https://twitter.com/BenGiove/status/1540480043813548032

There are 3 Signs a Crypto Project is NGMI

-Large supply overhangs

-Treasuries concentrated in native tokens

-Bad governance practices

A thread on why these hurt a protocols chances for survival

Bear markets = Opportunity markets

But to find the next great opportunities, you must also know which types of projects to avoid

There are three main warning signs to keep in mind when conducting due diligence on a protocol…

Warning Sign #1: Supply overhangs

Many tokens have a low circulating supply which leads to huge discrepancies b/w MC and FDV

A low MC/FDV = A large amount of structural sell pressure

This sell pressure comes from two sources:

-Insider unlocks as team and investor allocations vest -

Token emissions from liquidity mining programs

These not cause a token to only bleed more heavily during a market, hurting morale, but also drains a protocol’s treasury

Warning Sign #2: Native Token Treasuries

The reason why token inflation can drain a DAO treasury is b/c many are highly concentrated in their native token

Per @DeepDAO_io only ~12.3% of DAO treasury assets are in stablecoins

This ties a protocols ability to sustain itself thru a market to the value of its token

This is a problem b/c DAO’s may now become forced sellers to cover expenses

This adds more downward pressure on price and further depletes runway

It may also push DAO's to pursue alternative, riskier forms of financing to survive

This includes OTC-deals to sell discounted, locked tokens to market makers and VCs in which DAO's have little leverage to negotiate favorable terms

Warning Sign #3: Bad Governance Practices

All governance is a mess - But some DAOs have far worse gov practices than others May DAOs are highly centralized, with its token supply concentrated in the hands of insiders

This leads to “governance theater” where insiders ignore, manipulate, or bypass governance to pursue their own ends

We’ve unfortunately seen plenty of examples of this in recent weeks

This can permanently damage a protocols legitimacy and trust within the community

If you are looking for the next great bear market you would be wise to avoid projects who are flashing any of these warning signs

For my more detailed thoughts on each of these red flags, check out the piece I wrote for

@BanklessHQ

Thread over and have a good weekend

https://twitter.com/BenGiove/status/1540480043813548032

There are 3 Signs a Crypto Project is NGMI

-Large supply overhangs

-Treasuries concentrated in native tokens

-Bad governance practices

A thread on why these hurt a protocols chances for survival

Bear markets = Opportunity markets

But to find the next great opportunities, you must also know which types of projects to avoid

There are three main warning signs to keep in mind when conducting due diligence on a protocol…

Warning Sign #1: Supply overhangs

Many tokens have a low circulating supply which leads to huge discrepancies b/w MC and FDV

A low MC/FDV = A large amount of structural sell pressure

This sell pressure comes from two sources:

-Insider unlocks as team and investor allocations vest -

Token emissions from liquidity mining programs

These not cause a token to only bleed more heavily during a market, hurting morale, but also drains a protocol’s treasury

Warning Sign #2: Native Token Treasuries

The reason why token inflation can drain a DAO treasury is b/c many are highly concentrated in their native token

Per @DeepDAO_io only ~12.3% of DAO treasury assets are in stablecoins

This ties a protocols ability to sustain itself thru a market to the value of its token

This is a problem b/c DAO’s may now become forced sellers to cover expenses

This adds more downward pressure on price and further depletes runway

It may also push DAO's to pursue alternative, riskier forms of financing to survive

This includes OTC-deals to sell discounted, locked tokens to market makers and VCs in which DAO's have little leverage to negotiate favorable terms

Warning Sign #3: Bad Governance Practices

All governance is a mess - But some DAOs have far worse gov practices than others May DAOs are highly centralized, with its token supply concentrated in the hands of insiders

This leads to “governance theater” where insiders ignore, manipulate, or bypass governance to pursue their own ends

We’ve unfortunately seen plenty of examples of this in recent weeks

This can permanently damage a protocols legitimacy and trust within the community

If you are looking for the next great bear market you would be wise to avoid projects who are flashing any of these warning signs

For my more detailed thoughts on each of these red flags, check out the piece I wrote for

@BanklessHQ

Thread over and have a good weekend