Berachain Backlash Sparks Debate Over Low Float, High FDV Token Model

Layer 1 Berachain's recent mainnet and token airdrop has ignited a debate within the cryptocurrency community, centering on the prevalent low float, high fully diluted valuation (FDV) token model.

BERA, designed to function as the network's primary utility token, saw an initial surge of 71% following its airdrop, reaching a peak of $14.83, or $1.4 billion market capitalization, within hours, according to CoinGecko. However, it has since dropped 63%, now trading at $5.51 and a market cap of $589 million.

A key point of contention surrounding BERA is its token allocation. Out of the total 500 million supply at genesis, approximately 79 million tokens (or around 15%) were designated for the airdrop.

Critics argue that BERA’s low circulating supply at launch, coupled with its high FDV—currently valued at $2.7 billion, according to DeFiLlama—created artificial scarcity that inflated the price before the subsequent crash. This has reignited concerns over the low float, high FDV model, which many traders see as unsustainable.

‘Overhyped’ Launches

Some in the cryptocurrency ecosystem believe this model primarily benefits early investors and insiders, while retail participants often bear the risk. Moonrock Capital CEO Simon Dedic voiced his concerns on X (formerly Twitter), arguing that projects are undermining themselves with high-FDV launches.

“I think projects are just burning themselves with those overhyped launches at crazy FDVs, then airdropping ridiculous amounts of money to people who simply just held a NFTs or farmed the chain,” Dedic said.

“Most retailers just burn their fingers at TGEs nowadays while CEXs and MMs cash in big time," he continued, referring to centralized exchanges and market makers. “Just don't see why you would do this if you are really serious about the longevity of your project.”

Sidney Powell, CEO and Co-Founder of Maple Finance, told The Defiant that instead of a low float, high FDV model, some companies are exploring the idea of holding community rounds “so that early supporters can get in at a more modest valuation and experience price appreciation instead of getting the first opportunity to buy at a frothy FDV post launch.”

This model, he noted, might be better suited for investors who are cautious about diluted valuations that are not aligned with the current circulating supply.

Model Pros

While the low float, high FDV model has faced criticism, some argue that it has strategic advantages. Prominent crypto investor Sisyphus (@0xSisyphus) outlined several benefits in a post on X last year.

They explained that it allows early investors and team members to secure profits through over-the-counter (OTC) sales or by hedging on perpetual contracts. Additionally, a higher FDV makes it easier to distribute larger airdrop amounts while giving projects more control over token supply and price stability.

More Controversy

The recent criticism of Berachain’s tokenomics model follows further skepticism from experts about the L1’s originality and fairness.

Yugo (@yugoviking), a well-known trading strategist, dismissed the project as “the ultimate grift L1,” criticizing the airdrop as another venture capital (VC) insider scheme.

Yugo called the airdrop “just another VC insider grift, with people wanting to get rich off of Ethereum tech,” noting that a “huge supply” was afforded to early investors, who “got in at anything from $50M.”

Additionally, some traders say Berachain lacks innovation as it’s a direct fork of Ethereum. Berachain’s documentation shows its modular framework allows developers to launch both L1 and L2 blockchains that fully support Ethereum Improvement Proposals (EIPs), which some will argue is a feature, as it makes it easier to deploy Ethereum-based dApps on the network.

Founded in 2021 and headquartered in the Cayman Islands, Berachain operates on a Proof of Liquidity (PoL) consensus, incentivizing liquidity providers to support network growth.

The Defiant has reached out to Berachain but has not yet heard back at the time of publishing.