Binance Doubles with Low Float, High FDV: Call for Action

There has been growing concern regarding the increased traction of tokens with high valuations but low initial circulating supply, leading to discussions about the sustainability of the upside potential for traders following the seeding event. tokens (TGE).

The latest findings from Binance Research have confirmed this trend, showing a growing number of tokens being launched with limited circulating supply and inflated valuations.

High valuation, low liquidity crisis

The influx of private market capital, coupled with aggressive valuations and an optimistic market outlook, has spurred the practice of launching cryptocurrency tokens at fully diluted valuation (FDV) points.

The report estimates that about $155 billion in tokens will be unlocked between 2024 and 2030. This significant influx of tokens into the market, without a commensurate increase in buying demand and capital flows, could exert selling pressure substantial, according to the report. , which in turn would challenge the market’s ability to absorb these tokens without negatively impacting prices.

“In bullish market conditions, these tokens can experience rapid price appreciation due to the limited liquidity available to trade at launch. However, it is clear that this type of price growth is unsustainable when a wave of token supply hits the market upon unlocking.

The analysis further highlights a widening gap between market caps and fully diluted valuations (FDVs) of tokens launched over the past three years, with 2024 FDVs already approaching 2023 totals. 2024 have an average MC/FDV ratio of just 12.3%, implying that about $80 billion in new demand would be needed to match future supply increases and maintain current prices.

This appears to be mainly due to recent token launches with extremely low circulating supplies, often below 20% of the total supply. With most tokens locked, their FDVs are inflated compared to the actual market caps.

Addressing the trend

As previously reported, more than 80% of newly listed cryptocurrencies have experienced a decrease in their value on Binance.

It was also found that the majority of tokens that have just graced the Binance trading boards are backed by top-tier venture capital firms that launch at inflated valuations, with an average fully diluted valuation exceeding 4.2 billion dollars in the listing and some tokens even exceed 11 billion dollars. These projects were noted to lack an established user base or potentially adequate community support.

To address the trend of launching tokens with high valuations with low initial circulation supplies, Binance has called for fostering a healthy and sustainable market environment. The plan involves Binance taking the lead in engaging small and medium-sized projects and inviting high-quality teams and projects to apply for the exchange’s listing programs, such as the direct listing, Launchpools, Megadrops, etc.

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