TokenGazer Crypto Review: In-Depth Analysis of Mainnet Launch’s Impact on Token Price
This report is written on the basis of published data and material.
Viewpoints, data and charts in the report are for reference only.
The market is risky, please be cautious about investment.
TokenGazer’s Review
The mainnet launch is a milestone for any blockchain project, when project teams deliver on their promise to ICO investors. It can be well regarded as a great bullish factor for a project. However, TokenGazer selects 11 projects whose mainnets were launched during the period from September 2017 to December 2018 only to find that their token prices “increased before the mainnet launch and dropped after it”.
For investors:
As for a popular project with high-ranking market capitalization, it is relatively safe to invest in it before the token price increases drastically, but investors need to be cautious as to whether its development progress is in accordance with its roadmap.
As for a less popular project with a lower-ranking market capitalization, its token price changes is in accordance with the overall market trend, and the impact of its mainnet launch is limited.
Meanwhile, investors need to keep an eye on the mainnet launch date and the unlock date of the tokens held by project teams and be cautious when they are too close to each other.
1 About Mainnet Launch
The mainnet refers to the functional blockchain network that is officially launched and runs independently. Native tokens on the mainnet represent access right to some kind of economic value or permission to conduct some operation in the network.
Before ICO was applied on a large scale, the crowdfunding of a blockchain project was to distribute native tokens to investors after its mainnet launch. For example, Ethereum distributed ETHs to its investors after Frontier, the first version of its mainnet was launched. But since Ethereum released the ERC-20 standard, project teams can create ERC-20 tokens on the Ethereum platform as IOU in advance, and raise funds for technology development and community operations through ICO. Therefore, projects’ ERC-20 tokens have been traded on exchanges before the mainnet launch.
After the mainnet launch, project teams generally distribute native tokens through swaps, which means they deliver on their promises to ICO investors:
ERC-20 tokens are replaced by native tokens, which are the officially launched products with utility value and projects are no longer “the ones without any activated products”.
Investors can tell a project’s development progress based on whether its mainnet has been launched.
Therefore, the mainnet launch is a milestone for any blockchain project, which can be well regarded as a great bullish event for a project. So what is the the token price trend after the mainnet launch?
2 Token Price Trends
To study the impact of mainnet launch on token price, TokenGazer has done research on the daily closing prices of dozens of blockchain projects over the 90 days before and 90 days after their mainnet launches (a period of 6 months). The results are shown in the table below.
As is shown in the table, for most of the projects, the token price at the mainnet launch time is higher than that 90 days before and 90 days after the mainnet launch, which means the price increased before the mainnet launch and decreased after the mainnet launch.
Most of the projects’ main launch dates are concentrated in the period from March 2018 to June 2018, when the price dropped with the overall market downturn. In order to minimize the impact of the market, the TokenGazer team analyzed the market capitalization share changes of the projects. The results are shown in the following table:
As is shown in the table, for most of the projects, the market capitalization share at the mainnet launch time is higher than that 90 days before and 90 days after the mainnet launch, which means the market capitalization share increased before the mainnet launch and decreased after the mainnet launch.
In the figure above the mainnet launch date is set as 0 on the horizontal axis so as to analyze the changes in the market capitalization shares over the 90 days before and 90 days after the mainnet launch date. It can be clearly seen from the figure that most of the projects have an increase in market capitalization share before the mainnet launch, and a decrease after the mainnet launch.
Therefore, judging from token price and market capitalization share changes (which have already ruled out the influence of market downturn to a certain extent), the project’s mainnet launch has not become a bullish factor to promote the further increase of token price as imagined. On the contrary, it has become a signal that the token price is going down.
3 Reasons for Price Decrease After Mainnet Launch
Why does token price decrease even plunge after the mainnet launch?
1) Projects with mainnets launched in the first half of 2018 were affected by the market downturn to some extent. The launch dates were mainly concentrated in the period from March 2018 to June 2018 when the overall market environment is bearish and the token price decreased correspondingly. But QTUM, whose mainnet was launched in September 2017 also had a token price increase before the mainnet launch and a decrease after it.
2) There is often a certain degree of speculation on the market before a project’s mainnet launch. In that period the project will be exposed to the media and the token price will increase to some extent, making the price peak before the mainnet launch. For example, EOS’ Google search interest as well as its token price reached the peak on record before the the launch of its mainnet.
3) Promises have not been fully delivered on. Project teams often claim a high TPS of their test networks, while after launch, the mainnet’ TPS is often orders of magnitude lower than what was claimed. For example, BM once claimed that EOS’ blockchain system can realize a million-level TPS, but the launched mainnet only reached 1000 TPS, quite different from expectations.
4) Many projects’ mainnet launch time coincides with the unlocking time of the team-held tokens. A large number of tokens are unlocked at a favorable price with the mainnet launch, which means the mainnet launch becomes a good opportunity for the team and early investors to cash out.
4 Suggested Strategies for Mainnet Launch
So how should cryptocurrency investors respond to the mainnet launch? Before answering this question, let’s first look at the detailed price changes of several different types of blockchain projects before and after their mainnet launches.
As for popular projects with high market capitalization, such as EOS, BTM and ONT, we analyze their native token price changes over the 90 days before and 90 days after their mainnet launches, with bitcoin price changes in the same period as a comparison. The results show that the prices of their native tokens are not correlated with the price of bitcoin. The token prices increase significantly before mainnet launches and keep decreasing after them.
As for less popular projects with low-ranking market capitalization, such as Nebulas and BOTTOS, etc, we analyze their native token price changes over the 90 days before and 90 days after their mainnet launches, with bitcoin price changes in the same period as a comparison. The results show that the the native token price is highly correlated with the price of bitcoin, without an independent trend of price changes.
For investors:
As for a popular project with high-ranking market capitalization, it is relatively safe to invest in it before the token price increases drastically, but investors need to be cautious as to whether its development progress is in accordance with its roadmap.
As for a less popular project with a lower-ranking market capitalization, its token price changes will follow the trend of the overall market, and the impact of the mainnet launch is limited.
Meanwhile, investors need to keep an eye on the mainnet launch date and the unlock date of the tokens held by the project team and be cautious when they are too close to each other.
It should be pointed out that TokenGazer does not study projects with highly concentrated native tokens or Ponzi-Scheme-like projects. Such projects are highly risky, and the token price is mainly controlled by top token holders, which is less subject to the mainnet launch.
In summary, judging from the current blockchain projects, the mainnet launch is a bullish factor which may bring about short-term investment opportunities that come before it, but the token price and market capitalization will show a downward trend after it, which requires investors’ close attention. For long-term investment, token price is still determined by its value, which is determined by the project’s technology development and application. The mainnet launch can be regarded as a milestone for a blockchain project, but at the same time it is only a small step in the long journey with a long way to go in later stages.
