How Token Inflation Can Kill Your Returns

Imagine you find a promising token:

1. It’s trending.

2. It just launched.

3. The tech looks promising.

But a few days later…

The price starts to drop.

No scandals. No hacks.

Just constant decline.

So what went wrong?

→ Token inflation

🚨 What Is Token Inflation?

Every crypto token has a total supply — but usually, only a fraction is circulating.

The rest?

Locked up.

Waiting to be released into the market.

This release is often done via unlocks and a vesting schedule.

As more tokens enter circulation, the value of each individual token usually goes down — because supply increases, but demand often stays flat.

📉 Example: Worldcoin

There was a lot of hype around Worldcoin.

But at that time, only 1.5% of tokens were in circulation.

That meant:

• 98.5% of the supply was still locked

• 65x more tokens were coming

Result?

The price dumped as unlocks began.

Early investors got exit liquidity.

Retail holders got wrecked.

✅ What to Look For Before Buying

Here’s your quick due diligence checklist:

1. Circulating Supply – tokens already on the market

2. Total Supply – max tokens that will ever exist

3. Market Cap = Price × Circulating Supply

4. FDV (Fully Diluted Valuation) = Price × Total Supply

🔍 Two key ratios:

• Circulating Supply ÷ Total Supply = % Released

• Market Cap ÷ FDV = % Diluted

👉 The lower the ratio, the more dilution is coming.

🛠️ Tools to Use:

• CoinGecko or CoinMarketCap – check supply & market cap

• DefiLlama Unlocks – token unlock calendar

• Tokenomist.ai – deep dive on tokenomics

🔒 Ideal setup?

Doesn’t exist.

Even new projects might bring outsized returns.

However, they usually crash after the demand cools off.

That’s why I either plan to exit fast,

or prefer projects where:

• At least 50% of tokens are already in circulation

• Remaining unlocks are spread out over years, not months.

That reduces the risk of sudden supply shocks and helps price grow sustainably.

Next Week:

I’ll show you how to spot real use cases and avoid projects that throw around "AI" and "blockchain" buzzwords just to raise money.

If you’re serious about allocating into crypto strategically, I offer a few free calls each month. Book here.

(Limited spots. Priority to engaged subscribers)

Until then…

– Matt