High FDV coins are not Meme, and large-amount unlocking does not mean the project is reset to zero.

High FDV coins are not Meme, and unlocking large amounts does not mean that the project will be reset to zero! FDV is indeed not a meme, and since this article was published I have been talking to OTC brokers trying to understand the secondary market structure of the assets I am shorting. The findings are revealing, so I thought I’d share them with you. All in all, I don't think these are bullish unlocks. Today, the editor of this site will share with you a detailed introduction on how high FDV coins are not Meme, and large-amount unlocking does not mean the project is reset to zero. Friends who need it, don’t miss it!

Many of these assets have active sellers, but few have bids below 70% of the market price (we are talking about the standard SAFT i.e. Simple Token Agreement with a 1 year cliff and 2/ 3 years vesting period).

In terms of trading volume, my rough estimate based on conversations with different brokers is that SAFT’s total trading volume is around $100 million. Considering these assets will have tens of billions of dollars in cumulative unrealized gains unlocked over the next few years, that's basically the end of the story.

To put it bluntly, “bullish unlocking” wants to see the lowest possible unrealized gains to market value ratio, as explained in the linked article.

Most coins are sitting on significant unrealized gains from the team (0 cost basis) and early investors (you can calculate this yourself using tools like cryptorank.io).

Coupled with extremely low floating rates (generally 5-15%), the trading price of most projects is 4-8 times the market value of unrealized gains, that is to say, the total circulating market value of the project is 4-8 times of unrealized gains.

Assuming 2 years from Cliff Day, this means that assets worth the entire market value will be unlocked every 3-6 months. This makes it difficult to attract buyers, especially when their alternative beta exposure is to memecoins and other assets that don’t have an oversupply.

One way to reduce this effect (besides increasing the initial float) is high pre-issuance secondary trading volume, ideally as close as possible to the current market price.

This helps reset the cost basis of unlocked tokens and radically lowers the unrealized gains to market cap ratio (e.g. the now famous Multicoin SOL assist resulting in the first unlock)

Unfortunately, I trade OTC This is not seen in the market.

Related to this, I'm trying to understand the market structure. I don’t want to single out specific assets, but there are many with the following characteristics

• Extremely high unrealized gains to market cap ratio;
• No secondary demand even ~70% below market;
• Funding rates on Binance It continues to be positive, and the open interest (Open Interest) reaches 8 figures;

Who would covet these things on CEX but not be interested in buying the secondary market at a discount of more than 70%?

My hypothesis is just that there is a special friction between buyers and sellers.

I don’t know much about the buy side, but I think if they are paying to be long on these things, they are most likely unsophisticated retail gamblers who don’t understand vesting schedules or OTC platforms.

Sellers may include:

• Founders/Teams who have over 90% of new coins in locked token bags and therefore have no collateral or inclination to short;
• Investors in venture capital funds who cannot Or there is no setup for shorting assets on CEX;

That’s why the opportunity to short these assets and profit from them still exists.

By the way, unlike what the CT doomsayers will tell you, this does not mean that all cryptocurrencies are scams, or even that all assets with high unrealized gains market caps will return to zero.

I am very bullish on cryptocurrencies and believe there will be some category winners that rise through their unlocks because they do have practical applications.

However, there will also be situations where long-tail assets "return to zero". This is natural and what you would expect in an asset class that provides liquidity to early-stage venture capital.

After all, most venture capital investments will fail. In traditional venture capital, only a handful of elite companies are listed and liquid, while long-tail projects fail quietly.

In the cryptocurrency space, a higher proportion of venture capital projects end up with not only spot liquidity, but even liquid derivatives markets. This is unheard of in traditional venture capital and is what makes crypto venture capital a unique asset class.

This also means that long-tail failures in crypto ventures will be public and painful, with both parties making or losing significant amounts of money, rather than failing quietly.

This also means that cryptocurrencies will have more structural shorting opportunities than any other asset class. To a certain extent, you can basically bet your money on the empirical fact that most startups fail.

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