Study: nearly 90% of tokens devalue after airdrop

Analysts at Keyrock conducted a study on 62 airdropsAirdrop, Drop, or drоp refers to the free distribution of tokens to active users of a project. across six blockchain networks during 2024. The findings will likely only delight short-sellersTraders who profit from declining prices of digital assets.. According to the publication:

• the price of most tokens distributed through airdrops declines within the first 15 days
• In 2024, 88% of tokens experienced significant declines within a few months, despite a brief uptick at the beginning.

• Out of the 62 analyzed airdrops, only 8 yielded positive returns after 90 days: 4 on Ethereum and 4 on Solana.

• Projects that distributed more than 10% of the total token supply performed better, while those distributing less than 5% often faced massive sell-offs.

• A lack of liquidityThe ability to quickly cash out an asset without significantly losing its value led to the collapse of many tokens due to excessive selling pressure.
• Projects with excessively high FDV[Fully Diluted Valuation, FDV— the market capitalization of a token after all tokens are released.] frequently faced rapid price declines due to a lack of liquidity and limited growth opportunities (hello, Hamster Kombat).

The Best and Worst Airdrops of 2024

Let's start with a success story.

Drift is a decentralized futures trading platform that has been operating on Solana for nearly three years. Drift has faced several hacking incidents. The team strategically allocated 12% of the total token supply for an airdrop — a relatively high percentage — and implemented a smart bonus system that activated every 6 hours after the initial distribution.

Launching with a modest market cap of $56 million, Drift surprised many, especially compared to other vAMMs (virtual automated market makers) that had fewer users and history yet received higher valuations. Drift's market cap soon soared to $163 million (a 2.9-fold increase post-launch).

Now, let's turn to the biggest loser of the year.

ZkLend was marketed as a platform for lending and borrowing various assets based on the Starknet protocol. However, the value of $ZEND has plummeted by 95%, with daily trading volumes barely exceeding $400,000. This is a stark contrast to a project that once had a market capitalization of $300 million.

So how did the project end up in such a dire situation? Firstly, the concept of ZkLend lacked innovation: it aimed to create a farming network where users could earn rewards through various protocols and attract liquidity and users through incentives and cross-chain activity.

However, this resulted in ZkLend being filled with users solely focused on short-term rewards. Consequently, rather than building a sustainable ecosystem, ZkLend became dependent on reward hunters (drop hunters), leading to low customer retention. Naturally, once the drop hunters received their rewards, they quickly sold off their tokens and exited the project.

Source: Keyrock