Why 80% of Crypto Token Launches Crash: What Smart Money Is Switching To

• More than 80% of token launches dip below their initial listing price.
• Average drawdowns of 50‑70% occur within the first 90 days.
• Crypto‑related IPOs surged to $14.6 bn in 2025, a 48x YoY jump.
• M&A activity hit a five‑year high of $42.5 bn, signaling institutional confidence.
• Public crypto equities trade at 7‑40× sales versus 2‑16× for comparable tokens.

You’re losing money on most crypto token launches, and most investors haven’t realized it yet.

Why 80% of Token Launches Fall Below TGE Price

Data from a leading market‑maker covering hundreds of token sales shows a stark pattern: after the Token Generation Event (TGE) – the price set when a token first appears on an exchange – more than four‑fifths of projects trade lower than that baseline. The typical decline ranges from 50% to 70% within roughly three months.

The drop isn’t a flash‑crash artifact; it reflects a predictable lifecycle. Tokens usually peak within the first 30 days as early adopters and insiders buy in. Once the initial hype fades, a wave of selling pressure emerges from airdrops, early‑investor unlocks, and liquidity providers looking to lock in profits. The result is a steep, sustained downtrend that catches naïve retail participants off guard.

How Crypto IPOs and M&A Are Outpacing Token Returns

While token prices are eroding, the traditional equity side of the crypto ecosystem is booming. Crypto‑related initial public offerings raised about $14.6 billion in 2025, a massive leap from the previous year. Simultaneously, mergers and acquisitions in the sector topped $42.5 billion, the strongest level in half a decade.

These figures point to a capital rotation rather than an exodus. Institutional money—pension funds, endowments, and asset managers—cannot easily hold unregulated tokens but can allocate to listed shares. When risk appetite tightens, investors demand “cleaner ownership,” meaning transparent reporting, enforceable shareholder rights, and inclusion in index‑tracked funds.

Valuation Gap: Public Crypto Equities vs. Tokens Explained

Comparing price‑to‑sales multiples reveals a pronounced gap. Public crypto companies such as Circle, Gemini, eToro, Bullish, and Figure trade between 7× and 40× sales. By contrast, comparable token projects sit at 2× to 16× sales.

This disparity isn’t just about multiples; it’s about accessibility. Regulated equities can be bought within existing compliance frameworks, listed in major indices, and held in standard custody solutions. Tokens often require bespoke custodians, special policy approvals, and carry opaque governance structures. The result: a premium placed on equity‑style exposure that offers clearer risk‑reward metrics.

What This Means for Your Portfolio Allocation

For a diversified crypto exposure, consider a two‑pronged approach:

• Core exposure: Allocate to publicly listed crypto firms that generate real‑world revenue—custody, payments, brokerage, compliance infrastructure.
• Selective token bets: Reserve a smaller, high‑conviction slice for protocols with proven user metrics, on‑chain revenue, and transparent tokenomics.

This balance lets you capture upside from innovative layer‑1 or DeFi projects while anchoring the bulk of your capital in assets that survive institutional scrutiny.

Investor Playbook: Bull and Bear Cases

Bull case: The regulatory tide continues to favor equity wrappers. More crypto firms pursue public listings, widening the pool of investable securities. As institutional demand rises, valuation multiples could compress upward, delivering double‑digit returns for equities. Tokens that survive will be those with sustainable fee streams and clear governance, offering asymmetric upside.

Bear case: A resurgence of retail speculation could revive token launch activity, driving prices temporarily higher and masking underlying weaknesses. If a major regulatory clampdown restricts crypto equities, investors may be forced back into the token market, where volatility and drawdowns remain severe.

In either scenario, the key is discipline: track on‑chain fundamentals (active addresses, transaction volume, fee revenue) for token picks, and scrutinize earnings reports, cash flow, and governance metrics for equity holdings.

By recognizing the structural bifurcation—robust, revenue‑generating protocols versus a long tail of speculative launches—you can position your portfolio to thrive regardless of market mood.