Blockphrase
Blockphrase is a Web 3 Consultancy that provides Tokenomics, Tokenization & Web 3 Services.

How to Determine an Appropriate Hard Cap & Soft Cap for a Token Sale

Setting the right fundraising cap for a token sale is one of the most critical decisions for a Web3 project. It directly impacts whether your project is a success or a failure.

A miscalculated Hard Cap or Soft Cap can lead to:

❌ Underfunding, You’re leaving the project without enough capital to execute its roadmap.

❌ Overfunding, You’re leading to unsustainable valuations and liquidity imbalances.

We at Blockphrase, take a data-driven approach to determine the optimal fundraising range, ensuring capital efficiency, market stability, and investor confidence.

 

Step 1: Calculating the Soft Cap (Minimum viable Funding)

The Soft cap needs to at least have a 24 year funding runway which includes the MVP, for the project to sustain

Example: If a project estimates $5M in operating costs for two years, then the Soft Cap should be set at $5M to ensure financial sustainability.

 

Step 2: Setting the Hard Cap (Balancing Market Demand & Liquidity)

The Hard Cap is the maximum amount the project will raise, raising too much can also be a burden. This should align with:

  • Comparing with token sales of similar projects.
  • Evaluating investor appetite and liquidity depth.
  • Ensuring sustainable token valuation at launch.

How to calculate Hard Cap?

  1. Comparative Market Analysis
  • Study similar token sales, analyzing raise amounts, FDV, and token distribution models.
  • Example: If similar projects raised $15M at a $50M FDV, setting a $100M Hard Cap without demand drivers is unrealistic.

2. Liquidity Planning (CEX & DEX Reserves)

  • A $15M Market Cap at TGE should not have only $50K in liquidity — that creates an unsustainable price floor.
  • Liquidity Allocation: At least 10–20% of the raise should be set aside for liquidity pools.

3. Investor-Friendly Tokenomics

  • Too high a Hard Cap? Risk of overvaluation & supply overhang.
  • Too low? Project may lack funds to scale, making it unattractive to investors.

🚨 Hard Cap ≠ “Raise as much as possible.” The goal is capital efficiency, not excessive dilution or liquidity constraints.

 

Step 3: Structuring Tokenomics for Long-Term Stability

  • To prevent price crashes due to liquidity shortages, make sure you have appropriate CEX & DEX Valuations
  • Vesting & Unlock Schedules that can balance supply and demand.
  • Ensuring sustainable adoption beyond speculation, i.e user’s need to have enough incentives to use the program.

💡 Example: A well-balanced tokenomics model should factor in:

  • Market-making allocations.
  • Reserve funds for growth.
  • Supply distribution strategies that align with demand cycles.