TL;DR
- 89% of airdropped tokens lose value in the first 90 days.
- Airdrops that distribute more than 10% of the total supply show better performance.
- Liquidity and community engagement are key to successful airdrops.
Airdrops have emerged as a popular strategy to generate interest in new projects.
However, a recent study by KeyRock has revealed that this distribution technique faces significant challenges.
Airdrops in the Barren Desert: Surveying the traits behind 2024’s 11% success rate
Gaining and retaining crypto users is tough. Airdrops aim to attract long-term engagement but often lead to quick sell-offs. Let's see how 2024’s airdrops fared. 🧵 pic.twitter.com/9Cx44Z7L1F
— Keyrock 🔑🪨 (@KeyrockTrading) September 25, 2024
According to the analysis, a staggering 89% of airdropped tokens lose value within the first 90 days, raising serious questions about the effectiveness of these promotion methods.
The report highlights that while many of these tokens experience initial price spikes, most fail to sustain their value over the long term.
The research examined 62 airdrops on six different blockchain networks throughout 2024, and the results were alarming.
Networks like Ethereum and Solana proved more resilient, with 25% of their tokens holding or increasing in value after three months.
This resilience is largely attributed to the active participation of its communities, which highlights the importance of user engagement in the success of these initiatives.
In contrast, other networks such as BNB and Arbitrum did not show positive results, suggesting that the choice of platform also influences the performance of the tokens.
A key finding of the study was that larger airdrops, those that distribute more than 10% of the total token supply, tend to perform better in the long run.
These mass distributions foster a sense of ownership within the community, which contributes to price stability and minimizes fluctuations.
On the other hand, smaller airdrops often face rapid sell-offs and significant price drops in the short term, showing that the allure of scarcity can backfire in the long run.
The impact of valuations and liquidity on airdrops
One critical aspect mentioned in the report is the effect of inflated valuations on airdropped tokens.
Fully diluted valuations (FDVs) that are excessively high can limit a project’s growth and liquidity, resulting in a sharp price drop after launch.
Without the liquidity to support these high valuations, many tokens are overwhelmed by selling pressure, causing them to collapse in the market.
Case studies of projects like $DRIFT and $ZEND illustrate the differences in airdrop outcomes.
$DRIFT achieved remarkable success by rewarding its loyal users with 12% of its total token supply, leading to a growth in its market capitalization.
In contrast, $ZEND’s approach attracted speculators rather than committed users, resulting in a drastic 95% drop in the token’s price.
While airdrops remain a popular marketing tool, their effectiveness is increasingly uncertain.
To maximize the chances of success, projects should focus on realistic valuations, foster liquidity, and cultivate genuine community engagement.
With the right approach, airdrops can be an effective way to build a strong and sustainable user base.
