Can Airdrops Kill A Project?
Yesterday, the team behind OP announced that they will conduct a third round of airdrops for those who participated in the proposal votings and the overall governance of the network. This made me think about the past year when we experienced four major token airdrops from some of the most anticipated projects out there: Aptos, Arbitrum, Sui, and Sei. Out of these four projects, two were profitable for me.
However, the thought that was nagging me was that when they airdrop free tokens, it creates significant selling pressure, especially in a bear market, which can cause the token's price to plummet even further.
Sei Network
#sei
Arbitrum One
#arb
Aptos
#apt
Sui Network
#sui
So, from a business perspective, how wise is this decision?
Pros
Marketing and Hype: Airdrops can generate hype and excitement around the project, attracting attention from the crypto community and media. After the Aptos airdrop all new projects flooded with new users in hope of a new airdrop that could give the free money.
Engagement: It can encourage early engagement with the project, as recipients may explore the project's features, participate in discussions, and provide feedback. And early users have to get some rewards to do so.
Cons
Speculation: Airdrops can attract speculators who are only interested in short-term gains and may not contribute to the project's long-term success.
Costs: Airdropping tokens can be costly, as it involves giving away valuable assets.
Selling pressure: Most of the people that receives the airdrop they instant sell their allocation because it is free money and the experience showed that 99% they will be able to buy back their allocation at a discount and make some nice profits.
The conclusion is that It can be effective in certain situations, especially for projects aiming to build a broad and engaged user base quickly. However, it should be part of a broader marketing and community-building strategy and not relied upon as the sole means of achieving success.
Airdrops alone cannot guarantee the long-term viability or success of a project but if not done correctly they can kill the token price on it's initial listing.
What is an Airdrop
Giving a coin or token away in an effort to generate interest in a specific project.
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Airdrops are not always a good investment tool. You have to be very careful
Yes but at the same time if they are free and the only thing needed is an nft mint or some transaction it’s an easy way to make money
I think the cons tends to outweigh the Pros, however, airdrops are great marketing schemes. However, I feel that the bear market isn't such a good time for airdrops though. Although those who wouldn't sell might grow bored. If managed well though, it can offer so much more.
In a bear market the selling pressure alone outweighs any pros !
That's true, I think it'll be difficult to get people to hold on to airdrop especially in a bear market
Airdrops are neither good or bad. It all depends on timing and strategy to build a community around your token. If done right it can help break new ground for for token if done wrong it can drive the whole project down.
Yes sure but most of the times they are not done wright
A "wrong" airdrop can kill a project's potential if the product is valuable.
This is what happens to ARB, SUI, OP, SEI, as far as what I've observed.
In 2 - 3 years, they will not have any single issues (after all locked supply starts to circulate), though.
Yes indeed after some time and the unlocking of all locked supply the selling pressure stops but only if the project is still relevant price wise
It's a tough call, I've seen so many airdrops liquidated right away that it drops the price precipitously. I think it has to be done judiciously to the right people for it to work in your favor.
Most of the people who do airdrops, just want the token to swap for stablecoins or Bitcoin. Maybe a small percentage care for the project or the ecosystem after speculating and sweating their time for a goodie!
Yes exactly they just hope that the more hype a project has the higher the value of the airdrop
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In my experience in the Cosmos ecosystem, airdrops are not good for the ecosystem simply due to the fact that people earn them and dump them.
There are always issues and the coins seem to get concentrated to people who know how to game the system. It brings out the greed in people as they are only in those projects for the free money, they don’t care at all about the actual fundamentals or if there is really any to begin with.
Plus these days, many airdrops require you to KYC or give up some kind of personal information. Not cool.