Core User Airdrops Yield Higher Token Prices, Study Finds

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Recent research reveals that the size of airdrops has a surprisingly limited impact on token price performance.

Despite the common belief that larger token distributions lead to significant price movements, findings from multiple studies suggest otherwise.

Airdrop Size Less Impactful on Price Action

Airdrops, a method of distributing newly minted tokens to selected wallets, have become a common practice in cryptocurrency. They often help establish an initial float, enable on-chain governance and power transactions, reward early contributors, and attract new users. However, the actual impact of these distributions on token prices remains a topic of debate.

Average Price Performance Over Time. Source: 6THMAN Ventures

A comprehensive study analyzing over 2 million events across 40 different protocols found that the size of token distribution does not significantly affect price performance or volatility.

“Large anticipated token distribution events typically create selling pressure and stabilize lower after some time,” the study says.

Read more: What are Crypto Airdrops?

Another study by CoinGecko supports this view, highlighting that 23 out of the 50 biggest token distributions recorded peak token prices during the first two weeks of their airdrop date. This immediate interest often leads to a brief surge in price, followed by stabilization as the market adjusts.

The type of recipient plays a crucial role in token price performance. Airdrops to core users already engaged with the protocol result in better price performance. These users are likelier to hold or buy more tokens, leading to lower volatility and more stable prices. Conversely, widespread airdrops to a broader audience often result in more immediate sellers. 

“Widespread recipients were twice as likely to sell their tokens, causing higher volatility and more significant price drops,” analysts note.

Read more: Best Upcoming Airdrops in 2024

60 Day Wallet Behavior Token distribution Analysis.
60 Day Wallet Behavior Token Distribution Analysis. Source: 6THMAN Ventures

This strategic targeting helps maintain token value and reduce post-airdrop price volatility, indicating stronger community retention and engagement. For instance, small token distributions to core users resulted in 4-8 times more buyers than other categories.

In conclusion, the size of airdrops has little impact on token prices. Instead, the type of recipients and their engagement with the project significantly influence the price dynamics. These findings challenge the traditional belief that larger airdrops lead to better performance, highlighting the importance of recipient behavior.

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