1/ More and more post-TGE projects are turning to Kaito for mindshare. For yappers, it’s a chance to earn. But what are the impacts on the projects themselves? In this highlight from my latest report, we’ll examine how the market responds to these campaigns 🧵👇

3/ In the 30 days after launch, projects typically underperformed the broader altcoin market (defined as total crypto market cap excluding BTC and stablecoins). This can be interpreted in a few ways: 1) the market views Kaito as bearish, or 2) Kaito faces adverse selection.

4/ Theory 1: Unlike organic increases in mindshare, which may signal investor interest and new marginal buyers, Kaito campaigns inform the market that mindshare is being manufactured. Even if organic attention is created in tandem, the strength of this signal may obfuscate it.

5/ This creates an unfavorable situation for potential buyers, as 1) they can’t get an accurate read on social momentum (who’s coming in to buy?), and 2) distributing tokens to yappers introduces marginal sellers with a cost basis of zero (I know who’s coming in to sell).

6/ Theory 2: Even without a Kaito campaign, these tokens would have underperformed due to adverse selection. Examining the 30 days prior to launch, we noticed, on average, a relative underperformance in fundamentals compared to competitors.

7/ Viewed through this lens, Kaito campaigns may reflect that a project’s access to capital, either from prior outperformance or fundraising, has outpaced its ability to find a competitive edge in the current market.