Understanding Token Economics
By Justin Barlow
October 19, 2023
- Inflationary Rewards- ie Staking or Mining
- Fundraising Events - ie ICOs and Presales
- Airdrops
- Users search for yield and look to take advantage of high yield rewards, when rewards drop, demand drops, and thus price drops.
- Buy and burns put upward pressure on asset prices and create an artificial sense of demand
- Institutional investors are more likely to hold onto tokens that generate large amounts of yield or that they were able to buy at presale prices
- Premines, as well as founder and team allocations, do not appear to affect price performance as long as they face lockup periods
- Tokens with very little outstanding circulating supply do better than those with a large outstanding circulating supply (in % terms) over the short term, but often struggle once they reach their scheduled unlocks due to the steep increase in supply.
- Fixed yield rewards (inflation) can actually promote long-term growth by incentivizing users to continue holding despite the lack of a hard cap.
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