- In twelve months, 38 projects witnessed a decrease of 89.7% in their total locked token values.
- This decrease is primarily attributed to two major factors: a drastic price drop and an increase in the number of tokens released.
The cryptocurrency market has been through a tumultuous journey over the past year. It's no surprise, therefore, that some projects have seen a drastic decline in their total locked token values (TLTV). According to CryptoMonday.de data presentation, 38 projects saw their TLTV drop by a staggering 89.7% between January 2022 and January 2023. On 1/1/2022, these projects had a combined TLTV of $142.51 billion, which plummeted to just $14.66 billion 12 months later.
According to CryptoMonday's CEO Jonathan Merry, that drop was primarily due to the bear market ravaging the crypto space since late 2021. The global crypto market shrunk by 64% from a $2.3T valuation to $827B. Another factor that led to that fall in the projects' TLTVs was the amount of token unlocks (TUs) experienced in 2022. TU or vesting schedule is the procedure of releasing locked tokens into the market over time.
Merry explains, "2021/22 crypto winter played an important role in this decline in TLTVs across these 38 projects. As prices fell across the board, investors became more risk-averse, shifting from high-risk assets to safer investments. This resulted in further liquidation pressures on tokens and led to an even larger decrease in TLTV for the 38 projects."
How Do Projects Assign and Distribute Their Tokens?
In light of the bear market, investors have become increasingly aware of token vesting methods and their effects on TLTV. In order to ensure a fair and orderly distribution of tokens, projects have implemented various approaches such as holding tokens in EOA (externally owned address) or wallet, which allow token holders to manage their own tokens as they see fit, and using a multi-sig treasury. These approaches help to ensure that investors have greater control over their tokens, thereby helping to protect the TLTV of projects in the long run.
Finally, it is worth noting that TLTVs do not necessarily indicate success or failure for any given project. They do not consider other metrics such as usage or adoption rate – both of which can be more accurate indicators of platform health and potential future growth opportunities than TLTVs alone.
Therefore it is possible that even though there was a general decrease across these 38 projects' TLTVs over this period, other metrics, such as daily active users (DAU), could still show positive growth for these same platforms – suggesting that their decreased TLTVs could simply be down to market conditions rather than any inherent weakness within their business model itself.
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