When VCs Hit the Sell Button: Polychain, Celestia, and the Wealth Transfer Game in the Crypto World
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When VCs Hit the Sell Button: Polychain, Celestia, and the Wealth Transfer Game in the Crypto World
Don't cling to the包袱; love technology, and believe in something.
Navigating Web3 tides with focused insightsAuthor: Pavel Paramonov
Translation: TechFlow
This article discusses recent events involving @celestia and @polychain, where Polychain sold $242 million worth of $TIA. I will explore the pros and cons of this situation, and what lessons we can learn from it.
Did You Expect Investors Wouldn't Make Money?
Many people (including respected researchers) view Polychain's actions as predatory and uncertain. How could a Tier-1 fund dump such a large position into the open market and harm the price?
First, Polychain is a venture fund, and its job is to profit from liquid assets originally purchased when illiquid (I can't believe I'm actually saying this).
Polychain took not only early-stage risk by investing in Celestia, but also early-concept risk—backing the idea of an external data availability layer. At the time, this concept was new, and many (especially "Ethereum maximalists") didn’t believe in it.
Imagine if you discovered Spotify in 2008 and believed people would stream music instead of using CDs or MP3 players—you'd be called crazy. That’s exactly how fundraising feels when you're not just starting out, but trying to build and pioneer an entirely new market, like data availability throughput.
Polychain’s role is to take risks and earn returns, just like anyone else. Founders risk building companies that may fail, and people make risky decisions every day.
Everything we do involves making choices and taking risks—the difference lies only in the nature and scale of those risks.
Polychain isn’t the only VC firm making investments; there are many other venture capital firms doing the same.
Interestingly, no one blames the others because their trading data is harder to track. However, Polychain’s selling alone didn’t cause such a severe market collapse. It’s unfair to single out Polychain with hatred because:
Their job is to take risks and generate profits—and they’re doing it well.
They aren’t the only ones selling; other investors are too.
Are these moves beneficial for investors? Yes.
Are these actions ethically sound for the community? You know the answer.
Did You Expect the Team Wouldn't Make Money?
Well, maybe you did expect that. There's a major issue with profitability in crypto: most protocols don’t generate revenue, and they don’t even try to. According to Defillama, Celestia currently generates around $200 in daily revenue (roughly equivalent to a senior software engineer’s salary in Eastern Europe), while distributing about $570,000 in token rewards.
This is just the on-chain P&L of the team—we know nothing about their off-chain expenses, but I believe a team of this size likely has high operational costs. Now, some KOLs are vocally arguing: “Web3 protocols should be profitable; businesses should make money.” Does that sound insane?
Yes, it does—but the core problem isn’t business models. The real issue is that some teams treat token sales as revenue and build entire business models around them, without considering long-term consequences.
If token sales equal your business model, then why bother with cash flow or sustainability? Exactly. But investor funds aren’t infinite, and tokens aren’t either.
Meanwhile, VCs invest in startups with high potential for massive success. Many companies today aren’t profitable yet, but they offer something revolutionary or intriguing enough to attract others to explore and develop these ideas further.
Anyway, you wouldn’t expect the core team to sell tokens, right? Here’s the thing: when your protocol doesn’t earn revenue, you have to fund operations from somewhere. The foundation must sell part of its own token holdings to pay for infrastructure, salaries, and countless other expenses.
At least funding expenses is one reason I’d like to believe motivates such sales. There are many other motives and perspectives: on one hand, they may be seen as “abandoning” their community; on the other, they built the protocol and promoted it heavily, so perhaps they deserve to sell at least a portion? “Selling” meaning part—not all.
In the end, this comes down to tokens vs. equity—a key reason crypto VCs often prefer tokens over equity. Selling on public markets is easier and faster than private exits or waiting for traditional liquidity events.
Tokenomics Isn’t the Main Problem—Tokens Are
Clearly, investors increasingly favor token deals over equity. We live in the era of digital assets, so investing in digital assets makes sense, right?
But this trend isn’t always as straightforward as it seems. Interestingly, many founders themselves realize their products might not need a token, and would prefer equity financing. Yet they face two major challenges:
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As I mentioned earlier, most crypto-native VCs dislike equity because exits are harder
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Equity valuations are typically lower than token valuations, so teams want to raise more capital
This creates a dilemma and actively incentivizes choosing the token model. Token launches appeal to more investors because they offer a clear exit path via public markets, which in turn makes fundraising easier. For teams, this means higher valuations and more capital available for development.
Your company’s core value remains unchanged. You can retain 100% ownership through equity while raising significant funds via these “artificial” tokens. This approach also attracts more investors focused specifically on token opportunities.
Unfortunately, under current conditions, in 99% of cases, the token model enriches venture investors while impoverishing retail participants. Or as @yashhsm put it: infrastructure/governance tokens are memecoins dressed in suits.
However, when $TIA launched, it delivered strong returns to retail investors, surging from $2 to $20. People thanked the team for making them rich and staked tokens to qualify for various airdrops. Yes, we’ve lived through such moments—back in autumn 2023…
Once prices began falling, widespread FUD about Celestia emerged: rumors about strange team behavior, predatory tokenomics, mockery of on-chain revenue, etc.
Criticism is healthy when valid issues are raised. But it’s problematic when those who once praised Celestia now call it “shit” solely due to price movements.
What Can We Learn From This Situation?
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VCs are rarely your friends. Their primary goal is profit, yours is profit, and the LPs behind VCs also exist to make money.
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Don’t blame VCs for selling tokens: their tokens are unlocked, they fully own the assets, and can use them as they wish.
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Blame VCs who sell tokens while simultaneously tweeting about how much they “love holding” them—this is deception and shouldn’t be tolerated.
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Business models shouldn’t revolve solely around token sales. Find a way to generate real revenue—or even if the tech is great, people will eventually lose faith if there’s no sustainable income.
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Token economics apply to everyone: if a team unlocks tokens, they fully own them and can dispose of them freely. However, if you truly believe in what you’re building, selling large portions becomes questionable.
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Equity financing is unpopular, and some token valuations are artificial, disconnected from any fundamental metrics.
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Teams should carefully design tokenomics early on, as poor designs can cost them dearly later.
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Technological innovation is independent of token price.
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When rankings rise, people celebrate; when they fall, problems surface. If former supporters now turn into haters purely based on price action, that’s deeply concerning.
Don’t cling to baggage—love technology, and believe in something.
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