Count this as yet another disillusionment in token sales, only this time the price tags are the almost impeccable reputation of Turing Award, the esteem of a famed VC like Union Square Ventures, and $42 milli...
Count this as yet another disillusionment in token sales, only this time the price tags are the almost impeccable reputation of Turing Award, the esteem of a famed VC like Union Square Ventures, and $42 million of market value evaporated, based on reported outstanding supply.
Algorand, the project that concluded its first public token sale in June with much fanfare and a handsome amount of $60 million raised, became one of the biggest losers in July on Binance, having the highest negative monthly return of -61.8% out of all cryptocurrencies on the exchange.
As staggering as the drop is, however, it's hardly a surprise to some traders and investors that The Block talked to, with some predicting that the price will likely tank even further. The reasons, they said, are that there are simply too many tokens and too high of a valuation.
Too many tokens
The company’s token sale plan is to have a maximum circulating supply of 10 billion Algo released to the market over the next five years, with a yearly sale of no more than 600 million tokens. As many Algo as this sounds like, there is a catch - public investors can get a 90% refund by returning Algo after a year of the lock-up period. This means that for these retail investors, the downside of buying Algo is protected - worse comes to worse, they can always return Algo after a year.
“That's when Algorand started to create a lot of buzz, especially among Asian investors,” said cryptocurrency market maker Altonomy co-founder Ricky Li.
Along with the buzz came the skyrocketing of Algorand’s valuation. As it closed its first public sale at $2.40 per token, some investors are valuing the company at a fully diluted market cap of $24 billion: $2.40 per tokens times 100 billion total token supply equals $24 billion.
“This is simply just too many tokens for this specific token,” said Li. “It’s basically betting on it reaching Ethereum-level hype, at least close to that, to be able to justify this amount of volume in retail interest.” And for comparison, ethereum is valued at $23.8 billion at the time of writing.
Even Algorand itself thought that the widely circulated $24 billion valuation figure was wrong, according to a person familiar with the matter. Although it does not yet seem like the company has made any clarifications.
As a result, the high valuation and the large number of tokens are too much for the retail market to absorb, even given the intense market interest in this protocol, since it was founded by MIT professor and Turing Award winner Silvio Micali and backed by well known venture capital firms like Union Square Ventures. The price drop simply reflected the high number of tokens, several market observers told The Block.
And more tokens to come?
When Algorand conducted its first auction, the company defined “Circulating Supply” as “the quantity of Algos available to transact freely” and its total amount was 10 billion. However, some investors, who spoke with The Block under the condition of anonymity, raised doubts at this definition, questioning whether there are tokens from undisclosed sales that will eventually enter the market as well.
It is stated on Binance that Algorand did not conduct a private token sale, except for two rounds of equity fundraising for a total of $66 million. However, Li, whose company specializes in trading altcoins, said it has seen a steady flow of Algo coming to the trading desk every week recently, and almost all of them are selling. It is unclear where this flow of Algo is coming from.
In addition, a letter allegedly sent from the Algorand Foundation to “early backers who participated in the original Algorand Foundation auction” was also disclosed recently, warning these "early backers" to not participate in the early redemption program that the foundation recently launched to reduce the circulating supply of Algo.
As Alogrand, at times regarded as a leading project in the space, faces deep price fall-off, Li pointed out that uncertainties around Algo are also harmful to the general altcoin market. "Overall the altcoin space, volatility and liquidity have been dropping,” said Li.
Algorand did not respond to to The Block’s request for comments before publication.
source https://www.tokentalk.co/The Block/alogrands-token-price-tanked-618-as-turing-award-union-square-ventures-backing-fail-to-justify-valuation-5d4c9c5049613cd83c467479
No comments:
Post a Comment