Crypto insiders stopped buying new tokens 2 years ago, creating a liquidity trap that’s crushing retail buyers
More than 80% of the tokens launched this yr are buying and selling underwater, marking a definitive shift available in the market’s urge for food for venture-backed cryptocurrency initiatives.
Data from Memento Research confirmed that it tracked 118 main token technology occasions in 2025 and located that 100 of them, or 84.7%, are buying and selling beneath their opening totally diluted valuations. At the identical time, the median token in that cohort is down 71% from its launch value.
According to the agency:
“TGE in 2025 typically signalled the highest for many initiatives, with value discovery already occurring pre-TGE. If you’re buying at launch, you’re mainly searching uncommon outliers whereas the median end result is a ~70% bleed downwards.”
The mechanics of the crash
To perceive the severity of the drawdown, it’s essential to differentiate between market capitalization and Fully Diluted Valuation (FDV).
Retail buyers sometimes purchase the circulating float, which is often the ten% to fifteen% of tokens truly out there for buying and selling.
However, the worth of that float is more and more decided by the FDV, which represents the mission’s complete worth as soon as all enterprise capital and crew tokens vest.
Memento’s report confirmed that the “low float, high FDV” mannequin, the place initiatives launch with a small circulating provide however a huge complete valuation, has hit a arduous ceiling. It famous:
“The clearest perception was how larger launches did worse → the hyped, high-FDV token debuts dragged valuations down: 28 launches began ≥$1B FDV: 0% inexperienced, median drawdown roughly ~ -81%. [Their] opening valuations are set manner too high and above its honest worth, leading to worse long-term efficiency with bigger % drawdowns.”
This meant that high-profile initiatives with high FDVs like Berachain noticed their valuations compress violently after launch.
For context, Berachain, a layer-1 blockchain that commanded vital hype, noticed its implied valuation drop from over $4 billion to roughly $300 million.
While these drops symbolize “paper” losses for locked-up insiders, they translate to actual losses for buyers of the liquid token.
Speaking on this example, Alexander Lin, co-founder of enterprise agency Reforge, pointed out:
“Marginal buyers [of these tokens] are speculative and deal with the market, notably alts, as a on line casino. Participants claiming to be fundamentalists with their podcasts and long-form weblog posts nonetheless prioritize short-termism and will not be high quality allocators with a long-term technique.”
The liquidity vacuum
Meanwhile, this token’s underperformance was not solely on account of poor tokenomics. It may be linked to a brutal macro atmosphere that noticed the broader crypto market wrestle.
According to CryptoSlate’s knowledge, the broader crypto market shed roughly $1.2 trillion in worth between mid-October and late November.
During this era, Bitcoin retraced roughly 30% from its $126,000 highs to below $90,000. Still, it remained the first venue for institutional flows and curiosity within the crypto market.
This created a tiered liquidity atmosphere. The approval of Spot ETFs within the United States has efficiently channeled capital into Bitcoin and Ethereum, but it surely has arguably cannibalized demand for riskier, long-tail property.
So, institutional allocators now have a regulated, liquid avenue for crypto publicity that doesn’t require them to diligence new protocols or handle complicated custody dangers.
Jeff Dorman, Chief Investment Officer at digital asset supervisor Arca, factors to this shift as a main driver of the TGE failure fee. He noted:
“I don’t know a single liquid fund that has purchased a new token on TGE in over two years. That ought to in all probability inform you one thing.”
When liquid hedge funds and household places of work abstain from taking part in TGEs, the “bid” aspect of the order ebook evaporates.
Without institutional help to soak up the preliminary promoting strain from airdrop recipients and market makers, costs have nowhere to go however down.
So, most crypto TGEs for this yr launched into a liquidity vacuum, hoping for a retail frenzy that by no means materialized.
The ‘predatory’ construction
Nonetheless, the sheer consistency of the losses has reignited a fierce debate over the ethics of the present crypto enterprise capital mannequin.
Critics argue that the trade has optimized for “extraction” fairly than worth creation, with insiders incentivized to promote into no matter liquidity exists earlier than the mission has established a sustainable income mannequin.
Omid Malekan, an adjunct professor at Columbia Business School, suggests that the market is lastly punishing this conduct. He stated:
“Raising an excessive amount of cash and pre-selling too many tokens destroys worth in crypto. Going ahead, groups that preserve doing this accomplish that knowingly. They care extra about extracting a few {dollars} than reaching success.”
Meanwhile, there have been uncommon crypto initiatives that bucked the purple sea development, although they typically relied on idiosyncratic catalysts.
For context, Aster, a mission backed by Binance founder Changpeng Zhao, noticed its valuation surge roughly 750% post-launch, rising from a strategic FDV of $675 million to over $5 billion.
Similarly, initiatives like Humanity and Pieverse maintained their worth.
Yet, even among the many winners, a sample emerges: not one of the tokens buying and selling above their itemizing value launched with an FDV of $1 billion or extra.
Essentially, the market proved prepared to help modest valuations the place upside was seen, and it flatly rejected the “unicorn” premiums hooked up to unproven protocols.
Preparing for 2026
The wreckage of 2025 offers a distinct roadmap for issuers and buyers heading into 2026.
The market has signaled that it’ll not settle for tokens that serve merely as fundraising mechanisms. The period of the “governance token” that does nothing however vote on discussion board posts is ending.
Nathaniel Sokoll-Ward, co-founder of RWA platform Manifest Finance, describes the present state of token design as “cargo cult pondering” as a result of these initiatives mimic the aesthetics of profitable networks with out the underlying mechanics.
He questioned:
“What downside does the token clear up that fairness or a conventional cap construction does not? For most initiatives, the reply is nothing.”
Considering this, the mandate for token issuers is to launch otherwise subsequent yr. The “Price to Reality” ratio should reset; anchoring opening valuations to single-digit multiples of precise annualized charges is the one technique to construct secondary market help.
Furthermore, initiatives should “Float like a Business.” The follow of releasing 5% of a token’s provide to simulate shortage is useless. Issuers want to focus on preliminary floats of 15–25% to deepen liquidity and cut back the volatility of early unlocks.
For buyers, the shift is behavioral.
Memento Research’s Ash urged buyers to deal with the TGEs as earnings studies, not lottery tickets. According to him, buyers in these initiatives ought to map the unlock schedule for the subsequent 30 to 90 days, confirm that market-maker phrases present actual depth, and observe particular catalysts, comparable to listings and incentives.
Meanwhile, most significantly, he suggested buyers to be affected person, saying:
“I will not contact most launches till they retrace and let the airdrop fractal play out.”
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