Why Most Airdrop Tokens Plummet in Value Within 15 Days

Crypto airdrops have been a popular strategy for distributing tokens and generating initial excitement since 2017, but they now face growing difficulties. Although there was early enthusiasm, a recent analysis from KeyRock Trading indicates a decline in token performance shortly after their listing.

Furthermore, many airdropped tokens struggle to maintain long-term interest or value.

Analysis of Airdrop Token Performance

The investigation, which examined 62 airdrops across six blockchain networks in 2024, reveals a concerning trend regarding the effectiveness of these initiatives. Specifically, after 90 days, 88.7% of the tokens reviewed experienced a drop in price, with only a select few demonstrating resilience.

Read more: Generating Passive Income through Forks and Airdrops in 2024

In the cryptocurrency realm, airdrops serve to enhance protocol participation and expand token distribution. However, the excessive use of such methods appears to have eroded their effectiveness, resulting in lower community retention levels and, at times, outright abandonment of protocols.

“Examining price movements over periods of 15, 30, and 90 days, it is clear that most price volatility occurs in the first few days following the airdrop. After three months, only a few tokens achieve a positive outcome, with the majority not following this trend,” Keyrock stated.

Interestingly, despite the generally discouraging performance of airdrops, the results were not uniformly negative. The data showed notable variation in outcomes among different blockchains.

For example, Ethereum and Solana distinguished themselves, with 14.8% and 25% of their airdrops, respectively, maintaining or increasing in value after three months. In contrast, other networks such as BNB, Starknet, Arbitrum, Merlin, Blast, Mode, and ZkSync recorded no airdrops with positive results.

The differences in performance across chains underscore the impact of network preference and user demographic factors. Solana, which is becoming more popular among retail investors and is a formidable competitor to Ethereum, exhibited relatively better performance, likely attributed to its expanding and engaged community.

Larger Airdrops Tend to Perform Better

Additionally, KeyRock’s report explored the implications of token distribution strategies. Airdrops were categorized according to the percentage of total token supply distributed: small (less than 5%), medium (greater than 5% but less than or equal to 10%), and large (more than 10%). The findings indicate that the size of an airdrop can significantly affect both the initial market response and its long-term success.

Read more: Top Upcoming Airdrops in 2024

In the short term, smaller airdrops often performed better, likely due to lower immediate sell pressure. However, these advantages were typically fleeting, with significant price declines often occurring within three months. This suggests that while initial scarcity may limit immediate sell-offs, it could also trigger delayed market corrections as circumstances shift or insiders opt to cash out.

Moreover, medium-sized airdrops found a middle ground, demonstrating slightly better retention and performance. Yet, it was the larger airdrops that surpassed all, showing exceptional performance over extended periods. These broader distributions seemed to cultivate a stronger sense of community ownership, which could play a vital role in moderating price fluctuations and maintaining user engagement.

“In conclusion, this data suggests that more generous token distributions can be beneficial. Protocols that are liberal with their airdrops tend to develop a more committed user base, leading to improved outcomes over time,” Keyrock concluded.