New token launches have become unattractive investments due to the privatization of price discovery and inflated valuations by venture capital markets, which ignore traditional supply and demand dynamics. This environment allows sophisticated market participants to exploit these dynamics. Despite higher fully diluted valuations (FDVs) compared to the past, popular new launches have consistently been priced within the top market valuations for the last five years due to privatized price discovery.
The performance of tokens like Avalanche and Solana was partly driven by overall market returns and their revaluation within the market. Avalanche saw a 7x return, and Solana moved from the top 25 to the top 5, significantly repricing itself against Ethereum and the broader market.
Investors in new tokens should consider both the FDV of new tokens relative to the market and the overall market trajectory. High initial valuations require substantial market-wide growth for good returns. Judging new tokens by their early performance can be misleading, as significant repricing often depends on broader market trends.
New launch valuations are expected to remain high while demand persists. Investors should seek undervalued or forgotten opportunities rather than trying to be early in privatized gains. They should become more sophisticated in evaluating the valuation and supply/demand dynamics of new tokens to identify which high FDVs are based on real market conditions and which are artificially inflated.
Opting out of these markets is a way to vote with capital. Good founders are aware of market dynamics and adjust their fundraising and launch plans accordingly.