Telegram’s Toncoin Soars, But CEO’s Legal Woes Cloud Future
Animoca Brands, Pantera Capital Management, and Mirana Ventures are a few of the top companies that made significant investments in Toncoin, the cryptocurrency that supports the blockchain of Telegram. The excitement surrounding Toncoin originated from its promise to make Telegram a “super app” for digital assets, akin to WeChat, the 900 million-user Chinese social media platform.
Investors thought that Telegram’s blockchain-based gaming and payment systems would eventually rely heavily on Toncoin. The total value locked (TVL) on Toncoin’s blockchain surpassed $1 billion at its peak, and the token’s value increased fourfold between February and early July as a result of this confidence.
But recent developments have sparked questions about Toncoin’s future and the investments that go along with it. The arrest of Telegram CEO Pavel Durov on August 24, 2024, outside of Paris, shocked the cryptocurrency world. Durov is accused of failing to stop illegal activity on Telegram, including the distribution of illicit content and drug trafficking.
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After Durov’s arrest, Toncoin’s value dropped precipitously due to these unforeseen legal issues, falling by about 20%, but it has subsequently regained some of these losses. DefiLlama reports that the TVL on the Toncoin blockchain has likewise dropped to $573 million.
The Risk of CEO Involvement and Its Impact on Toncoin
Now, the investment community is debating how Durov’s legal troubles will affect Toncoin’s future and Telegram’s more expansive blockchain goals. The original investment thesis, according to Lasse Clausen, founding partner of the cryptocurrency venture capital firm 1kx, was based on the notion that Telegram would promote the Toncoin network’s uptake. But Durov’s legal troubles have brought about a “black swan” incident that casts doubt on the project’s long-term sustainability.
Investors in Toncoin are currently evaluating whether Durov’s legal issues would cause users to abandon Telegram, a network that became well-known in the cryptocurrency sector for its careless supervision practices, which have now put its CEO in legal hot water.
Given that many VC firms that invested in Toncoin made pledges not to sell the token for at least a year, this uncertainty comes at a vital juncture for the cryptocurrency.
Some investors perceive an opportunity in the current circumstances, despite the difficulties. According to reports, Toncoin investor and cryptocurrency market operator DWF Labs bought millions of dollars worth of the cryptocurrency on the open market when Toncoin’s price fell after Durov’s arrest. This action demonstrates how cryptocurrency investments especially those involving volatile assets like Toncoin are high-risk and high-reward.
Token Deals and the Volatility of Crypto Investments
In the cryptocurrency world, token deals are commonplace. In token deals, VCs and other crypto funds invest in projects like TON in exchange for tokens rather than traditional equity. Creating liquid funds for these kinds of investments is frequently necessary in order to enable quicker exits by holding assets for shorter periods of time. But because of its volatility, as demonstrated by Toncoin, the effects of a bad investment are seen right away.
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One of the biggest cryptocurrency venture capital firms, Pantera Capital, invested the most in Toncoin, buying tokens at a 40% discount from the going rate at the time. Pantera’s investment is still lucrative despite the recent volatility, but it cannot sell its holdings right away due to a one-year lockup period.
Past incidents such as the failure of TerraUSD, where investors, including Three Arrows Capital, lost substantial amounts of money when the project failed, serve as a reminder of the risks involved in token sales. Although not as disastrous, the Toncoin incident serves as a reminder of the hazards associated with investing in cryptocurrencies.
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