Airdrops are frequently utilized by new crypto projects, yet research indicates that around 88% of such tokens decline in value within three months. This finding comes from a report collected over the past seven years.
A report on Sept. 18 by DappRadar analyst Sara Gherghelas revealed that since 2017, over $20 billion has been distributed in airdrops, with 88% of the tokens losing value shortly after, “underscoring the disconnect between immediate excitement and sustainable growth.”
In an interview with Cointelegraph, DappRadar’s head of content, Robert Hoogendoorn, emphasized that airdrop success hinges on effective token distribution; projects aim to engage committed holders.
“Successful airdrops often use phased or targeted distribution methods to mitigate community sell-offs. However, no single strategy guarantees success, as it ultimately relies on distribution, product-market alignment, and token usability,” he explained.
“Market dynamics also greatly influence airdrop valuations. A successful airdrop keeps the community engaged with the product after token deployment.”
The first known crypto airdrop dates back to 2014, when Auroracoin, introduced its native coin, AUR, as an alternative to Bitcoin in Iceland.
Crypto projects must select holders carefully
Since the launch of Auroracoin, Hoogendoorn noted that airdrops have surged during bull markets and are now incorporating strategies like on-chain engagement, social media campaigns, and liquidity incentives.
However, Hoogendoorn argues that projects need to scrutinize users’ on-chain activity, trading patterns, and social media influence to prevent airdrop hunting and farming.
“We are witnessing a trend where airdrop distributions factor in user reputation through social media metrics. Additionally, many projects have adopted engagement and reward platforms to distribute portions of their airdrop allocations,” he noted.
Airdrops from unreliable projects are likely to fail
Jackson Denka, CEO of Azura, a DeFi platform backed by the Winklevoss twins, stated to Cointelegraph that many airdropped tokens plummet in value due to their association with fundamentally weak protocols that lack adoption and revenue generation.
“No amount of financial engineering or incentives can change the reality that some assets are inherently better investments than others,” he maintained.
“Airdrops, regardless of structural flaws, will increase in price when linked to a quality, growing product over time.”
Hyperliquid was recognized for executing the best airdrop launch ever in November 2024 by excluding venture capitalists and actively promoting community participation.
In the long term, Denka anticipates airdrops will diminish in prominence as more ICOs emerge, with investors paying to acquire tokens before public release, akin to an IPO but for crypto tokens.
“No other financial market provides free equity to its users. Companies like Uber, Robinhood, and Facebook never did this,” he pointed out.
“In retrospect, the airdrop craze will be viewed as a fleeting moment in the broader narrative of crypto markets, although they will always remain.”
Liquidity must also be prioritized
An additional challenge facing airdrops is liquidity. Kanny Lee, CEO of SecondSwap, a platform for trading locked tokens, explained to Cointelegraph that airdrops often decrease in value due to an oversupply of liquidity introduced too rapidly, saturating the market with tokens.
Two recent successful airdrops incentivized users for ongoing engagement, which helped sustain liquidity post-initial volatility and employed a gradual unlocking schedule to release tokens in phases, according to Lee.
Related: Binance airdrops $45M in BNB to memecoin traders affected by market crash
“Both strategies emphasize the same key principle: value persists when users remain engaged and liquidity grows gradually,” he added.
Looking ahead, Lee believes that rewarding users for holding tokens will become the norm.
“Sustainable liquidity should be the primary objective for any airdrop design. It’s not about the sheer number of wallets receiving tokens, but about how long those tokens remain active in the market,” he stated.
“Programs that promote ongoing participation or introduce supply incrementally can help mitigate sharp corrections following large distributions.”
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