To foster a healthier and more sustainable crypto ecosystem, Binance, the world’s largest cryptocurrency exchange, urged small and medium-sized crypto projects to address the prevalent trend of low float and high fully diluted valuations (FDV) on Monday.
The exchange invites these projects to apply for its listing programs, emphasizing the importance of solid fundamentals and sustainable models.
Binance Pledged Support For Projects To Tackle Low Float and High FDV Trend
Binance highlighted its commitment to supporting projects that demonstrate robust fundamentals, maintain an organic community base, and operate with a sustainable business model.
“We hope to enhance the development of the blockchain ecosystem through our support of small and medium-sized projects with strong fundamentals, an organic community base, a sustainable business model, and a dedicated team acting as responsible industry participants.”
The call to action responds to a growing trend in which new projects launch with high market capitalizations but retain a large portion of their token supply locked, leading to low float.
On May 17, Binance Research reported that launching with low-circulating supplies has become increasingly common. Limited liquidity at launch causes rapid price appreciation under bullish market conditions. Such price growth is often unsustainable when many tokens are unlocked and flood the market, however.
The trend of token unlocking is set to continue, with approximately $3 billion worth of vested crypto tokens scheduled for release in May 2024 alone. Projects like Sui and Pyth Network are expected to unlock over $1 billion in tokens allocated to various holders, including early investors.
Binance estimates that around $155 billion in tokens will be unlocked between 2024 and 2030.
Over 80% of Binance Token Declined
Pseudonymous crypto researcher Flow noted that 80% of tokens listed on Binance have declined in the past six months since their launch. Flow described these newly launched tokens as “exit liquidity” for insiders who capitalize on the restricted retail access due to the low initial circulating supply. He suggests that growth for many projects listed on Binance may be slower than in previous bullish periods.
Looking at all the new listing of the past 6 months on the largest CEX, Binance, we note that >80% of tokens are down from their listing date.
The only exceptions are:
– $MEME: A meme coin
– $ORDI : No tier 1 VC
– $JUP + $JTO: Big Solana momentum
– $WIF: Another meme coin pic.twitter.com/Y8VQV6jt6T— flow (@tradetheflow_) May 17, 2024
Despite limited venture capital support, tokens like Ordi have seen huge profits, up over 261% since launch, while memecoins like Dogwifhat have also surged.
Retail interest has been a driving force behind the success of memecoins, which operate independently from traditional altcoin markets. Lian explained that many retail investors are drawn to memecoins for their long-term holding potential, which is evident in the substantial trading volumes of coins like WIF.
The recent surge in memecoin prices, including Pepe hitting an all-time high, coincided with Keith Gill’s return to social media. Gill was a key figure in the 2021 GameStop short squeeze.
Concerns persist regarding the high initial fully diluted valuations of new tokens listed on Binance, averaging over $4.2 billion, despite the tokens’ need for a substantial user base.