Binance Doubles Down on Low Float, High FDV: Calls for Action

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

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

High valuation and low liquidity crisis

The influx of private market capital, coupled with strong valuations and bullish market outlook, has spurred the practice of cryptocurrency tokens being launched at extremely high, fully diluted valuation (FDV) points.

the a report It is estimated that approximately $155 billion worth of tokens will be unlocked from 2024 to 2030. This large influx of tokens into the market, without a commensurate increase in buy-side demand and capital inflows, could exert pressure A significant sell-off, according to the report, will challenge the market's ability to absorb these tokens without negatively impacting prices.

“Under bullish market conditions, these tokens could see a rapid price increase due to limited liquidity available for trading at launch. However, this type of price growth is clearly unsustainable when a wave of token supply hits the market when they open. “

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

This appears to be primarily due to recent token launches with very low circulating supply, often less than 20% of the total supply. With the majority of tokens locked, their FDV is inflated compared to the actual market capitalization.

Direction processing

As mentioned earlier, more than 80% of newly listed cryptocurrencies saw their value drop on Binance.

It has also been found that most of the tokens that have recently appeared on Binance's listing boards are backed by top-tier venture capital firms and are launching at inflated valuations, with the average fully diluted valuation exceeding $4.2 billion upon listing and some tokens crossing the $11 billion mark. dollar. It has been noted that these projects lack an established user base or proper community support.

To address the trend of launching tokens at high valuations with low initial supplies in circulation, Binance has done just that Named To promote a healthy and sustainable market environment. The plan includes Binance taking the lead in engaging SMEs and inviting high-quality teams and projects to apply for the exchange's listing programs, such as direct listing, Launchpools, Megadrops, etc.