Analysis of the dumping event between Celestia and Polychain

Recently, the large-scale dumping by Celestia and Polychain has attracted widespread attention in the industry. Polychain sold TIA tokens worth $242 million, an action that has sparked mixed reviews. This article will delve into the pros and cons of this event, as well as the lessons we can learn from it.

It is inevitable for investors to profit

Many people criticize Polychain's behavior as predatory and uncertain. However, as a venture capital fund, Polychain's duty is to gain returns from early investments. They not only took on the risks of investing in Celestia during its early stages but also bet on the then quite innovative concept of an "external data availability layer."

It is worth noting that Polychain is not the only investor, as several other venture capital funds are also involved. Just relying on Polychain's selling is not enough to cause such drastic price fluctuations, and it is unfair to blame them entirely.

The Necessity of Team Profitability

There is a widespread profitability issue in the cryptocurrency sector, with most protocols not being profitable, and even not considering profitability. Data shows that Celestia currently generates only about $200 in revenue per day, while distributing approximately $570,000 in token incentives. In this situation, the team has no choice but to sell a portion of the tokens to cover operational costs.

However, this also raises a question: if token sales are equivalent to a business model, then what is the need to consider other profit-making methods? This way of thinking may lead to long-term issues.

Deep Issues of Token Economics

Investors are increasingly inclined towards token investments instead of equity, and there are complex reasons behind this trend. Many founders realize that their products may not actually need tokens, but they face two major challenges: most crypto-native venture capitalists do not favor equity investments, and equity valuations are often lower than token valuations.

This situation directly incentivizes teams to choose a token model, as it can attract more investors and provide a clear public market exit path, making it easier to raise funds. However, this model often leads to retail investors losing money while venture capitalists profit in the current environment.

Insights and Reflections

1. The primary goal of venture capital institutions is to profit, and investors should view their actions rationally.

2. Project evaluations should not fluctuate drastically just because of token price volatility.

3. The project team should pay attention to tokenomics design early on to avoid heavy costs in the future.

4. The business model should not rely solely on token sales; long-term sustainable profit methods need to be considered.

5. Technological innovation is not directly related to token prices; investors should focus on the intrinsic value of the project.

6. For unlocked tokens, holders have full disposal rights, but large-scale selling may affect market confidence.

7. When evaluating a project, one should comprehensively consider its technical strength, business model, and long-term development potential, rather than just focusing on short-term price trends.