Durov's arrest causes a stir in the encryption investment community, Toncoin's prospects are concerning

The detention of Pavel Durov in France has caused a huge uproar in the encryption investment circle. Many investors have made significant investments in the digital token Toncoin, which is closely related to Telegram.

Many well-known institutions, including some large encryption venture capital funds, have invested huge amounts of money in Toncoin. It is reported that one top fund invested over $100 million in Toncoin earlier this year.

Investors are attracted by an enticing vision: Telegram is expected to develop into a comprehensive digital asset platform similar to WeChat, where its 900 million users will use Toncoin in various scenarios, from payments to blockchain games. From February to early July this year, the price of Toncoin skyrocketed fourfold, and the total locked value on its underlying blockchain TON once exceeded $1 billion.

However, Durov has been accused of not doing enough to combat illegal activities on Telegram, which subsequently led to his detention, exposing potential risks. He is accused of participating in the distribution of child pornography and enabling illegal activities such as drug trafficking on the platform. Telegram stated that it will comply with relevant European laws.

After Durov was arrested in the suburbs of Paris on August 24, the price of Toncoin plummeted by about 20%. Although it has rebounded since then, data platforms show that the total locked value of TON has dropped to $573 million.

A founder of a cryptocurrency investment firm stated: "Most investors believe that Telegram itself will greatly drive the adoption of the Toncoin network. But now the company and its founders are facing a black swan event, which may raise concerns about future developments."

Those venture capital firms that have made large investments in Toncoin (usually promising not to sell tokens for at least a year) are assessing whether France's actions against Durov will lead to a significant loss of users. Telegram is very popular in the crypto space largely due to its lenient management style, which is precisely what has led it into legal disputes.

Some Toncoin supporters remain optimistic. A cryptocurrency market maker stated that after the price of Toncoin plummeted, they invested "millions of dollars" in purchasing the token on the open market.

For venture capital firms and their investors, token investments have some advantages, the most obvious being the ability to exit more quickly. A common pattern is that tokens begin to unlock after 12 months, after which investors can gradually sell. The price fluctuations of tokens also allow supporters to gain a more comprehensive understanding of the project's progress.

Token trading often involves significant discounts. It is reported that a large fund purchased Toncoin at a discount of 40% below market price. Based on an average price of $6.32 announced at the time of the transaction in May, this investment is still in a profitable state.

However, token investments also face significant risks: once issues arise, the effects will be immediately apparent. Funds typically value their held assets based on market capitalization at regular intervals, which means that a sharp decline in prices will directly reflect in the reports given to investors.

The collapse of a well-known stablecoin project in May 2022 is a typical case. Just a few months prior, several investment institutions had purchased over $1 billion worth of related tokens. When the stablecoin collapsed, these tokens instantly became worthless, triggering a chain reaction throughout the entire encryption industry.