Monad Faces Scrutiny Over Token Structure
Arthur Hayes has voiced significant concerns regarding Monad, a recently launched layer-1 blockchain, predicting a potential collapse of up to 99% in the coming months. During an appearance on Altcoin Daily, the former CEO of BitMEX characterized Monad as "another high FDV, low-float VC coin," asserting that its tokenomics inherently disadvantage retail investors. Fully Diluted Value (FDV) represents the total market value of a project if all of its tokens were in circulation. Hayes explained that substantial discrepancies between FDV and the circulating supply often follow a predictable pattern: an initial surge in price, followed by significant selling pressure once allocations for early investors and insiders become available.
He further elaborated, stating, "It’s going to be another bear chain," and commented that initial excitement does not necessarily translate into sustained long-term utility. Monad secured $225 million in funding from Paradigm last year, and its network officially launched on Monday, accompanied by an airdrop of its MON token. While the MON token has seen an increase in value since its debut, Hayes maintains that short-term trading fluctuations do not alter the general performance history of most new layer-1 networks. He anticipates that only a select few base-layer protocols will endure future market cycles, specifically naming Bitcoin, Ether, Solana, and Zcash as those he expects to remain relevant.
Cointelegraph reached out to Monad for comment but had not received a response by the time of publication.
Investor Takeaway
Launches characterized by high FDV and low float continue to pose a challenge for new blockchain networks. Initial price rallies can obscure underlying structural supply risks that become apparent when locked tokens enter the market.
Broader Market Outlook Remains Positive
Despite his somber assessment of Monad, Hayes expressed an optimistic view on the broader cryptocurrency market, believing it is entering a more favorable phase of the current cycle. He attributed this positive outlook to a resurgence in monetary expansion rather than catalysts originating from specific protocols. "I think that we are at the end of the beginning of this cycle and the massive amounts of crazy bull market money printing is ahead of us," he stated.
Hayes argued that governments, particularly the United States, are preparing to inject more liquidity into the economy as economic growth slows and political campaigns intensify. He challenged the conventional four-year Bitcoin cycle theory, suggesting it has minimal correlation with halving events. Instead, he described past market surges as responses to global credit expansion initiated by the US and China. According to Hayes, when liquidity decreases, Bitcoin is the first asset to signal distress, serving as the "last free-market smoke alarm" for the financial system.
Privacy Technologies Poised for Growth
Looking ahead, Hayes anticipates that privacy technologies will gain increasing prominence within the cryptocurrency space, highlighting zero-knowledge systems and privacy coins as likely beneficiaries. He expects that institutions will continue to develop solutions around Ethereum, given its central role in stablecoins and tokenized finance. Concurrently, he predicts that retail traders will be drawn to assets that offer enhanced data protection.
These sentiments align with Hayes' own investment strategies. Earlier this month, he revealed that Zcash has become the second-largest holding in his family office, Maelstrom, trailing only Bitcoin. He also included Zcash among the assets he believes will maintain their significance following future market corrections.
Investor Takeaway
Hayes' perspective on the market is bifurcated: he advises caution regarding new blockchains with high FDV token structures, while expressing confidence in assets linked to liquidity cycles and advancements in privacy technology.
Monad's Position in the Layer-1 Ecosystem
Monad is entering a highly competitive landscape where many new blockchain networks struggle to retain user engagement beyond their initial launch phase. A common strategy employed by these networks involves incentives, substantial airdrops, or limited token floats to stimulate activity. However, most fail to maintain momentum once token unlocks commence and competition intensifies. Hayes' warning reflects a broader concern among analysts, traders, and developers: the significance of supply schedules has never been greater.
Even robust engineering capabilities and substantial venture capital funding do not immunize a network from market pressures if its circulating supply remains constrained while future unlock events exert downward pressure on market sentiment. Supporters of Monad highlight its parallelized execution engine, which they claim offers superior performance compared to existing chains. Although MON's price has risen since its launch, Hayes cautions that such early gains can be misleading for retail traders. He posits that without genuine adoption and consistent fee generation, new networks typically revert to their pre-hype valuations once speculative interest wanes.
It remains uncertain whether Monad will follow the path of previous short-lived Layer-1 experiments or succeed in establishing a significant user base. However, Hayes' cautionary remarks add a critical dimension to market discussions concerning token design and unlock schedules.