Binance, the world's largest cryptocurrency exchange, has taken a proactive approach to addressing the prevalent issue of low float and high fully diluted valuations (FDV) among small and medium-sized crypto projects. The exchange recently called upon these projects to participate in its listing programs, emphasizing the importance of establishing strong fundamentals and sustainable business models.
In an effort to support projects that exhibit robust fundamentals, an organic community base, and sustainable operational models, Binance has pledged its commitment to fostering the development of the blockchain ecosystem. The exchange acknowledges the vital role played by small and medium-sized projects in driving innovation within the cryptocurrency space and aims to provide them with the necessary resources and guidance to succeed.
The growing trend of new projects launching with high market capitalizations but maintaining a large portion of their token supply locked has raised concerns about low float scenarios. This limited liquidity at launch often leads to significant price appreciation in bullish market conditions. However, the sustainability of such price growth is called into question when a large number of tokens are unlocked and flood the market.
According to a recent report by Binance Research, the practice of launching tokens with low-circulating supplies has become increasingly common. As a result, approximately $3 billion worth of vested crypto tokens are 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, highlighting the significance of the issue.
One notable observation made by pseudonymous crypto researcher Flow is that 80% of tokens listed on Binance have experienced declines in the past six months following their launch. Flow describes these newly listed tokens as "exit liquidity," suggesting that insiders capitalize on restricted retail access due to the low initial circulating supply. This trend indicates that growth for many projects listed on Binance may be slower compared to previous bullish periods.
Despite the challenges faced by many projects, some tokens have managed to defy the odds and achieve substantial profits. For example, tokens like Ordi have seen impressive gains, up over 261% since launch, despite limited venture capital support. Additionally, memecoins such as Dogwifhat have surged in popularity, driven by strong retail interest. Retail investors are increasingly drawn to memecoins for their long-term holding potential, as evidenced by the significant trading volumes of coins like WIF.
The success of memecoins in the cryptocurrency market has been undeniable, with recent price surges, such as Pepe reaching an all-time high, coinciding with the return of key figures like Keith Gill to social media. However, concerns persist regarding the high initial fully diluted valuations of new tokens listed on Binance, averaging over $4.2 billion. Despite the need for a substantial user base to support these valuations, the exchange encourages projects to focus on building solid fundamentals and sustainability to ensure long-term success.
In conclusion, Binance's initiative to encourage small and medium-sized crypto projects to address low float and high FDV trends underscores the exchange's commitment to promoting a healthier and more sustainable ecosystem within the cryptocurrency space. By prioritizing projects with strong fundamentals, organic community support, and sustainable business models, Binance aims to support the growth and development of innovative blockchain solutions that will drive the industry forward.
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