Last year, the current cryptocurrency market cycle saw a shift from VC-backed tokens to community-driven tokens. However, this trend is slowing, demonstrating that investors are gradually returning to non-meme coins.
In an interview with BeInCrypto, Ella Zhang, Head of YZi Labs, explained that while community-driven narratives provide investors with a fairer entry point, they’ve lost momentum over time due to weak fundamentals.
The Decline of VC Dominance
A noticeable trend has emerged in the cryptocurrency market since 2024: investors are increasingly favoring altcoins with minimal involvement from venture capitalists.
This shift is evident in the current market cycle, where, according to Dune data, the benchmark for venture capital (VC) unrealized profits has significantly decreased to a mere 3X. This number contrasts sharply with the benchmark of previous cycles, where VCs saw returns valued at 563X.
“The interest in VC-backed tokens started to decline from the end of 24’Q1, while meme coins surged in popularity, leading to what became known as the meme coin frenzy,” said Zhang.
Over time, smaller investors have started to catch onto VC mechanisms that maximize initial profits and hinder retailers’ prospects. They have pointed to VCs’ tendencies to dump tokens after they are unlocked, causing the token prices to drop significantly by the time retailers can access the market.
“Wow, another VC round that Public Crypto Communities can’t participate in. It’s no wonder that [the] Meme Coin SuperCycle is still alive. We are sick and tired of these private round trash coins that get released at 50x higher valuation to dump on innocent retail from Day 1,” vented one user on X.
In turn, low-float, high-fully diluted valuation (FDV) tokens have dropped in popularity as more retail investors turn to high-float tokens.
High vs. Low-Float Tokens
According to data from CoinGecko, low-float tokens represent a 21.33% share amongst the top 300 crypto assets.
Many players in the crypto industry suggest that retail investors are turning to altcoins with low VC involvement to access a fairer token distribution. This gives early adopters and smaller investors a better chance to participate in the project’s initial success.
“In Crypto, if you buy into a Meme Coin, the mainstream influencers say you’re ‘Gambling’. But if you go buy into their Low Float, High FDV coin released by VC insiders… they call it ‘Investing’ as they dump unlocks on you,” the X user added.
Zhang outlined the fundamental differences between low-float and high-float tokens.
“A low float, high FDV token has a large potential market cap but limited tradable supply, often leading to volatility, especially around major token unlock events. In contrast, high float tokens are gaining popularity because they offer better liquidity, price stability, fairness, transparency, and confidence. These qualities appeal to today’s more discerning investors and reflect a maturing market where fundamentals increasingly outweigh hype,” she explained.
As a result, platforms that provide a more equitable playing field for small and large investors have risen in popularity.
The Pursuit of Fairer Distribution
Last month, prominent crypto analyst Miles Deutscher explained that the rise of the Solana platform Pump.fun had delayed the much-anticipated altcoin season by redirecting capital toward more speculative assets.
The platform, which allows users to launch tokens instantly with minimal effort, has surged in popularity. Pump.fun began 2025 with a record $14 million in daily revenue.
“Pump.fun was in direct response to a lot of the VC-esque insider launches of 2021, because of the bonding curve, because it’s supposed to be a ‘fair launch,’ because it’s on-chain, and because centralized exchanges aren’t listing at multi-billion dollar valuations and dumping on retail. So this is actually in response to the inability of projects to launch in a fair and distributed manner,” he said in a video.
Zhang agreed with the platform’s attractiveness in democratizing access for a broader range of investors.
“Pump.fun and similar platforms are reshaping early-stage altcoin investing, making it more accessible, transparent, and community-driven. These platforms primarily focus on meme coins, experimental tokens, and community-driven projects, making it easier for anyone to launch and participate in new crypto assets,” she said.
In recent months, however, this trend has begun to invert.
Meme Coin Popularity Fades
Despite their accessibility, meme coins’ fleeting popularity has driven traders back to VC-backed altcoins.
“According to data from CoinMarketCap, this trend is now slowing down. The meme market cap to non-meme altcoin market cap ratio has been decreasing, indicating that funds are gradually rotating back to non-meme coins. We see this as a natural market cycle – while community-driven narratives can generate momentum, long-term value ultimately comes from strong fundamentals,” Zhang told BeInCrypto.
The drop in interest in meme coins is due to several projects’ lack of significant utility. Without a transcendental purpose to fuel their success, meme coins lose momentum quickly.
For Zhang, the success of meme coins was bound to be a temporary phenomenon.
“While 40,000-50,000 crypto tokens are created daily, the average lifespan of a liquid meme coin is 1.3 hrs, and only about 5% of the meme coins achieve a market cap exceeding $10m. That’s not to say there aren’t good meme coins, but for any asset to have lasting/growing value in general, it [needs] either one or multiple underlying services, businesses, products, technologies, or new innovations to fuel the price. Without fundamentals, the value is impossible to be held,” she said.
Smaller, more inexperienced investors have also lost substantial money due to the high speculation and risks associated with meme coins. Nearly 90% of users who traded meme coins launched from Pump.fun have either lost their investment or made less than $100 in profits.
The frequency of pump-and-dump schemes has driven them away from the market altogether.
“After all of these meme coin ‘fair launch’ rugs I’m ready to get rinsed by low float – high FDV VC tokens again,” said one user on X.
Though VC-backed projects are recovering lost ground, they should draw from the lessons learned during the meme coin frenzy to cultivate better practices for the future.
VC Adaptation to Community Values
The principles of a fair launch align with the values of blockchain and crypto to create an ecosystem based on equitable distribution and community participation. According to Zhang, crypto VCs must adapt to this philosophy to maintain a competitive advantage over time.
“VC investors have to adapt to the evolving Web3 landscape, which is increasingly driven by community-focused, fair-launch principles—this has become the native culture within crypto,” she said, adding that “VCs who adapt to this shift by backing projects with real utility and a focus on fair, transparent practices will be better positioned to thrive as the market continues to evolve.”
Zhang also said that project builders should not discard VCs altogether. In many ways, they can balance the advantages of VC funding with the desire for fair token distribution and community ownership.
“Projects can still benefit from VC funding as an initial catalyst, not just for capital but for strategic guidance. Early investors can play a crucial role in helping founders navigate challenges, offering insights, connections, and operational support. Unlike founders—who must stay focused on building—VCs naturally interact with a broader range of projects, ideas, and industry leaders. By leveraging investors as more than just capital providers, founders can access a wealth of market intelligence, networks, and strategic partnerships to accelerate their project’s success,” she said.
Meanwhile, industry leaders have also been brainstorming more sustainable alternatives to the current options available to retailers.
The Future of Project Launches
Successful project launches prioritize business growth and long-term value creation over simple token distribution strategies. Binance Founder Changpeng Zhao recently emphasized this with his suggestions for sustainable tokenomics.
“He called for long-term builders to commit to a slow emission token economy with significant milestones–this refers to projects starting out as low float and gradually increasing supply based on significant milestones, to eventually become high float projects,” Zhang explained.
According to Zhao’s plan, future unlocks would only occur if at least six months have passed since the previous unlock. Additionally, the token’s market price must have remained above twice the price of the last unlock for a continuous 30-day period immediately preceding the unlock, and the maximum amount of tokens unlocked in each instance is 5% of the total supply.
Zhao’s social media post offered an opportunity to discuss healthier token distribution strategies. Though the viability of his idea remains to be seen, it highlights the need to support the success of feasible ideas that hold long-term value.
“Projects with strong fundamentals will continue to grow, while those without will eventually fade away,” Zhang concluded.
In the future, the industry must adopt a model combining VC support’s advantages with the principles of fair launch and community engagement to ensure a more equitable and sustainable future.
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