The cryptocurrency market has entered a new, challenging phase, particularly for newly launched tokens. Recent data paints a stark picture: more than 80% of the tokens introduced this year are currently trading underwater. This marks a significant shift in market sentiment and appetite for venture-backed digital asset projects, indicating a profound liquidity trap that is disproportionately affecting retail buyers.
The Grim Reality of 2025 Token Launches
According to Memento Research, which diligently tracked 118 major Token Generation Events (TGEs) in 2025, a staggering 100 of them, or 84.7%, are trading below their initial fully diluted valuations (FDV). The median token within this group has plummeted by a disheartening 71% from its launch price. This trend suggests a fundamental re-evaluation by the market of how new projects are valued and received.
"TGE in 2025 often signalled the top for most projects, with price discovery already happening pre-TGE. If you’re buying at launch, you’re basically hunting rare outliers while the median outcome is a ~70% bleed downwards," stated Memento Research in its analysis.
This insight underscores a critical challenge: the excitement and hype surrounding a token launch rarely translate into sustained value. For many, participating in a TGE has become less an investment opportunity and more a high-stakes gamble with unfavorable odds.
Understanding the Mechanics of the Market Crash
To grasp the severity of this drawdown, it is essential to distinguish between a project's market capitalization and its Fully Diluted Valuation (FDV). Retail investors typically purchase the circulating supply, often a mere 10% to 15% of the total tokens available for trading. However, the market price of this small float is increasingly dictated by the FDV, which represents the project's total theoretical value once all tokens, including those held by venture capitalists and development teams, are vested and unlocked.
Memento's report highlights that the "low float, high FDV" model, where projects launch with a minimal circulating supply but an astronomical total valuation, has undeniably hit its limit. The data indicates a clear inverse relationship: larger launches performed worse, with highly anticipated, high-FDV token debuts experiencing the most significant valuation compressions.
- 28 launches with an initial FDV of $1 billion or more: 0% were in the green.
- The median drawdown for these mega-launches was roughly 81%.
This suggests that initial valuations are frequently set far too high, often exceeding the project's fair value and leading to severe long-term underperformance. A prime example is Berachain, a much-hyped layer-1 blockchain, whose implied valuation reportedly plummeted from over $4 billion to approximately $300 million post-launch.
While such drastic drops might represent "paper losses" for insiders whose tokens are locked, they translate into very real, tangible losses for retail buyers of the liquid token. Alexander Lin, co-founder of venture firm Reforge, aptly summarized this situation:
"Marginal buyers [of these tokens] are speculative and treat the market, particularly alts, as a casino. Participants claiming to be fundamentalists with their podcasts and long-form blog posts still prioritize short-termism and are not quality allocators with a long-term strategy."
The Liquidity Vacuum and the Institutional Shift
The underperformance of these new tokens isn't solely attributable to flawed tokenomics; it's also intertwined with a challenging macroeconomic environment that has seen the broader crypto market struggle. CryptoSlate's data revealed that the overall crypto market shed approximately $1.2 trillion in value between mid-October and late November. During this period, Bitcoin, despite its resilience, retraced roughly 30% from its highs of $126,000 to below $90,000, yet it remained the primary destination for institutional capital and interest.
This confluence of factors has created a tiered liquidity environment. The approval of Spot ETFs in the United States, while a boon for market legitimacy, has successfully channeled capital into established assets like Bitcoin and Ethereum. However, this has arguably cannibalized demand for riskier, long-tail altcoins. Institutional allocators now possess regulated, liquid avenues for crypto exposure that bypass the need to vet new protocols or manage complex custody risks inherent in nascent projects.
Jeff Dorman, Chief Investment Officer at digital asset manager Arca, points to this fundamental shift as a primary driver of the high TGE failure rate. His observation is telling:
"I don’t know a single liquid fund that has bought a new token on TGE in over two years. That should probably tell you something."
When major liquid hedge funds and family offices abstain from participating in TGEs, the essential "bid" side of the order book diminishes. Without institutional support to absorb the initial selling pressure from airdrop recipients and market makers, prices invariably trend downwards. Consequently, most crypto TGEs this year have launched into a vast liquidity vacuum, hoping for a retail frenzy that, for the most part, simply hasn't materialized.
The 'Predatory' Structure Under Scrutiny
The consistent pattern of losses has reignited a heated debate surrounding the ethics and sustainability of the current crypto venture capital model. Critics argue that the industry has optimized for "extraction" over genuine value creation, with insiders often incentivized to offload tokens into whatever available liquidity exists, long before a project has established a viable business model or sustainable revenue streams.
Omid Malekan, an adjunct professor at Columbia Business School, suggests that the market is finally delivering consequences for this behavior:
"Raising too much money and pre-selling too many tokens destroys value in crypto. Going forward, teams that keep doing this do so knowingly. They care more about extracting a few dollars than achieving success."
Glimmers of Hope and Lessons for 2026
Amidst this sea of red, a few crypto projects managed to defy the prevailing negative trend, often bolstered by unique catalysts. For instance, Aster, a project with backing from Binance founder Changpeng Zhao, saw its valuation surge approximately 750% post-launch, growing from a strategic FDV of $675 million to over $5 billion. Similarly, projects like Humanity and Pieverse demonstrated resilience and maintained their value.
However, even among these rare winners, a crucial pattern emerges: none of the tokens trading above their listing price launched with an FDV of $1 billion or more. This powerfully signals that the market is willing to support modest, realistic valuations where genuine upside is visible. Conversely, it has flatly rejected the "unicorn" premiums often attached to unproven protocols, favoring projects with more grounded initial expectations.
Preparing for 2026: A Roadmap for Change
The wreckage of 2025 provides an unequivocal roadmap for both token issuers and investors heading into the new year. The market has loudly declared that it will no longer passively accept tokens that serve primarily as fundraising mechanisms. The era of the "governance token" that offers little beyond the ability to vote on forum posts is rapidly drawing to a close.
Nathaniel Sokoll-Ward, co-founder of RWA platform Manifest Finance, critically describes the current state of token design as "cargo cult thinking." He argues that many projects merely mimic the superficial aesthetics of successful networks without embedding the crucial underlying mechanics that drive real utility and value.
"What problem does the token solve that equity or a traditional cap structure doesn't? For most projects, the answer is nothing," he questioned, cutting to the core of the issue.
Considering this, the mandate for token issuers in 2026 is clear: they must launch differently. The "Price to Reality" ratio must be reset, anchoring opening valuations to single-digit multiples of actual annualized fees. This disciplined approach is the only sustainable path to building robust secondary market support. Furthermore, projects need to "Float like a Business." The outdated practice of releasing a mere 5% of a token's supply to simulate artificial scarcity is effectively dead. Issuers must target initial floats of 15% to 25% to genuinely deepen liquidity and mitigate the extreme volatility often associated with early token unlocks.
For investors, the required shift is primarily behavioral. Memento Research's Ash strongly advises treating TGEs as rigorous earnings reports, not mere lottery tickets. He suggests a structured approach:
- Map Unlock Schedules: Understand the vesting schedule for the next 30 to 90 days.
- Verify Market Maker Terms: Ensure market makers provide genuine liquidity depth.
- Track Catalysts: Monitor specific events like new listings and incentive programs.
- Practice Patience: Resist the urge to buy at launch.
"I won't touch most launches until they retrace and let the airdrop fractal play out," Ash advised, advocating for a strategic, patient entry point rather than a speculative leap of faith.
The lessons from 2025 are harsh but vital. The crypto market is maturing, demanding genuine utility, sustainable tokenomics, and realistic valuations. Those who adapt to these new realities will likely be the ones to thrive in the years to come, while those clinging to old, extractive models will continue to struggle.
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