Probably Fishing

The Chicken and The ALGO

· 5 min read algorand tokenomics

The Chicken and The ALGO

Crypto protocols rarely grow linearly, they move in reflexive waves. Developer and user inflows spike when token prices rise, and plateau (or reverse) when they fall. Price action is therefore not a vanity metric, it’s an acquisition engine for both users and builders and should be top of mind for any organization responsible for a crypto ecosystem. Price is the ultimate KPI.

The Algorand Foundation (AF) still holds ~1.4 B ALGO or about 14% of total supply. After a temporary pause in structured selling in mid 2023, the Foundation resumed regular selling and hasn’t slowed down.

In Q1 of 2025 we saw an egregious 174M ALGO sold. Q2 of 2025 is on pace to see ~80M ALGO in sales, which is more in line with the historic average of ~100m, but is still far too high for what we’re getting in return, or what’s sustainable.

With a circulating float of roughly ~8.6B ALGO, 100–200M per quarter may sound modest but it represents months of average spot bids. Liquidity-adjusted, these sells meaningfully impact the price and therefore hurt user and developer growth.

The net effect of this selling is a structural headwind. Every fundamental improvement must first clear the Foundation’s sell quota before it can translate into upward price discovery.

Here’s a rough projection of the remaining ALGO if outflows stay on a similar trajectory (best case scenario ~80M per quarter, without any outlier -200M ALGO quarters).

Assumptions

Two price paths

You can see that again, price plays a significant role in sustainability. In one scenario all the ALGO is sold by Q1 2028, and another still has ALGO left in 2031. (This doesn’t account for AF’s USD balance which can only be estimated at ~$50M — 100M+)

AF’s stated justification for selling is “ecosystem growth,” yet:

The iteration cycles for xGov cannot take 1 yr+ while at the same time having no support system for developers. The very obvious result of this is a net outflow of talent.

Because demand reacts second while supply pressure is first, the loop is hard to break without attacking the supply side directly.

Narrative follows price, not the other way around.

Below is a non-exclusive and non-exhaustive list of approaches to consider moving forward. This is meant to spur discussion amongst the community and to hopefully display to the AF realistic ideas for moving forward. The asks must be in line with what they can do & what they’re willing to do.

1. Budget-Capped Foundation with Hard Guardrails

2. On-Chain-Only Sales + Liquidity Commit

Effects:

Risks: Exposes treasury to impermanent loss and contract risk.

3. Phased Treasury Hand-Off to xGov

Effects: Aligns incentives, rushes decentralization of the org, and battle-tests xGov with real budgets.

Cons: xGov security/process must harden fast, will need to be gradual.

4. Wind-Down & Programmatic Emissions

End

Algorand’s dilemma is not a mystery of the chicken and the egg, do we need users first or builders first?! This argument is frivolous in my view, and putting energy towards this can only paper over the fundamental issue. It is a supply-and-incentive mismatch: a very large seller funding comparatively little that directly grows token demand. Hopefully xGov will fix the funding issue, but we need more to assure structured selling doesn’t continue in such a destructive fashion.

History shows that when price goes up, developers and users follow. The fastest route to price going up is to stop fighting the market with your own treasury.

My worst case scenario is one where AF spends all the ALGO and then hands off to the community where there’s near zero chance of a recovery. We must act before it’s too late, and I think that time is getting closer.

Mandatory additional reading:

The end of the foundation era in crypto

Tokens are the new Herbalife. Parallelisms between crypto and MLM schemes

This piece originally appeared on Medium .