As a seasoned investor with decades of experience under my belt, I must admit that the recent token sale fiasco left me quite puzzled. I’ve seen my fair share of market fluctuations and project launches, but this one took the cake (or should I say, the cake took the token?).
Former United States President Donald Trump’s token launch was something of a flop.
On October 16th, the ex-President of the United States, Donald Trump, debuted the World Liberty Financial (WLFI) digital token. According to its website, this token offers investors the opportunity to exercise voting privileges regarding a future decentralized finance (DeFi) platform.
Despite a full trading day, sales for the token have been relatively low. By 10:00 am UTC on Oct. 17, the token’s website indicates that only 848.63 million WLFI ($12.7 million at the presale price) has been sold, which equates to approximately 4.24% of the total supply. This leaves a staggering 19.1 billion coins ($287 million) still unsold.
Why did the token struggle significantly during its initial trading day, even with the renowned former president’s involvement? Here are five possible reasons that could account for the token’s unexpectedly poor performance.
There were limits on who could purchase Trump’s token
Instead of typical token presales that allow purchases from anyone anonymously, the Trump DeFi coin is exclusively available for purchase by accredited U.S. investors and non-residents.
Upon your initial visit to our website, you’ll encounter a question regarding your residency and eligibility as an ‘accredited investor’, as per the definition under Regulation D of the U.S. Securities Act of 1933. This determination is crucial since it affects whether you reside within or outside the United States.
Users who don’t fit into either category are not allowed to progress further into the website.
Purchasers cannot obtain tokens until they have successfully undergone a Know Your Customer (KYC) process to confirm their identity first. For individuals claiming to be U.S. residents, it is required that they submit an affidavit declaring themselves as accredited investors in order to pass this check.
As stated by Investopedia, an American investor is considered “accredited” if they exceed an annual income of $200,000, possess a total net worth beyond $1 million, or serve as a general partner, executive officer, or director for a company that is offering unregistered securities.
These criteria effectively exclude the vast majority of Americans.
To skip this condition, users need to click on “I reside outside the United States,” followed by submitting evidence verifying their residence exterior to the U.S., for further processing.
It’s quite probable that the slow sales of the token are mainly due to the fact that a significant number of Trump’s backers, who are based in the U.S. and don’t meet the criteria for accredited investors, make up a large portion of his support base.
Typically, such a restriction wouldn’t pose much of a problem. Global crypto users, excluding those in the U.S., could acquire the token directly from the site. Then, they would transfer the token to U.S. residents using decentralized exchange platforms.
In simpler terms, when U.S. citizens purchase this digital token, they’ll utilize cryptographic addresses that don’t reveal their real identities. This anonymity makes it challenging for authorities to discern whether a buyer is from the U.S., thus providing sellers with a possible justification if they claim they didn’t know.
However, this has not happened with Trump’s WLFI token because the token is not transferable.
WLFI is not transferable or tradable
Unlike many other cryptocurrencies, WLFI tokens are not transferable between digital wallets. Consequently, approved investors are unable to trade these tokens with unapproved investors, and no one residing outside of the United States can sell them to American residents.
Actually, token holders don’t have the option to sell their tokens. Instead, they must simply wait until the DeFi protocol is launched. Once that happens, the developers assert that token holders will be given the ability to vote on proposals related to the protocol.
According to the clear guidelines set for the token sale, it is not permissible to transfer these tokens to other users.
As a crypto investor, I find myself in a predicament when I’m unable to sell my tokens. This situation hinders me from realizing potential profits by selling them at a higher price compared to what I initially paid. Furthermore, the uncertainty deepens as there seems to be no promise or expectation that token holders will receive returns from the forthcoming DeFi protocol.
The website crashed
Regardless of having just a modest number of tokens sold, the site struggled under the minimal traffic load. Several users encountered an “unavailable” or “page not working” message while attempting purchases.
Due to the site being offline, potential buyers of WLFI might not have been able to make purchases. Reflecting on this decision, some users may have opted to hold onto their funds, which potentially led to a decrease in WLFI token sales.
It appears that the WLFI team failed to provide an explanation for why the site crashed, but it’s possible they anticipated sales would be much lower than they actually were. Consequently, they might not have adequately provisioned their servers to manage the website’s traffic load, leading to the crash and exacerbating the situation.
People think it’s a grift
One possible reason for the slow sales of the token could be the widespread belief that the project is merely a fraudulent scheme or small-time swindle.
Some commentators argue that it appears the issue of non-transferability of tokens might intentionally be concealed from purchasers, with the aim of boosting token sales.
Even though it’s explicitly mentioned on the token’s website that the tokens aren’t transferable, some people think that perhaps the project team didn’t anticipate that buyers would thoroughly read the terms and conditions.
The declaration of Trump’s token was met with significant controversy on X, leading to a community warning. This warning emphasizes that the ‘token’ is non-transferable and remains confined within the wallet, meaning users cannot withdraw until this ‘program’ decides to permit it. Be sure to review the fine print!
Vladimir Djukic, founder of the Reflecto passive-income token, shared the announcement:
The buying process is tedious
Another potential cause for slow token sales could be that the purchasing process is excessively difficult or inconvenient for potential investors, discouraging them from participating.
For some individuals, it might be unclear if they qualify as accredited investors due to their lack of understanding about this specific term.
One might question what it truly means to “reside” in the United States. An individual who spends only a few months annually in the U.S., while the remainder of the year is spent elsewhere, might find themselves unsure about where they actually belong when choosing an option.
Before proceeding to the final step of purchasing tokens, users are required to undergo a Know Your Customer (KYC) verification process by Sumsub. Some users might hesitate to share their sensitive documents like passports or driver’s licenses due to trust issues with Sumsub.
Although individuals might be open to putting faith in the organization handling the Know Your Customer (KYC) verification, some may still be hesitant or uncomfortable with the idea of uploading their personal documents.
As a crypto investor, I’ve found that the intricate and lengthy nature of the token purchasing process has often dissuaded me from participating in token sales, despite my belief that the investment could potentially yield returns in the long term.
Regardless of the lackluster performance in token sales, Trump still garners significant backing within the American cryptocurrency community. In fact, a political action committee supporting Trump managed to collect over $7.5 million in cryptocurrencies between July and September, as per data from the US Federal Election Commission.
According to a study by Galaxy Digital, there’s a perception that Vice President Kamala Harris, rather than President Joe Biden, might be more favorable towards cryptocurrencies.
She’s recently tried to win over crypto supporters by promising fair regulations for the digital asset, which is a part of her “Opportunity Economy promise.
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2024-10-17 16:42