Crypto Airdrops Need Evolution as Majority Lose Value, Analysts Advise

New crypto projects frequently utilize airdrops, yet a substantial 88% of these tokens diminish in value within three months, as indicated by data spanning the past seven years.

The Airdrop Conundrum

According to a report by DappRadar analyst Sara Gherghelas, since 2017, over $20 billion in tokens have been distributed through airdrops, but the vast majority lost value quickly, underscoring the gap between initial excitement and lasting viability.

DappRadar’s head of content, Robert Hoogendoorn, emphasized the importance of strategic token distribution, aiming to place tokens with committed holders.

Optimizing Airdrop Strategies

Successful airdrops often employ phased or targeted distribution to mitigate sell-offs. However, there is no universal formula for success; factors like distribution strategy, market fit, and token utility are critical.

"Market conditions significantly affect airdrop valuations. A successful airdrop keeps the community engaged with the product post-launch," Hoogendoorn noted.

The first airdrop was in 2014 with Auroracoin, an Icelandic Bitcoin alternative.

Need for Selective Distribution

In the decade since, airdrops have evolved with strategies like on-chain engagement and social media campaigns. Projects must carefully assess user activity and reputation to avoid airdrop exploitation.

"Trends now integrate social media activity into airdrop distributions, using engagement platforms to allocate airdrops," Hoogendoorn stated.

Challenges with Unsustainable Projects

Azura CEO Jackson Denka pointed out that many airdropped tokens fail due to unsound protocols lacking genuine adoption and revenue generation.

"Tokens linked to strong, growing products may appreciate over time," Denka asserted.

Addressing Liquidity Concerns

SecondSwap CEO Kanny Lee highlighted liquidity issues, as excessive token release can overwhelm the market. Successful airdrops reward ongoing user engagement and use a gradual unlock schedule.

"Sustainable liquidity should be the main goal. It's about token activity, not just distribution volume," Lee emphasized.

Future trends may reward long-term token holding, fostering sustained market engagement.