In-depth Analysis of the Celestia and Polychain Dumping Event

Recently, Polychain, an important investor in the Celestia project, sold a large amount of TIA tokens, worth up to $242 million. This event has sparked widespread discussion in the cryptocurrency community. This article will delve into the background of this event, explore its pros and cons, and summarize potential lessons learned.

Investor Profits: An Inevitable Result of Market Operations

Many people are dissatisfied with Polychain's large-scale sell-off behavior, believing that such practices are predatory and uncertain. However, we need to recognize that, as a venture capital fund, Polychain's core responsibility is to generate returns through early investments.

Polychain not only took on the risks of investing in Celestia's early stages but also bet on the then not widely recognized concept of "external data availability layer." This forward-looking investment strategy undoubtedly carried significant risks, so it is reasonable to expect corresponding returns.

It is worth noting that Polychain is not the only investor and dumping party. There are several other venture capital funds involved in the market, but their trading data is harder to track. Therefore, it is unfair to attribute the price fluctuations caused by dumping solely to Polychain.

The Profit Requirements of the Project Team

There is a serious problem that is common in the cryptocurrency space: most protocols are not profitable and do not even consider profitability. Taking Celestia as an example, according to statistics from a certain data platform, the project generates only about $200 in revenue per day while issuing up to $570,000 in token incentives.

In this case, the project team had to cover expenses such as infrastructure and salaries by selling a portion of their tokens. Although this practice may put short-term pressure on the coin price, it is an unavoidable choice from the perspective of maintaining project operations.

In-depth Thoughts on Token Economics

The core issue facing the current cryptocurrency market is not the token economics itself, but the rationale for the existence of tokens. Many project founders realize that their products may not actually need tokens and prefer to raise funds through equity financing. However, they face two major challenges:

1. Most crypto-native venture capitalists prefer not to engage in equity investments due to the difficulty of exit.
2. Equity valuation is usually lower than token valuation, and teams often hope to raise more funds.

This situation directly incentivizes the team to choose a token model, as it can attract more investors and provide a clear exit path in the public market, making it easier to raise funds. For the team, this means a higher valuation and more development capital.

However, this model often leads to the interests of retail investors being harmed and venture capital profiting in the current environment. Some believe that infrastructure/governance tokens are essentially just well-packaged meme coins.

Lessons Learned and Reflections

1. The essence of venture capital institutions is to pursue profits, and one should not expect them to establish deep friendships with project parties or investors.

2. For the selling behavior of unlocked tokens, we should not overly blame it. What should be criticized are those venture capitalists who sell while promoting the tokens on social media.

3. The project team should establish a sustainable business model, rather than merely relying on token sales. Either design a profitable model or maintain competitiveness with excellent technology.

4. Token economics design should be given high importance in the early stages of the project to avoid potential issues in the future.

5. Technological innovation is not directly related to token prices. Market participants should objectively assess the value of the project, rather than changing their attitudes with price fluctuations.

Overall, the Celestia and Polychain dumping events reflect the complexity and challenges of the cryptocurrency market. It reminds us to take a more rational view of investment risks, while also calling on project parties and investors to work together to build a healthier and more sustainable ecosystem.