Sophon’s utility token, SOPH, skilled a pointy decline of greater than 33% inside 24 hours of its debut and itemizing on Binance.
The major driver behind the worth plunge seems to be the airdrop of 900 million SOPH tokens, 9% of the full 10 billion provide, unlocked at launch.
Why is SOPH’s Price Declining?
For context, Sophon is a Layer 2 ZK (zero-knowledge) blockchain constructed on Validium know-how and a part of ZKsync’s Elastic Chain imaginative and prescient. It is designed as a consumer-focused platform concentrating on leisure purposes. The blockchain offers high throughput, low fees, and Ethereum-level safety.
The mission has raised over $70 million from outstanding traders, including Binance Labs. On May 23, Binance announced SOPH’s listing by way of an X (previously Twitter) put up.
“We’re pleased to announce that Binance will be the first platform to feature SOPHON (SOPH),” Binance posted.
Trading commenced at 13:00 UTC on May 28. On the identical day, SOPH additionally started buying and selling on different main exchanges, together with OKX, KuCoin, Upbit, Bitget, and MEXC, marking a broad rollout.
According to data from CoinGecko, the token climbed to an all-time excessive of 0.11 shortly after launch. However, it noticed a steep drop after this. Over the previous day, SOPH’s worth has depreciated by 33.3%. At the time of writing, the altcoin was trading at $0.06.
The decline additionally worn out over $80 million in market capitalization. Furthermore, the trading volume surged 2,724.8%, indicating heavy distribution by early airdrop receivers.
At the Token Generation Event, Sophon unlocked 9% of SOPH’s complete provide for distribution. This included 6% allotted to Layer 1 farmers and 3% for eligible early contributors, zkSync customers, and NFT holders.
Notably, airdrops often lead to short-term price declines on account of elevated provide. This is particularly true when a token’s utility shouldn’t be but absolutely established.
Currently, SOPH’s instant utility stays limited to gas fees and sequencer decentralization. Thus, this may increasingly not but present sufficient demand to counterbalance the airdrop-driven sell-off.
“We expect the utility to evolve over time as our network and our product offering grows, incorporating new utilities as we do. There is plenty planned on the product front so stay tuned for the evolution of SOPH,” Sophon stated.
Adding to the volatility, Binance utilized a “seed tag” to SOPH. The seed tag is a classification for cryptocurrencies with greater danger and larger volatility than different tokens. It usually identifies new initiatives which can be vulnerable to bigger worth swings.
Furthermore, the change introduced futures buying and selling for SOPH with as much as 75x leverage, amplifying worth swings. Given these components, the market sentiment surrounding SOPH stays fragile.
That’s not all. After three months, an additional 20% of SOPH’s provide, allotted as node rewards, will start unlocking weekly. If market sentiment doesn’t enhance, this could exert further downward pressure.
Despite this, on-chain exercise affords some optimism. Data from DefiLama revealed that Sophon’s complete worth locked (TVL) reached a peak of $20.28 million in the present day.
This mirrored a rise of 14.1% from the day gone by. Additionally, decentralized change quantity reached a document peak of $47.44 million.
The put up Sophon’s SOPH Token Faces Over 33% Drop Post Airdrop and Binance Listing appeared first on BeInCrypto.
