Do airdrops undermine the value of new projects?

Airdrops are now one of the go-to strategies for fresh crypto projects to grab attention, build their communities, and thank early supporters. I've been seeing a pattern where many of these projects face huge sell-offs right after the airdrop ends. Those early holders cash in on their free tokens, which usually sends the price plummeting, making it tough for the project to bounce back. Some folks say airdrops are awesome for marketing and attracting more users, while others think they just create a temporary hype bubble that damages the long-term value.

Nothing changed. That was always the case since the beginning of airdrops. Once listed, expect a hard dump. It's just that in today's airdrop, the hype is not the same during its peak, which is why after the selling pressure period ended, most projects are unable to bounce back because only a few stay, and the built community is not that strong.

This depends on whether the Airdrop proceeds benefit the community. Projects often fail due to the disappointment of the community that built, supported, and contributed to the project, and ultimately not receiving the rewards they deserve. This disappointment ultimately fuels negative sentiment, and investors are reluctant to invest. The situation is different if the project recognizes its community's contributions, and so far I've seen projects succeed and be in a pretty good position to attract more investors. The key is that projects rely heavily on post TGE sentiment when mutual benefit is achieved, they can be considered successful.

Named few projects that did airdrops and died after they finished sending all tokens to qualified wallet address, do you know how many projects surviving in this space since past years and they did airdrops? They are still here now.

The community that supported the project is quite different from those who invested in the project. The airdropped tokens serves as a reward for those participants who feel they might be able to bring the coin to the reach of a larger audience. But that's just what airdrops are meant for. The real Investors are the reason for the dump not because of the community support. Once the coin is launched, they want to get their funds out as soon as possible and make back their profits. They don't care much about what happens next after that. This has always been a process in most newly launched tokens

You blamed airdrop like the root of problem from the dump happened to the project without even mentioning how mm, product, development, and the developers are also variable that really impact the successful of project. Can you get hundreds thousand of people as supporters without even incentivized them? Surely, none will look at your project. Go take a look at some project such as concordium or santiment. This project never did airdrop, and still shite.

For starters, if the whole project was just about value, it's easy to kill like that. If it's the new kind of tech, there probably will be community that keeps the interest alive. And while bad token distribution methods can affect the price, then you should ask if it would actually be a good thing when those people who didn't believe in the project, sold their tokens cheap. Before airdrops were a thing, people were blaming bounty hunters for dumping their tokens and tanking the value.

Because the people that claims most of the airdrops don't have confidence in the newer projects. They'll just get the reward and you're dumped forever even before the devs dump their tokens and the project itself. It's a great way to market and it's one of the reasons why the 2017 and 2021 bull run were great. Also last year, we've got significant numbers for airdrops and that had made a lot of people happy with the dime that they've got. But because of many scam projects that uses airdrops for their marketing, people just got tired and it's no longer worth it to put so much effort in it.

It looks unfair for those who really bought the cryptocurrency or a share of that project. Why should some people get free money while they used their hard-earned money to buy it? If you are the buyer, you will also feel the same and you would probably dump it too the moment it hits the market. There are so many ways to market a project, and social media applications are very active with people now. A new project doesn't need to do giveaways in order to create hype. Just a good marketing strategy and probably a feature that is so unique that it could cause a big hype, short or long term.

This is why they allocate only a small portion of the allocation for marketing purposes, rather than paying for tradable tokens in the market. By offering airdrops, they can market the project for free. The project has already gained popularity in the market before its distribution, and the developers have already made a profit. It’s not killing the value project; it made the developers richer. If the project has potential, it will eventually recover; an airdrop is a winning solution for developers instead of paying a marketing platform with a tradable coin or token.

Airdrop allocations are usually less than 10%, the common number is 5% and not all of them sells. What usually kills projects is VC unlocks. Let us not forget thar TIA gave out airdrop and the price did 10x afterwards. However, it has since dumped over 90% from the top simply because the VCs staked a shit ton of TIA tokens worth billions of $ and were constantly dumping the staking rewards. Let's not forget these VCs are already up around 100x from their VC deals. Another case in point, HyperLiquid. They did the biggest airdrop in crypto history airdropping over 10B worth of HYPE tokens. What did they get in return? Cult-like community that stuck with HyperLiquid even in their darkest hour (when binance and okx tried to take it down by draining HLP). If you think airdrop users dump, don't forget VCs are usually up 10 to 50x from their buy price and it's also a really huge bag.

It makes no sense to blame airdrops for project failures. Considering the effort bounty creators put in, they deserve to be rewarded for their efforts. They promote the project and wait patiently to be paid. Now, if the token price doesn't recover after the selloff caused by airdrops, then it's because the project wasn't good enough to survive in the market. Many of these creators create many coins, making it difficult for the coin price to rise when the project creator creates millions of tokens and doesn't create a mechanism to reduce the production of tokens in the market. Also, if the project isn't attractive, this will drive the price down. Imagine investing in a project with 1 billion tokens? Honestly, it's complicated.

Airdrop generates hype, like it or not. You can say it add some selling pressure, but the last time I see project didn't do airdrop, nobody know they even exist so it's actually a win win situation. like nelson4lov have mentioned, people are blaming airdrop while 90% of allocation are going to the team, investors, and insiders. Sometime airdrop just amounts to 2.5% and the rest going to exchange for liquidity. Also, nobody is forcing you to do an airdrop.

A typical example of such a project that received so much hype yet died from the first day of listing is Hamster Kombat. I think it marked the death of airdrops because after it, I rarely see people talk about airdrops and it even made me stop participating in airdrops too. I don't know if people still do airdrops now but the death of Telegram airdrops is a clear proof that airdrops have become a waste of time. New projects can rather focus on delivering real utility rather than sharing free token because it hardly help them.

Absolutely. It's a strategy that has existed long before and it has worked and kept working ever since. HyperLiquid had 0 VC investments. Majority of the token that was distributed on TG went to users over $400m on value and it grew to over $10B in value after hype did over 20x. I'm just using hype for example because it shows that if an airdrop is done right, the it has many multiple effects on the overall ecosystem and protocol narrative. Good execution, good chart. Bad execution, you get TIA chart.

Sort of. There is a balance, airdrops means marketing, so if the project gets more marketing than the tokens they distribute, then it will do fine, if it gets less then it will do badly. So let's assume that you distribute 10k tokens, and you want the project to be 1 dollar per token, if the marketing brings in 10k+ dollars funding, that means you can consider it 1 dollar token, if it brings in less, then it's bad, if it brings more, it's good. Many people end up with issues on that part because most airdrops bring in nearly no money and boring marketing. If your projects marketing is exactly the same as the project next to yours, then there is no reason why it would go up, and you should avoid that if possible and get better marketing.

They are, but to know why that is you must understand what has changed. Back in the golden days of airdrops, most people that were getting them or claiming them were already active crypto users. They got rewarded by luck as they were already participating in something, or they did extra activities to gather more crypto. In this time organized farming did exist but it was very small. As crypto became more mainstream, parasitic individuals came to the idea that farming airdrops is a job. Now you have massive organized groups that farm airdrops all day long. They do not care even 1 percent about the project in which they are participating in. They do not care about the things they are writing about, whether it is true or not it does not matter to them. All that matters is getting the airdrop with the least amount of effort and selling them later. It does not work well anymore, trust me. You won't even retain 0.01% of airdrop participants in your project, even if it is a really good project. Average projects stand no chance. This is the negative effect of letting organized farming exist. Because airdrop perform badly, airdrops have become much worse. These individuals in the end ruined this for everyone. These days a good airdrop is very rare, and you should consider yourself lucky if you end up participating in one.

That is a major reason for allowing each player or group of players to have their own token/currency... Groups that do care and carefully avoid "dumping" their own coin or token, driving its price down, can retain value in their own currency even while organised mass farmers just ignorantly dump their particular currency into oblivion. The total population of players will thus get to observe which civilisations/demographics in the game build valuable currencies and which just totally squander theirs... -MarkM-

If you talking about weak projects, then I will say maybe airdrop distribution is always affecting them so much, but if it’s a strong project, then airdrop distribution shouldn’t have much negative impact on the growth of the coin. Also recently most projects always make their airdrop allocation so small, so most people that even participate in airdrops don’t really receive much coins, but definitely when they distribute, most People will sell off, but if it’s a good project, even after airdrop participants dumps their coin, then it’s going to bounce back so quick.

The massive sell is expected because many airdrop participants are not investors; they participate to earn income. This is essentially the price they pay for free promotion of their projects, which is considered a form of compensation. If the project is that good, it can withstand the sell pressure and can maintain its presence in the market. Airdrops cannot kill good projects; it’s the utility.