LayerZero experienced a severe setback on Friday, completely wiping out the gains it had achieved on Thursday following its airdrop. The price of LayerZero plummeted to $3 from a peak earlier in the week at $4.57. This decline dragged down the token’s market capitalization below $1 billion, settling at $745 million.
The drop in LayerZero’s price coincided with a broader cryptocurrency market sell-off, where many tokens saw double-digit declines. Bitcoin, for instance, breached the critical support level of $64,000, contributing to an overall market cap decline to $2.33 trillion.
Another factor in LayerZero’s decline was criticism from its user base regarding the proof-of-donation mechanism implemented during its airdrop. Participants were required to donate $0.1 to the Protocol Guild in order to claim tokens, marking a departure from traditional airdrop methods.
Simultaneously, the ZRO token also experienced a sharp decline as some users reported issues with receiving their allocations. Developers responded by launching a platform for users to appeal and rectify allocation discrepancies.
Further exacerbating the situation, some ZRO recipients opted to liquidate their holdings shortly after receiving them. This behavior mirrored recent trends observed with zkSync recipients who swiftly sold off their tokens post-airdrop.
Despite these challenges, the performance of ZRO was consistent with typical post-airdrop trading patterns observed across various tokens. For instance, Sei initially spiked to $0.2128 after its airdrop, plummeted to a low of $0.09, and eventually rebounded to $1.04. Similarly, Sui surged to $1.4 initially, dropped to $0.3, and later surged to a high of $2.10 within a year.
Consequently, some traders, despite heavy losses, expressed their intention to hold onto their tokens in anticipation of a market recovery. The future trajectory of LayerZero’s price hinges largely on the overall performance of the cryptocurrency market in the coming weeks. Continued bearish trends in Bitcoin, particularly if it dips below $56,527, its May low, could further pressure LayerZero and other altcoins.
Historically, altcoins have shown a strong correlation with Bitcoin’s movements. They surged to multi-year or all-time highs when Bitcoin reached record levels in March, only to retreat when Bitcoin’s momentum waned.