Recent research indicates that the size of airdrops has a surprisingly minimal effect on token price performance.
Contrary to the widespread belief that larger token distributions cause significant price movements, multiple studies reveal that this is not typically the case.
Less Influential Airdrop Size on Price Movement
In the world of cryptocurrencies, airdrops—a technique for sending freshly created tokens to particular wallets—have become standard procedure. They frequently support the creation of an initial float, permit on-chain governance and transaction powering, honor early adopters, and draw in new users. The precise effect of these distributions on token prices, however, is still up for discussion.
According to a thorough analysis of over 2 million events from 40 distinct protocols, price performance and volatility are not much impacted by the size of the token distribution.
According to the report, "highly anticipated token distribution events usually generate selling pressure and stabilize lower after some time."
A study by CoinGecko supports this perspective, revealing that 23 out of the 50 largest token distributions reached peak prices within the first two weeks of their airdrop date. This initial interest often causes a brief price spike, followed by market stabilization.
The type of recipient significantly influences token price performance. Airdrops targeted at core users already engaged with the protocol result in better price performance, as these users are more likely to hold or buy additional tokens, leading to lower volatility and more stable prices. In contrast, broad airdrops to a wider audience often result in more immediate selling.
Analysts note, “Widespread recipients were twice as likely to sell their tokens, causing higher volatility and more significant price drops.”
Strategic targeting of airdrops helps maintain token value and reduces post-airdrop price volatility, indicating stronger community retention and engagement. For example, 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 price dynamics. These findings challenge the traditional belief that larger airdrops lead to better performance, emphasizing the importance of recipient behavior.
May 2024, Cryptoniteuae