Understanding The Dynamics Of VC Tokens And Memecoins

According to Foresight News, there is a growing interest among retail investors in Memecoins, but it is important not to completely disregard VC-backed tokens. This article aims to provide a neutral perspective based on observed data, avoiding misconceptions and the influence of a few key opinion leaders (KOLs). VC tokens are defined as those with more than 51% of their supply allocated to the team and investors. These tokens are often associated with infrastructure projects like EIGEN, SUI, APT, AVAIL, ZK, and SEI, where a significant portion of the token supply is dedicated to community and ecosystem growth. This allocation is crucial for the health of the ecosystem, as compelling incentives attract decentralized applications (DApps) to new chains. Projects like Sui and Aptos have effectively used their token supply to incentivize ecosystem development, leading to noticeable growth and increased visibility through marketing efforts. This creates a feedback loop where incentives drive marketing, attracting retail investors who follow the hype. VC-backed tokens are designed for long-term growth, with investors unlocking their tokens as planned. Venture capital firms aim for substantial returns, similar to retail investors, and are unlikely to exit easily when a significant portion of the supply is dedicated to long-term project growth. These firms understand how to create positive feedback loops, as seen with Sui, where initial frustrations among retail investors turned into enthusiasm following treasury grants and announcements that boosted token prices. On the other hand, Memecoins are fully circulated at the time of their token generation event (TGE) and are often perceived as fairer. However, the hype around Memecoins is driven by snipers who acquire cheap tokens, leaving retail investors as their exit liquidity. Influential KOLs buy large amounts of tokens from the open market, creating a narrative to support their positions. Retail investors may exit at a 2x profit, while KOLs hold for a 10x return, eventually leading to a liquidity exit from decentralized exchanges, leaving retail investors unaware of the shift. The strategy for retail investors should involve participating in both VC-backed tokens and Memecoins without becoming emotionally attached to any token. It is essential to remain vigilant and be prepared to exit at the right time, as most tokens eventually lose their value. Balancing investments in both types of tokens can help mitigate risks and capitalize on potential gains.