Analysis of the Celestia and Polychain Selling Events: The Dilemma of Investment, Profit, and Tokenomics

Recently, the Celestia project experienced a significant dumping event, with a well-known investment institution selling TIA tokens worth $242 million. This event has sparked widespread discussion, and this article will delve into the pros and cons, as well as the lessons the industry can learn from it.

1. The Profit Motive of Investors

Many people have described this dumping as predatory and irresponsible behavior. However, we need to understand the nature of venture capital:

• The responsibility of venture capital funds is to profit from early investments.
• They took on the risk of investing in emerging concepts.
• Everyone is making choices and taking risks, the only difference lies in the scale and nature.

It is worth noting that it is not just one investment institution that is involved in the sell-off. Several other venture capital funds are also participating, but their trading data is harder to track. Therefore, it is unfair to place all the blame on a single institution.

2. The Profit Needs of the Project Team

There is a common profitability issue in the crypto space. According to data platforms, Celestia currently has a daily income of only about $200, while distributing approximately $570,000 in token incentives daily. In this situation, the project team has to sell tokens to cover operating costs.

However, viewing token sales as the primary source of income is a dangerous practice. This model overlooks the importance of sustainable business models and cash flow.

3. The Intrinsic Issues of the Token Model

Token investment is more popular than equity investment for several reasons:

• Easier to exit
• Valuation is usually higher
• Attract a broader range of investors.

This trend has led many projects to adopt a token model even if they do not really need a token. However, this model often results in retail investors suffering losses while venture capitalists profit.

4. Key Insights

1. The primary goal of venture capital institutions is profit, and one should not expect them to act in a friendly manner.

2. The project should not solely rely on Token sales, but should establish a sustainable profit model.

3. The team should pay attention to tokenomics design early in the project to avoid potential issues in the future.

4. There is no direct correlation between technological innovation and token prices.

5. Market sentiment often fluctuates sharply with price movements, and this phenomenon is worth being vigilant about.

Overall, the Celestia event highlights the many challenges currently faced by the crypto industry in terms of investment models, profitability, and tokenomics. Industry participants need to seriously consider these issues to promote the healthy development of the entire ecosystem.