Arthur Hayes Warns Monad Could Crash 99% Despite Rally: A Deep Dive into the Layer-1's Precarious Position
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Introduction: A Warning Amidst the Green
The cryptocurrency market is no stranger to dramatic rallies, but seasoned investors know that green candles can sometimes be the most dangerous. The past week saw Monad (MON), a newly launched layer-1 blockchain, surge by an impressive 30%, capturing the attention of traders and investors alike. However, this price pump has been met with a stark and sobering warning from one of crypto's most prominent voices. Arthur Hayes, the outspoken former CEO of BitMEX, has sounded the alarm, cautioning that despite its recent gains, Monad could be poised for a catastrophic collapse of up to 99%. This warning casts a long shadow over the project's celebratory mainnet launch and airdrop, pointing to a fundamental flaw that has plagued many new entrants: a token structure that heavily favors venture capitalists (VCs) and insiders at the expense of retail investors.
The Hayes Thesis: "Another High FDV, Low-Float VC Coin"
Arthur Hayes's core argument against Monad is both simple and damning. In a recent interview with Altcoin Daily, he categorized the project as “another high FDV, low-float VC coin.” This terminology cuts to the heart of a critical issue in modern crypto launches.
- Fully Diluted Valuation (FDV): This is the theoretical market capitalization of a cryptocurrency if its entire maximum supply were already in circulation and trading at the current price. For new projects with a small percentage of tokens initially available, the FDV can appear astronomically high.
- Circulating Supply: This is the number of coins or tokens that are publicly available and trading in the open market.
Hayes argues that networks with a large gap between a high FDV and a low circulating supply are inherently risky. They are engineered for short-lived price spikes driven by limited availability, not organic demand or proven utility. The initial rally creates a facade of success, but it is often unsustainable. Hayes bluntly predicted Monad's fate, stating, “It’s going to be another bear chain,” emphasizing that early pumps are no guarantee of real adoption or long-term relevance.
The Unlocking Threat: Why Insiders Hold the Key to a Crash
The most significant risk factor Hayes highlighted is the token unlock schedule. When a project launches, only a small fraction of its total token supply is typically made available to the public through exchanges or airdrops. The vast majority is locked and allocated to insiders, including team members, advisors, and the VCs who funded the project.
Hayes warned that "once insiders start unlocking tokens, Monad price can see a sharp fall." This creates a persistent and predictable selling pressure. As these large holders' tokens become unlocked over months or years, they often liquidate their positions to realize returns on their investment. This flood of new supply onto the market can easily overwhelm buying demand, leading to what Hayes suggests could be a "steep decline" or even a 99% crash from current levels. The recent price action seems to reflect this underlying anxiety; after being rejected at the $0.048 level, MON found support at $0.035, indicating fragile confidence among traders.
Echoes in the Market: Analysts Reinforce the Cautionary Tale
Arthur Hayes is not alone in his skepticism. The overall market sentiment surrounding the MON token appears weak despite its recent rally. Popular crypto analyst Altcoin Sherpa echoed Hayes's concerns, advising MON holders to have an exit strategy.
In a post on X (formerly Twitter) on November 28, 2025, Altcoin Sherpa stated: "To all underwater $MON holders: I suggest you make some sort of exit plan in case things don't go as planned." He provided historical context by comparing MON's potential trajectory to other projects like XPL and WLFI, which saw their prices plummet far below initial expectations after their launches. This comparison serves as a practical warning that prices "can go much lower than you think," suggesting that the current support levels may not hold once broader market sentiment turns negative.
Monad's Launch Context: Billions in Funding Meet Market Skepticism
Understanding Monad's background is crucial to contextualizing these warnings. Monad is not an obscure project; it raised a substantial $225 million in a funding round led by Paradigm, one of the most prestigious venture capital firms in the crypto space. The platform officially launched its mainnet on November 24, 2025, concurrently releasing the MON token through an accompanying airdrop.
This massive war chest and high-profile backing generated significant hype, but it also contributes directly to the "high FDV" problem Hayes described. The enormous valuation implied by the funding round sets a high benchmark before the network has proven its utility or achieved significant user adoption. The disconnect between its financial backing and its current market performance is precisely what analysts are flagging as a red flag.
Hayes's Broader Bullishness: A Cycle Driven by Liquidity, Not Just Halvings
It is important to note that Arthur Hayes's warning on Monad exists within a broadly bullish outlook for the wider cryptocurrency market. He explicitly stated that he believes "we are at the end of the beginning of this cycle," with "massive amounts of crazy bull market money printing" ahead.
Hayes posits that the next major bull phase will be driven by renewed global monetary expansion. He argues that the US government, facing slowing economic growth and political pressures, is preparing for another round of liquidity injections. Furthermore, he pushed back against the simplistic narrative that Bitcoin's cycles are dictated solely by its four-year halving event. Instead, he contends that previous bull markets were triggered by synchronized global credit expansion, particularly from economic powerhouses like the US and China.
The Survival of the Fittest: Which Layer-1s Does Hayes Back?
In his critique of Monad, Hayes also provided a clear view of which blockchain protocols he believes have true staying power. He stated that only a few layer-1 chains are likely to survive future market cycles, naming Bitcoin, Ethereum, Solana, and Zcash as the protocols he expects to endure.
This shortlist highlights his investment thesis: prioritize networks with proven security, extensive developer ecosystems, significant decentralization, or unique value propositions (like Zcash's focus on privacy). By contrasting these established giants with newcomers like Monad, Hayes underscores the immense challenge any new layer-1 faces in achieving long-term relevance and avoiding the "bear chain" fate he predicts.
Strategic Conclusion: Navigating Hype Versus Substance
The case of Monad serves as a critical case study for crypto investors in late 2025. The warnings from Arthur Hayes and other analysts are not necessarily predictions of certain doom but are powerful reminders of fundamental market mechanics.
The key takeaway is that investors must look beyond short-term price rallies and scrutinize a project's tokenomics with extreme care. A high Fully Diluted Valuation coupled with a low circulating supply represents a fundamental risk that cannot be ignored, no matter how impressive the technology or backing may seem. The historical precedent set by other "high FDV, low-float" projects provides a clear cautionary template.
For readers and investors, the path forward involves vigilance. Watch Monad’s token unlock schedules closely, as these dates will be critical inflection points. Monitor on-chain metrics for real usage and adoption beyond exchange trading volume. Most importantly, align investments with protocols that have demonstrated resilience and organic growth over multiple market cycles. While Hayes's bullish outlook on macro liquidity suggests fertile ground for crypto assets broadly, it also means that capital will likely flow towards projects with proven value—making it an increasingly challenging environment for speculative newcomers to thrive.
Disclaimer: This article is based on publicly available information and analyst commentary. It is intended for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency markets are highly volatile; always conduct your own research and consult with a qualified professional before making any investment decisions.