Is Worldcoin About to Crash? Shortseller Reveals Bearish Case

• Analyst targets Worldcoin in short seller case.
• Calls out Worldcoin insiders. 
• Expected 4% daily inflation from VC and team unlocks. 

Worldcoin, a crypto project with founders including OpenAI’s Sam Altman, has faced intense scrutiny. Most notably, this has centered around the potential privacy-harming features of its iris-scanning tech. 

However, most recently, one analyst highlighted the issues with its promise of a universal basic income. Rather than spreading the wealth around the world, Worldcoin is accused of benefiting investors and other insiders. 

Worldcoin Favors Insiders Over Users, Claims DeFi²

On Monday, May 13, crypto analyst DeFi² made a short seller’s case for Worldcoin, pointing out several factors that could lead to a significant devaluation. In particular, these concern Worldcoin’s tokenomics which he claims heavily favor insiders. 

“In addition to being a deceptive project with no real link to OpenAI ,” DeFi² claims that many investors are unaware of “how aggressively this coin is likely to be sold off as unlocks continue to ramp up in the coming months.”

DeFi² points out that Worldcoin has set a very aggressive daily emission rate of 0.6%. According to DeFi², these emissions are already contributing to a steady devaluation of the token. For instance, the token is down 50% from its March peak at $10,78.

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This situation is exacerbated by the Worldcoin Foundation’s decision to sell $200 million worth of tokens to trading firms, which will dilute the existing circulating supply by 18%. This decision, DeFi² notes, also put in question Worldcoin’s commitment to its users and their privacy. 

Moreover, in just 70 days, about 4% of the tokens intended for the team and the venture capital will unlock. The resulting sell pressure from these insiders could lead to nearly $50 million worth of tokens being sold daily. This would naturally put enormous sell pressure on the token, depressing its price. 

Worldcoin Down Almost 10% After the Revelations

The revelations by DeFi² have apparently convinced at least some investors of Worldcoin’s issues. After he published his report, Worldcoin fell to $5.15, down 9.79% in just 24 hours from $5.75. Still, the project has increased yearly, posting a 200% gain since last year.  

Designed to provide an infrastructure for future digital identity, Worldcoin plans to scan the irises of billions of people around the world. The aim is to create a network that can distinguish between real people and bots, solving a major issue plaguing decentralized networks since their inception. 

However, Worlcoin has faced significant criticism over its supposed privacy-harming features, leading to bans in several countries , including Kenya and Spain. The project also faces investigations in France, Germany, and the United Kingdom. Its regulatory woes were further exasperated by the data breach on May 2023, which the company experienced, leading to the exposure of sensitive user data. 

On the Flipside

• Despite not currently being active in Worldcoin, Sam Altman was a key figure in its founding. As late as 2023, Altman was fundraising for Tools for Humanity, the organization behind Worldcoin.  
• Short selling is one of the riskiest strategies in finance. Unlike long positions, which can only ever go as low as zero, a short contract can leave a short in the hole for more than the total funds they invested. 

Why This Matters

Understanding the tokenomics of any project, including Worldcoin, is crucial for crypto investors. Even the best projects can be bad investments if their tokenomics are lacking.  

Read more about Ethereum founder’s take on Worldcoin: 
Vitalik Buterin Praises Worldcoin, Despite Privacy Concerns

Read more about North Korea’s latest malware: 
How North Korea’s Durian Malware Targets crypto exchanges