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Dragonfly Capital managing partner challenges VC token dumping theories

source-logo  crypto.news 20 May 2024 09:29, UTC

Dragonfly Capital’s Haseeb Qureshi raised concerns about theories of recent listings on Binance, hinting at complexities behind market fluctuations.

The drop in prices of tokens listed on Binance over the past six months might not be the result of venture capital dumping, but rather a more nuanced interplay of market dynamics, suggests Dragonfly Capital managing partner Haseeb Qureshi.

In an X article published on May 19, Qureshi raised concerns over data published by @tradetheflow_, who found that recent Binance listings, dubbed “high FDV, low float” tokens, have experienced significant declines despite initial optimism.

Looking at all the new listing of the past 6 months on the largest CEX, Binance, we note that >80% of tokens are down from their listing date.

The only exceptions are:

– $MEME: A meme coin
– $ORDI : No tier 1 VC
– $JUP + $JTO: Big Solana momentum
– $WIF: Another meme coin pic.twitter.com/Y8VQV6jt6T

— flow (@tradetheflow_) May 17, 2024

These tokens, boasting large fully diluted valuations but minimal circulating supply upon listing, have prompted theories regarding market manipulation.

Among the prevailing theories are concerns about venture capital (VC) and Key Opinion Leaders (KOLs) dumping tokens on retail investors, a shift of retail interest towards memecoins, and challenges related to inadequate supply for meaningful price discovery.

However, Qureshi disputes these claims, stating that “every top-tier VC that comes to your mind has at least a 1-year cliff and a multiyear vest before they get their tokens.”

“So here’s why this story doesn’t make sense: every single one of these tokens are less than a year from TGE, meaning VCs with 1-year cliffs are still locked!”

Haseeb Qureshi

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Qureshi, who clarified that his views do not represent Dragonfly Capital as the firm’s staff has varied opinions, suggested an alternative explanation. He noted that the stability of these tokens persisted until mid-April, when a broader market downturn occurred, partly due to geopolitical tensions in the Middle East.

“So what is the best explanation of why these coins are still down? My explanation: these new projects have all been mentally basketed as ‘risky new coins.’ Appetite for the ‘risky new coins basket’ went down in April, and didn’t recover. The market decided they didn’t want to buy them back.”

Haseeb Qureshi

He also addressed theories about retail traders selling their tokens to invest in memecoins, describing these theories as unfounded, “memecoin mania was a full on frenzy by March, but the basket dumped in April, a month and a half later.”

In an X post on May 17, a crypto researcher at SwissBorg under the alias @tradetheflow_ revealed that 80% of tokens listed on Binance over the past six months have lost value since their listing. The analyst noted that most of these tokens, which experienced declines, were backed by major venture capital firms such as Coinbase Ventures, Pantera Capital, Paradigm, and Dragonfly.

Only two memecoins and one token not backed by any major VC firm managed to show positive returns since their listing, the researcher added, underscoring the need for more transparent and robust mechanisms in token listings.

Read more: Binance extends cliff period for token listings to bolster regulatory compliance