Analysis of TokenAirdrop situation in 2024

Acquiring and retaining cryptocurrency users is extremely difficult. In the previous article, we delved into how Memecoins and prediction markets are used to attract the masses. In this article, we will analyze:

• The most successful and biggest failure in the 2024 Airdrop
• The encryption project has been very successful in retaining users.
• How does the Airdrop scale affect Token prices
• How does high FDV damage Token price
• What is the optimal ratio between Liquidity and FDV

Airdrop provides free tokens to attract long-term participation, but often leads to rapid dumping. Although some have successfully increased adoption rates, many have failed. This article explores the Airdrop situation in 2024 and the factors that affect its outcome.

Key Points

It's hard to keep up

Most Airdrops will collapse within 15 days. In 2024, despite the initial price surge, 88% of Tokens will fall within a few months.

Big drop, big win

Airdrops that account for more than 10% of the total supply have seen stronger community retention and performance. Tokens with allocations below 5% are usually quickly dumped after the Airdrop is released.

For FDV

Exaggerated Fully Diluted Valuation (FDV) has the greatest damage to the project. High FDV suppresses rise and liquidity, leading to a sharp drop in price after Airdrop.

Liquidity is crucial

Due to insufficient Liquidity to support high FDV, many Tokens collapsed under dumping pressure. DepthLiquidity is key to price stability after Airdrop.

A difficult year

Crypto Assets in 2024 fell into trouble, with most Airdrops suffering the most severe blow. The successful ones? Smart distribution, strong Liquidity, and realistic FDV are their strategies.

Prepare for airdrop ？Contact us for a personalized Liquidity plan.

Airdrop: The double-edged sword of token distribution

Since 2017, Airdrop has been a popular strategy for distributing Tokens and sparking early speculation. However, by 2024, many projects have struggled to take off due to oversaturation. While Airdrop still brings initial excitement, most have led to short-term dumping pressure, resulting in low community retention and the abandonment of protocols. Nevertheless, some outstanding projects have succeeded against the odds, indicating that, with proper execution, Airdrop can still bring meaningful long-term success.

Purpose of this study

This report aims to uncover the mystery of the 2024 Airdrop phenomenon - distinguishing winners from losers. We analyzed 62 on-chain Airdrops across 6 protocols and compared their performance in several aspects: price behavior, user reception, and long-term sustainability. While each protocol has its own unique variables, the collective data clearly depicts the effectiveness of these Airdrops in achieving their intended goals.

2024 Airdrop Performance

Most people underperform after release when assessing overall performance. While a few Tokens have received impressive early returns, most Tokens face downward pressure as the market revalues their worth. This pattern illustrates a broader issue in the Airdrop model: many users may only be incentivized to participate in the protocol for the short term, rather than the long term.

For all Airdrops, a key question arises - does the protocol have staying power? Once the initial rewards are distributed, will users continue to see value in the platform, or is their participation purely transactional? Our analysis, based on data from multiple time frames, reveals an important insight: for most Tokens, enthusiasm quickly fades, typically within the first two weeks.

Overall Performance of Airdrop

Observing the PA for 15, 30, and 90 days, it is clear that most price movements occur in the first few days after the Airdrop. After three months, very few Tokens are able to produce positive results, with only a few Tokens going against the trend. In other words, it is important to consider the broader context: the entire Cryptocurrency market has performed poorly during this period, which complicates the situation.

Airdrop Performance on Different Blocks on-chain

Despite the overall poor performance, not all chain stores are the same. Out of the 62 Airdrops analyzed, only 8 have achieved positive returns after 90 days—4 on Ethereum, and 4 on Solana. BNB, Starknet, Arbitrum, Merlin, Blast, Mode, and ZkSync did not have winners. Solana has a hit rate of 25%, while Ethereum has 14.8%.

For Solana, this is not surprising, as the chain has become the favorite of retail investors in the past two years and is a real challenger to Ethereum's dominance. Moreover, since many other chains we study are Layer 2, directly competing with each other, it is not surprising that only the main chain maintains a select few winners.

Although we haven't included Telegram's Ton network, we do want to point out that there have been quite a few successful Airdrops as the network's enthusiasm and adoption continue to grow.

Standardized Performance

That being said, what would happen if we try to separate larger chains from Airdrops? Would these data change if we take into account the variations of the parent token? Even when we standardize these Airdrop prices based on the performance of their respective ecosystems - for example, comparing Airdrops on Polygon with PA of $MATIC, or comparing Airdrops on Solana with PA of $SOL - the results are still not optimistic.

Yes, the market has already declined from its peak in 2023, but this is not enough to make up for the sluggishness of Airdrops, whether compared to system Tokens or general AltCoins. These dumpings, although unrelated to the larger narrative, reflect the market's general fear of short-term prosperity. When things that were once considered 'established' are declining, the last thing anyone wants is untested or 'new' things.

Overall, the improvement is at best moderate. Even in the worst case scenario within 90 days, both Solana and ETH have only dropped by about 15-20%. However, this still indicates that the volatility of these Airdrops is much higher and is only related to the overall narrative, not the price action.

How does the scale of Airdrop affect Token prices

Another key factor affecting the performance of Airdrops is the distribution of the total Token supply. The protocol determines how much Token supply will significantly affect its price performance. This raises the key question: Is generosity rewarding? Or is caution safer? Will providing more Tokens to users bring about better price behavior, or will it bring risk due to the rapid gift of too many Tokens?

To further segment, we divide Airdrop into three groups:

• Small Airdrop: <5% of the total supply
• Medium Airdrop: > 5% and ≤ 10%
• Large Airdrop: >10%

Then we checked their performance in three time ranges - 15 days, 30 days and 90 days.

In the short term (15 days), small-scale Airdrops (<5%) often perform well, possibly because of limited supply, resulting in less direct dumping pressure. However, this initial success is often short-lived, and tokens from small Airdrops will experience a large amount of dumping within three months. This may be due to various factors: the initially low supply suppressed dumping, but over time, as the narrative changes or insiders begin dumping, the wider community will also follow suit.

The performance of medium-sized Airdrops (5-10%) is usually slightly better, balancing supply distribution and user retention. However, the best performance over a longer period of time is usually seen with large Airdrops (>10%). Although these larger allocations may have greater short-term dumping pressures, they seem to cultivate a stronger sense of community ownership. By distributing more Tokens, protocols can empower users to benefit more from the success of the project. In turn, this can bring better price stability and long-term performance.

Ultimately, these data indicate that it is rewarding to be more generous in Token distribution. Generously providing Airdrop's protocol often cultivates a larger user base for investment, which will bring better results over time.

Distribution Dynamics

Impact of Token Distribution

Our analysis shows that the scale of Airdrops has a direct impact on price performance. A smaller Airdrop results in less initial dumping pressure, but often leads to significant dumping within a few months. On the other hand, a larger distribution does indeed cause more early Fluctuation, but it brings about stronger long-term performance, indicating that generosity encourages more loyalty and Token support.

Allocate Associated with Market Sentiment

Community sentiment is a key factor in the success of Airdrops, although it is often intangible. Larger Token allocations are often considered more fair, giving users a stronger sense of ownership and participation in the project. This creates a positive feedback loop - users feel more invested and are less likely to dump their Tokens, contributing to long-term stability. In contrast, smaller allocations may initially feel safer, but often lead to short-lived enthusiasm and then rapid dumping.

While it is difficult to quantify the emotions or 'resonance' of all 62 Airdrops, they are still powerful indicators of the project's enduring appeal. Signs of strong emotions include active and engaged communities on platforms like Discord, organic discussions on social media, and genuine interest in the product. Additionally, the novelty and innovation of the product often help maintain positive momentum as they attract more loyal users rather than speculative reward hunters.

Complete Dilution Value Effect

An important area to follow is whether the Fully Diluted Value (FDV) of a Token at the time of issuance has a significant impact on its performance after the airdrop. FDV represents the total market value of all possible Tokens of a Cryptocurrency in circulation, including Tokens that have not been unlocked or distributed. It is calculated by multiplying the current Token price by the total supply of Tokens, including circulating Tokens and any locked, vesting, or future Tokens.

In the encryption field, we often see that the actual utility or impact of the FDV project at the launch of the protocol seems disproportionately high. This raises a key question: Is Token being penalized for inflation due to FDV, or is the impact of FDV different for each project?

Our data covers a wide range of projects, from projects with FDV of only $5.9 million to projects with FDV as high as $19 billion - indicating a 3,000-fold difference between the 62 airdrop samples we analyzed.

When we plot these data, a clear trend emerges: the larger the FDV at launch, the greater the likelihood of a significant price drop, regardless of project type, speculative extent, or community sentiment.

Reasons for FDV Relationship

There are two main factors at play here. The first is the basic market principle: investors are attracted by the sense of rise. Tokens with a smaller FDV provide rise space and a 'early' psychological comfort to attract investors with the promise of future returns. On the other hand, projects with excessively high FDV often struggle to maintain momentum due to limited pump space.

Economists have long been discussing the concept of market 'space'. As Robert Shiller aptly pointed out, this 'irrational exuberance' quickly disappears when investors feel that the returns are limited. In the field of Cryptocurrency, this prosperity also quickly disappears when the FDV of Token indicates limited rise potential.

The second factor is more technical: Liquidity. Tokens with a large FDV often lack liquidity to support these valuations. When a large number of incentives are given to the community, even a small proportion of users who want to cash out can create huge dumping pressure, while there are no buyers on the other side.

Taking $JUP as an example, its FDV at issuance is 6.9 billion US dollars, supported by a series of Liquidity pools and market makers. We estimate that this number will be 22 million US dollars on the day of issuance. This makes the Liquidity to FDV ratio of $JUP only 0.03%. Although this number is lower compared to the 2% Liquidity to FDV ratio of memecoin $WEN, it is relatively higher compared to other currencies of the same level.

We compare it to Wormhole, which had a FDV of up to $13 billion when it launched. To achieve the same 0.03% Liquidity ratio, Wormhole would need $39 million Liquidity from various venues. However, even with all available liquidity pools (including official and unofficial, as well as Cex Liquidity), our best estimate is close to $6 million - only a small portion of the required funds. Due to its 17% Token distribution to users, the unsustainable Market Cap is already established. Since its launch, $W has dropped by 83%.

As market makers, we know that without sufficient Liquidity, prices are highly sensitive to dumping pressure. The combination of two factors - the psychological demand for rise potential and the actual Liquidity required to support large FDV - explains why Tokens with high FDV are difficult to sustain their value.

The data confirms this. Tokens with lower FDV suffer much less price erosion, while tokens with overvalued valuations suffer the biggest losses in the months following the airdrop.

Read more about Liquidity in our research article:

Liquidity Analysis: Some Fundamentals Overview

Overall Winners and Losers

In order to delve deeper and better understand some of the players, we chose examples of winners and losers from this airdrop season to observe. Explore what they did well, where they made mistakes, and how it led to successful and not so successful community releases.

Airdrop Season: Case Studies of Winners and Losers

As we delve into Airdrop season, let's take a look at the outstanding winners and underperformers to reveal the factors that lead to their drastically different results. We'll explore which approaches these projects got right, which ones they got wrong, ultimately determining their success or failure in the eyes of the community.

Winner: $DRIFT

First is Drift, which is a decentralized futures trading platform that has been running on Solana for nearly three years. Drift's journey has been filled with victories and challenges, including surviving multiple hacker attacks and exploits. However, each setback has built a stronger protocol that has evolved into a platform that has proven its value far beyond Airdrop farming.

When Drift's Airdrop finally arrived, it was warmly welcomed, especially by its long-term user community. The team strategically allocated 12% of the total Token supply for the Airdrop, which is a relatively high proportion, and introduced a clever reward system that launches every six hours after the initial allocation.

Drift's Market Cap was only $56 million at launch, which surprised many, especially compared to other vAMMs (virtual Automated Market Makers) with fewer users, shorter history, but higher valuation. Drift's value quickly demonstrated its true potential, reaching a Market Cap of $163 million, a rise of 2.9 times since launch.

The key to Drift's success lies in its fair and thoughtful issuance. By rewarding long-term, loyal users, Drift effectively filters out new Sybil farmers, nurtures a more authentic community, and avoids the toxicity that sometimes plagues such events.

What makes Drift different?

1. Long history and solid foundation

• Drift has a long history that allows it to reward its existing dedicated user base. With high-quality and verified products, the team can easily identify and reward true super users.

1. Generous Layered Distribution

• 12% of the total supply allocation (a large part of which is used for Airdrop) reflects Drift's commitment to the community.
• The staggered issuance structure helps to minimize dumping pressure and maintain value stability after issuance.
• It is crucial that the Airdrop is designed to reward actual usage, not just inflated metrics of point farming.

1. Realistic Valuation
   • Drift's conservative issuance valuation avoids the trap of excessive speculation, keeping expectations grounded.
   • Sufficient Liquidity has been injected into the initial Liquidity pool to ensure the smooth operation of the market.

• The lower fully diluted valuation (FDV) not only sets Drift apart, but also sparks a broader industry discussion about overvalued competitors.

The success of Drift is by no means accidental. It is the result of deliberate choices, prioritizing the strength, fairness, and sustainability of the product over short-term speculation. As the Airdrop season continues, it is clear that protocols hoping to replicate Drift's success are best focused on building a solid foundation, promoting genuine user engagement, and maintaining a realistic view of its market value.

$ZEND: From Hype to Collapse - Starknet Airdrop Failure

ZkLend ($ZEND) is now facing a severe big dump, with its value down by 95% and daily volume struggling to exceed $400,000. This is in stark contrast to a project that once had a market cap of $300 million. What's even more unusual is that ZkLend's total value locked (TVL) is now more than twice its fully diluted valuation (FDV) - which is not common in the cryptocurrency world and is not a positive phenomenon.

So, how could a project that shone so brightly in the Starknet (a zk-rollup solution designed to scale Ethereum) hype end up in such a precarious situation?

Riding the wave of Starknet, but missing the opportunity

The concept of ZkLend is not particularly groundbreaking - it aims to be a lending platform for various assets, benefiting from the narrative of Starknet. The protocol leverages the momentum of Starknet, positioning itself as a key participant in the Cross-Chain InteractionLiquidity ecosystem.

Premise:

• Create an agricultural network, users can earn rewards through different protocol.
• Attracting Liquidity and users through rewards and Cross-Chain Interaction activities.

However, during the execution process, the platform ultimately attracted 'profit-seeking' active farmers - users only follow short-term rewards without making any commitments to the long-term health of the protocol. ZkLend did not cultivate a sustainable ecosystem, but found itself at the mercy of reward hunters, leading to short-lived participation and low retention rates.

Airdrop that goes against expectations

ZkLend's Airdrop strategy has made the problem even more complex. Due to the lack of significant product or brand awareness before the Airdrop, Token allocation has attracted speculators rather than real users. This major mistake of failing to adequately review participants has resulted in:

• A large number of bounty hunters are eager to cash in quickly.
• Participants lack loyalty or genuine involvement, with no long-term commitment.
• Due to speculators immediately dumping Token, the value of Token collapsed rapidly.

Airdrop did not establish attraction and foster loyalty, but triggered a short-lived activity outbreak that quickly disappeared.

A Severe Warning to the Industry

The experience of ZkLend has strongly reminded us that although hype and Airdrops can attract users, they cannot create value, utility, or sustainable communities in themselves.

Main lesson: 01928374656574839201

• Only speculation is not enough—creating real value requires more than just publicity around hot stories.
• As ZkLend has experienced, unreviewed Airdrops may trigger speculation and damage value.
• The high valuation of new products brings great risks, especially in the absence of validated use cases.

Conclusion

If the goal is to maximize returns, then selling on the first day is often the best move - 85% of Airdrop Tokens will drop in price within a few months. Solana is at the forefront of Airdrops as a top chain in 2024, but overall performance hasn't been as bad as adjusted for market conditions. Projects like WEN and JUP serve as success stories, demonstrating that strategic approaches can still yield significant returns.

Contrary to popular belief, larger Airdrops do not always lead to dumping. 70% of the distributed Tokens from the Airdrop have shown positive returns, highlighting the importance of FDV management. Overestimating FDV is a serious mistake. A high FDV limits the rise potential, and more importantly, causes Liquidity problems - inflated FDV requires a large amount of Liquidity to maintain, which is usually unattainable. Without sufficient Liquidity, the price of Airdrop Tokens is prone to significant decline, as there is not enough funds to absorb the dumping pressure. Projects launched with realistic FDV and reliable Liquidity supply plans can better cope with the Fluctuation after the Airdrop.

Liquidity is crucial. When FDV is too high, it puts enormous pressure on Liquidity. Due to insufficient Liquidity, large-scale dumping can lower prices, especially in Airdrops, where recipients may quickly dump. By maintaining manageable FDV and following Liquidity, projects can create better stability and long-term rising potential.

In the end, the success of the Airdrop depends not only on the scale of distribution. FDV, Liquidity, community participation, and storytelling are all important. Projects like WEN and JUP have achieved the right balance, creating lasting value, while other projects with FDV inflation and insufficient Liquidity have failed to sustain interest.

In a rapidly changing market, many investors will make quick decisions - selling on the first day is often the safest option. But for those who follow the long-term fundamentals, there are always some gems worth holding.

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