Written by: Oliver Knight

Abstract

• Due to early liquidity issues, weak utility, and uneven distribution, new cryptocurrencies generally depreciated in 2025, colliding with a risk-averse market.

For most of 2025, there was a simple rule: if a new token was launched, its price was likely to drop.

Data from Memento Research tracked 118 token generation events last year. The data shows that about 85% of tokens are currently trading below their initial valuations. The median token price has fallen over 70% from its initial price.

This stands in stark contrast to the previous bull market cycle in 2021, where a hot altcoin market and endless risk appetite saw various high-profile tokens, including MATIC, FTM, and AVAX, surge significantly after their launch.

A Tough Year for Newcomers

Signs of weakness appeared early and persisted throughout 2025. Tokens listed on major centralized exchanges, including Binance, typically faced immediate sell-offs. Exchange listings no longer served as signals of momentum but increasingly became warning signs.

Several factors contributed to the poor performance. Aside from a brief rebound in September, the altcoin market remained sluggish for most of the year following the collapse of the memecoin bubble in February. Bitcoin continued to perform well, leaving little room for speculative funds to shift towards new tokens.

This environment shaped trader behavior. Many chose to take quick profits and move to other areas rather than risk long-term holdings, unwilling to be the last holders in a declining market.

Teams hoping to kickstart ecosystems with their tokens found themselves defending charts that only fluctuated in one direction. Even well-funded and reputable projects struggled to shake off early sell-off pressures. For example, Plasma (XPL) is currently trading below $0.20 after hitting $2.00 at its debut in September. Meanwhile, Monad has dropped about 40% since its token launched in November.

Too Many Holders, Insufficient Synergy

A major issue is who ultimately owns these tokens.

Distribution plans from large exchanges, widespread airdrops, and direct sales platforms achieved their intended goals: maximizing reach and liquidity. However, they also led to a market flooded with holders who had little connection to the underlying products.

This dynamic marked a shift from early cycles. In earlier cycles, tightly-knit communities often formed around token sales and exchange listings within Discord groups. In 2025, exchanges and distribution platforms typically held large supplies, which were then distributed through airdrops or batch sales. Many tokens quickly exited their original ecosystems, held by traders focused on short-term price fluctuations rather than actual use.

This does not mean those traders are villains. It simply indicates that their incentive mechanisms differ. Once these supplies begin to circulate, it becomes challenging for projects to regain control of their narratives.

For years, the industry has generally believed that early liquidity would eventually translate into long-term value. In 2025, this assumption was shattered.

Tokens with No Clear Use Cases

Another troubling fact is that many tokens lack sufficient use cases.

To maintain value, tokens must be central to a product—something users rely on, not just something they trade. In reality, this means demand should be driven by usage rather than marketing.

However, many teams issued tokens before the relevant conditions were in place, hoping that utility and community would follow. In a market increasingly obsessed with price, this gap proved fatal.

This issue was less prevalent during the initial coin offering (ICO) cycle in 2017 when many tokens launched solely based on white papers. The novelty of the ICO model and the overall bullish altcoin market made fundamentals easier to overlook. By 2025, as altcoins generally underperformed Bitcoin, the dominant strategy shifted to extracting short-term gains from new tokens and rotating back to Bitcoin.

Regulatory Shadows Still Looming

Design choices were also influenced by events that did not occur in Washington.

Mike Dudas, managing partner at venture capital firm 6MV, stated that the failure of the U.S. market structure bill in 2025 left the question of whether tokens could possess equity-like rights unresolved. In the absence of clarity, teams avoided designing features that might attract regulatory scrutiny.

The result was a wave of cautious and simplified tokens—these tradable assets had almost no clear value propositions. To avoid legal risks, many issuers also refrained from providing holders with clear long-term reasons to hold the tokens.

What’s Next

If 2025 exposed unworkable practices, it also clearly pointed to directions many teams are now exploring.

A repeatedly mentioned theme (particularly emphasized by Dudas) is that exchange-led token distribution models often hinder long-term project success. Especially, Binance's listing announcements often became bearish signals—many newly listed tokens faced immediate sell-offs.

This issue stems from structural flaws. The token allocation plans, airdrops, and direct sales platforms of large centralized exchanges (CEX) were designed to pursue liquidity and trading volume rather than align long-term interests between users and projects. When large amounts of tokens are allocated to traders who will not use the product and are only focused on short-term arbitrage, sell-off pressure becomes inevitable.

In response, an increasing number of project teams may adopt a new model of "rewarding based on usage": instead of distributing large amounts of tokens to everyone upon launch, they will issue tokens based on the actual level of user participation.

This approach already has precedents—projects like Optimism and Blur have made similar attempts. Specifically, users need to genuinely use the product to earn tokens, such as:

• Paying usage fees,

• Achieving a certain level of activity (like frequent logins or actions),

• Contributing to network operating nodes or other infrastructure,

• Or participating in community voting governance.

The benefit of this approach is that tokens will genuinely end up in the hands of those who actually rely on and use the product long-term, rather than being taken by short-term speculators.

This model is slower to implement and more challenging to execute, but as the traditional "CEX airdrop + mass distribution" model gradually loses credibility, it is increasingly seen as a necessary step by more teams.

A Necessary Reset

The insights brought by 2025 do not suggest that "the token model has failed," but rather that: tokens with misaligned incentives cannot survive in a harsh market.

Data from Memento Research clearly supports this. The depreciation of most new tokens is not due to a disappearance of market demand for crypto assets, but because the issuance, ownership structure, and actual use of tokens are severely disconnected:

• Tokens had liquidity before they were truly needed;

• They were widely distributed before a community had formed;

• They were frequently traded before they played a substantive role in the product.

The next phase of the market is unlikely to pay for marketing gimmicks. Instead, it will favor restrained issuance strategies, clearer incentive mechanism designs, and those tokens whose value is genuinely anchored in actual use (not just at the moment of listing for trading).

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