Market Dynamics and Token Performance in 2025
Over 80% of cryptocurrency tokens launched in 2025 are currently trading below their initial fully diluted valuations, indicating a significant transformation in investor sentiment toward venture-backed projects within the cryptocurrency sphere. Data sourced from Memento Research reveals a disconcerting trend, where out of 118 tracked token generation events (TGEs), a staggering 100 tokens—equivalent to 84.7%—are experiencing negative trading performance. The median price for these tokens has plummeted by approximately 71% since their inception.
Memento Research elaborates on this phenomenon, asserting that the TGE often marked the peak valuation for many projects, suggesting that price discovery processes frequently commence prior to the actual TGE event. Their findings emphasize a stark reality for investors:
“If you’re buying at launch, you’re basically hunting rare outliers while the median outcome is a ~70% bleed downwards.”
The Underlying Mechanics of Market Decline
To comprehend the gravity of the current market downturn, it is imperative to delineate the distinction between market capitalization and Fully Diluted Valuation (FDV). Retail investors predominantly engage with the circulating supply, which typically constitutes only 10% to 15% of total token issuance available for trading. However, the valuation of this floating supply has increasingly been influenced by the FDV—a metric that encapsulates the complete market value once all tokens held by venture capitalists and founders become available.
The report highlights a detrimental trend termed “low float, high FDV,” wherein projects initiate with a limited circulating supply but possess inflated total valuations. Notably, larger capitalizations have correlated with poorer performance outcomes:
“The clearest insight was how bigger launches did worse → the hyped, high-FDV token debuts dragged valuations down: 28 launches started ≥$1B FDV: 0% green, median drawdown roughly ~ -81%. [Their] opening valuations are set way too high and above its fair value, resulting in worse long-term performance with larger % drawdowns.”
One illustrative case is Berachain—a layer-1 blockchain project that attracted substantial attention—whose valuation saw a dramatic contraction from over $4 billion to approximately $300 million post-launch.
While these declines may represent “paper” losses for locked stakeholders, they translate into tangible financial losses for purchasers of liquid tokens. In commentary on this predicament, Alexander Lin—the co-founder of venture firm Reforge—asserted:
“Marginal buyers [of these tokens] are speculative and treat the market, particularly alts, as a casino. Participants claiming to be fundamentalists with their podcasts and long-form blog posts still prioritize short-termism and are not quality allocators with a long-term strategy.”
The Liquidity Vacuum: A Broader Context
The underperformance of these tokens cannot be attributed solely to flawed tokenomics; it is also reflective of an adverse macroeconomic environment that has afflicted the broader cryptocurrency market. Analysis from CryptoSlate indicates that approximately $1.2 trillion was wiped from the total crypto market capitalization between mid-October and late November. During this period, Bitcoin experienced a retracement of around 30%, dropping from its peak of $126,000 to below $90,000. Nevertheless, Bitcoin continues to serve as the primary conduit for institutional investment and interest within the cryptocurrency landscape.
This situation has engendered a tiered liquidity environment; the recent approval of Spot ETFs in the United States has effectively redirected capital flow towards Bitcoin and Ethereum while concurrently undermining demand for more speculative long-tail assets. Institutional investors now possess regulated avenues for crypto exposure that obviate the need for extensive diligence on emerging protocols or complex custody arrangements.
Jeff Dorman—Chief Investment Officer at digital asset management firm Arca—identifies this shift in investor behavior as a principal factor contributing to the heightened rate of TGE failures. He remarked:
“I don’t know a single liquid fund that has bought a new token on TGE in over two years. That should probably tell you something.”
In instances where liquid hedge funds and family offices refrain from engaging in TGEs, the demand side of the order book diminishes substantially. Consequently, without adequate institutional support to mitigate initial selling pressures—particularly from early recipients and market makers—token prices are predisposed to decline.
Thus far in 2025, most TGEs have launched into an environment characterized by liquidity scarcity while hoping for retail participation that has not forthcoming.
The Ethical Quandary: A ‘Predatory’ Structure
The relentless pattern of losses has reignited discussions regarding the ethics surrounding contemporary crypto venture capital practices. Critics assert that existing models prioritize profit extraction over genuine value creation; insiders are incentivized to liquidate holdings at any available liquidity prior to establishing sustainable revenue streams.
Omid Malekan—an adjunct professor at Columbia Business School—postulates that market forces are beginning to penalize these exploitative behaviors:
“Raising too much money and pre-selling too many tokens destroys value in crypto. Going forward, teams that keep doing this do so knowingly. They care more about extracting a few dollars than achieving success.”
Notably, there have been exceptions among certain cryptocurrency projects that have defied prevailing trends; however, these successes frequently depend on unique catalysts rather than systemic advantages. For instance, Aster—a project supported by Binance founder Changpeng Zhao—experienced an extraordinary valuation increase of approximately 750%, escalating from an initial FDV of $675 million to over $5 billion post-launch.
Moreover, other projects such as Humanity and Pieverse have succeeded in maintaining their value amidst widespread declines. However, it is critical to note that all tokens currently trading above their listing prices did so without launching with an FDV exceeding $1 billion. This observation underscores the market’s willingness to endorse moderate valuations when potential upside is apparent while simultaneously rejecting inflated premiums associated with unproven protocols.
Strategic Considerations for Market Participants in Anticipation of 2026
The fallout from the tumultuous events of 2025 delineates a clear trajectory for both issuers and investors as they navigate into the upcoming year. The prevailing sentiment suggests that market participants will no longer endorse tokens serving merely as fundraising instruments; the epoch characterized by governance tokens lacking substantive utility appears to be drawing to a close.
Nathaniel Sokoll-Ward—the co-founder of RWA platform Manifest Finance—characterizes current token design practices as emblematic of “cargo cult thinking,” wherein projects replicate successful models without integrating functional mechanics:
“What problem does the token solve that equity or a traditional cap structure doesn’t? For most projects, the answer is nothing.”
In light of this analysis, it is imperative for token issuers to recalibrate their launch strategies moving forward into next year. Establishing a realistic “Price to Reality” ratio will necessitate anchoring opening valuations commensurate with single-digit multiples of actual annualized revenues in order to cultivate robust secondary market support.
Additionally, projects should adopt a paradigm akin to traditional business operations; specifically aiming for initial token floats comprising between 15% and 25% will enhance liquidity while mitigating volatility linked to early unlock events.
For investors navigating this evolving landscape, behavioral adjustments will be paramount. Memento Research’s Ash advocates for treating TGEs akin to earnings reports rather than speculative lottery tickets. Investors should meticulously scrutinize unlock schedules spanning the subsequent thirty to ninety days while ensuring that market-maker agreements provide substantive depth and tracking specific catalysts such as listings and incentivization structures.
Most critically—as echoed by Ash’s advisory—it remains prudent for investors to exercise patience:
“I won’t touch most launches until they retrace and let the airdrop fractal play out.”
