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Tokenomics Insights: Risks of Launching High FDV Tokens with Low Circulating Supplies

Die Zukunft der Kryptowährungen: Wie sich Token-Entsperrungen bis 2030 auf den Markt auswirken

The crypto market has recently witnessed a trend of tokens launching with high fully diluted valuations (FDVs) but low initial circulating supplies. This structure, often driven by venture capital (VC) funding and upbeat market sentiment, can lead to unsustainable price appreciation post-token generation event (TGE) and significant selling pressure once tokens unlock.

According to a recently released report from Binance Research, aggregated data from Token Unlocks and CoinMarketCap indicate that approximately $155 billion worth of tokens will unlock between 2024 and 2030. This estimation highlights the potential for a significant influx of tokens into the market, which could have repercussions on token prices and market dynamics.

Binance Research suggests that without increased buy-side demand, these unlocks could exert substantial downward pressure on token prices. Tokens launched in 2024 have shown the lowest market capitalization (MC) to FDV ratios in recent years, highlighting the prevalence of low circulating supplies at launch. The MC/FDV ratio for tokens launched in 2024 is just 12.3%, indicating a considerable value of tokens that will become available in the future.

The influx of private market capital has significantly shaped crypto market valuations. Since 2017, over $91 billion has been invested in crypto projects, driving up token prices even before public market launches. In Q1 2024, crypto deal-making activity rose by 52.1% QoQ, indicating a strong willingness among investors to fund projects at elevated valuations. This increased investment activity has fueled positive investor sentiment and allowed projects to raise substantial capital with less dilution.

However, the rise in token valuations poses long-term risks, according to the research report. Many new tokens have FDVs comparable to established layer-1 or DeFi tokens, despite lacking similar user traction and market presence. This discrepancy suggests a misalignment in valuations and actual market demand, which could pose challenges for sustainable growth in the market.

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To address these challenges, Binance Research advises investors to focus on project fundamentals such as tokenomics, valuation, product viability, and team credentials. Understanding how unlock schedules work and conducting thorough due diligence on projects are crucial steps to avoid the risks associated with high FDV tokens that may face significant selling pressure in the long run.

Projects are encouraged to adopt a long-term perspective in tokenomics design, ensuring equitable token distributions and considering the implications of high FDVs and low circulating supplies. Strategies such as token burning, milestone-based vesting, and increasing initial circulating supply can help mitigate future selling pressures and promote a healthier market environment.

In conclusion, the trend of launching tokens with low floats and high FDVs presents challenges for sustainable growth in the crypto market. Investors and project teams alike need to be mindful of the long-term implications of their decisions and focus on creating a balanced market environment. By emphasizing project fundamentals and conducting thorough due diligence, stakeholders can navigate the complexities of token unlocks and ensure a more stable and sustainable market in the long run.

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