Algorand Dutch Auction - What do you think?

What do you Guys think about the first Dutch Auction of Algos?

I have some concerns in terms of the limited supply (0,25% of total supply) to be distributed from a starting price of 10 USD. Also there is no information at all on future auctions or how much Algo will be sold via auctions at all. The only committment I found is that there will never be more then 10 billion Algos. So we have a lot of uncertainity, which would impact the price.

Here is Mr. Micali mentioning that Algorand Foundation is the one who is organizing the Dutch Auctions and puts the Algos into circullation (at 1:05:50):

My problem is that if you have a very limited supply, then you simply strategically target the highest paying “blind” group who might eventually commit on unrealisticly high prices (like 10 USD) due to FOMO and not being extensively educated in tokenomics & crypto. The other problem we have in this context that we are not going on an auction of Dutch tulips, where participants had a good idea about the market, product and fair prices. All the marketcap for crypto is mainly driven by speculation and not tangible value, which means it´s very hard to determine whether a price is fair, overpriced or underpriced especially in the context of having 99,75% supply not in circulation and having no accurate information when & how it enters the circulation.

To me this auction feels like you have 10 children and 100 adults on the sunny beach and make a Dutch auction on icecream and distribute 5 pieces initially starting from 1000 USD. Guess what will be the clearing price? Is this the fair or realistic market price? It´s not because your supply is strategically limited to tackle those children who would want an icecream whatever it takes.

This also suggests what to expect from future auctions, which will likely be scheduled on momentums, when the sentiment is at highest. IMO if you do a dutch auction with a higher supply (such as 600m Algo) then it´s really applied to achieve fairness & market price, however if you do it with a very limited supply (25m Algo), then it´s used for strategic targetting on the market and not with fairness in mind.

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100% agree. Loving the ice cream analogy.

this diagram has some key issues in this particular context, but nevertheless it is good enough to point out that the 0,25% supply and starting from the very high 10 USD price in a Dutch Auction is to test where the very top of the demand curve really is

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If it gets bought up at $10 Algorand will have a lot of funding.

Long term bullish.

Dont think whales will do this by themselves. A quarter billion is a very risky cost of doing business for potential return.

One thing that would be great is to pay attention to the amount of people bidding. If there are let’s say 10k bidders. On average there would be 2.5k algos per bidder. At $10 this means the average investor would need $25 k.

I dont think that’s the case. I dont see institutional investors buying yet, because there is no custody service yet.

Let’s say they will raise 100 million from this auction which is a lot of money, no matter how you put it, it will put the price per Algo at $4 .

I grew up near Dutch Orchards and where it usually comes down to is that virtually everyone will await the first part of the auction and start to fomo at 70-40% of the price.

I think most will be sold around $5 and the best deals around the $2-4 range if there still is some left.

Otherwise no algos for me until next auction.

Hi i’m new to the forum. Agree with all comments above.

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Hi Bert,

The Foundation recently updated the Token Dynamics page with new information which you may find interesting: https://algorand.foundation/token-dynamics

Yeah I have exactly the same concerns as you have and quite frankly I think I won’t be bidding after all

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3 bln x 5$ makes a 15bln marketcap…way too high imo. A range from 0.3$-0.5$ makes more sense to me

This market often doesn’t make sense at all. Not enough knowledge about math and too many are plain greedy.

That being said, I am bidding below $4, hoping around a $1

You are right…I made up my mind too and won’t be bidding…Good luck though :slight_smile:

Let’s assume you have a 5y investment period.

We have 10b Algos in 5 years.

IMO Algorand should have a max Mcap between 10-100b in 2024, making price between 1 - 10 USD.

I would generally look for a 10x profit over a 5 years risky investment in crypto, so a good price to buy would be between 0,1 - 1 USD depending on how bullish you are on Algorand, what is your risk appetite.

Now the likelyhood we will only have 2,5 - 25m USD funding from the first Algo auction is quite low, there will be much more “blind / dumb” money floating in.

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Agree. I will only bid under 1 dollar and more likely towards the 0.5 to 0.1 USD. Otherwise will wait to buy later on exchanges. I do quite a lot of bidding online and unfortunately theirs to many naive bidders around.

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The problem I see is that bidding is not for free.

Once you load your Coinlist account the exchange rate from ETH / BTC to USD and then back from USD to ETH / BTC might cost you 10% of the capital.

So you have to risk loosing ~10% of your ETH / BTC crypto to allow you to participate in the bidding.

It is not an explicit cost as handling fee, rather cost of exchange.

Maybe, someone has precise figures on this?

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I never thought about this, but as Algorand will have 2,5 billion tokens at start and auction 25 million, this immediately puts the marketcap between 2,525b - 25,25b if it sells between 1-10 USD, which is crazy.

Not sure how Coinmarketcap will calculate the 2,5 billion tokens to be held by Algorand, whether it´s in circulation or not. Actually it must be as these tokens will participate in the network consensus and receive rewards.

Actually in this sense it’s pretty smart to use 0.25% of the supply with a Dutch Auction model targetting a sales on high price to maximize the marketcap of the 25,25% of circulating supply.

The more i look at it and compare with others, the more i’m thinking fair price is more like 0.1 - 0.05 USD. I am defiantly not in for the sucker punch. No matter how good Algorand could be it’s early days.

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Concerns were raised to Algorand management, if they go ahead with these auction parameters, it´s their responsibility if it backfires. We can´t do more.

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Please update us here regarding the feedback. As I am hesitant to participate because of this blindspot aswell. I hate to say this but it looks moneygrab to me.

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Yeah and in the meantime the pumping starts on influencer channels.

Here is one of the paid commercials:

I do like Ivan on Tech channel, it´s pretty good to be honest, but he did hide the fact of sponsorship in the video a bit :slight_smile:

Anyway I am probably also out of the auction, no matter how much I love the consensus algorithm & respect Mr. Micali.

Bert did you see this video? This was helpful to me…https://www.youtube.com/watch?time_continue=187&v=0xlLgteeqQE