylo’s research revealed that 23 out of 31 airdropped tokens have declined in value since their launch day. This means that only 8 tokens are worth more now than they were on their first day. Out of these, only 4 tokens have performed better than Bitcoin (BTC), and just one of them was launched this year. These numbers suggest that selling airdrops on launch day, either for dollars or BTC, is often the most profitable move.
Initial Gains vs. Long-Term Holding
Some tokens do see a price increase right after they launch. However, holding onto these tokens for a long time usually results in losses. For example, only 4 out of 31 tokens have beaten BTC since their launch. This shows that while a few tokens may do well initially, long-term holding often leads to poorer performance.
The Importance of Initial Valuations
One reason airdropped tokens tend to lose value is that their initial valuations are often set too high. When users start selling these tokens, it quickly reveals these “unrealistic valuations.” Aylo’s data shows that fully diluted valuation (FDV) is a crucial factor to consider. If a token’s FDV is too high, its price is likely to drop as more tokens are unlocked and sold.
The Role of Yield Farmers
Yield farmers also impact token prices. These are users who sell tokens quickly to extract profits before moving on to the next opportunity. This constant selling pressure makes it hard for tokens to recover in value. Even though, in theory, tokens should bounce back after these initial sell-offs, the data shows this rarely happens.
Success Stories: Bonk and Degen
Despite the overall poor performance of most airdropped tokens, there are exceptions. Bonk (BONK) and Degen (DEGEN) are two meme coin airdrops that have performed very well. These tokens started with low initial valuations and have given the best returns to their holders. Bonk and Degen were designed to support the growth of the Solana and Farcaster ecosystems, respectively.
Points Programs and User Engagement
Even though airdropped tokens often lose value, points programs are still popular. These programs help keep users engaged and encourage them to stick around. However, based on current data, the way airdrops are conducted might change. Projects need to carefully consider how they structure their airdrops or if they should even do them at all.
Should You Hold an Airdrop?
Aylo’s data suggests that holding onto airdropped tokens is not usually a good idea. Most of the time, it’s better to sell them on launch day. If you’re really confident in a project’s long-term prospects, you might get a better chance to buy the token at a lower price later on. The next bear market could make some of these tokens better investments. There are good projects out there, but the timing of your purchase is crucial.
Problems with High Valuations
A big issue with airdropped tokens is that they often start with very high valuations. Market makers and projects sometimes set these prices too high, and when users start selling, the price drops quickly. This cycle teaches everyone that fully diluted valuation (FDV) matters. Holding airdropped tokens means betting that there will be enough demand to drive the price up even as more tokens are unlocked and investors hedge with shorts.
The Future of Airdrops
Many people believe that airdrops are poorly designed and hurt token prices in the short and medium term. However, the data shows that it’s tough to execute an airdrop without negatively impacting the token’s value. Some meme coin airdrops with low starting valuations have done well, but most do not.
Points Programs vs. Airdrops
Points programs are likely to stay because they create a fun and engaging experience for users. However, the way airdrops are done might change. Projects should think carefully about whether to do an airdrop at all and how to structure it if they do.
Closing Points
Selling airdrops on launch day is usually the best move. The data shows that most airdropped tokens lose value after their first day. While there are exceptions like Bonk and Degen, the odds are against you if you hold onto an airdropped token. Projects need to be careful with their initial valuations and consider the impact of yield farmers. Points programs may continue to engage users, but the future of airdrops might look different based on current trends.
