Binance Invites Small-to-Medium Projects to Counter High FDV and Low Liquidity in Crypto Market
Summary:
Binance invites smaller-scale crypto-projects to combat the concerning trend of low liquidity and high fully diluted valuations in the crypto industry. The exchange will assist these projects through their listing programs and support sustainable business models. This move responds to the issue of projects launching with a significant portion of their tokens locked and limited initial circulating supply, leading to an unsustainable price appreciation. The company estimated about $155 billion in tokens will be unlocked from 2024 to 2030, which might put downward pressure on the market unless balanced by increased demand and capital inflow.
Binance, the blockchain exchange platform, has issued an invitation for smaller-scale projects to join forces against the trend of low liquidity and high fully diluted valuations (FDV) prevalent in the crypto sector. Binance reached out to these smaller initiatives on May 20, introducing them to its listing programs, in an effort to bolster the crypto landscape through support of sustainable business models. The platform expressed a commitment to assisting projects characterised by solid fundamentals, active community participation, and a responsible and dedicated team.
This initiative is seen as a response to the current trend of projects launching with high market caps while a large portion of their tokens remains locked. As Binance Research pointed out on May 17, token projects frequently launch with small circulating supplies, setting aside a significant part of the token supply for future distribution. This trend results in sharp price increases during bullish market conditions, due to the restricted liquidity available at the time of launch. However, Binance warned that such growth is not sustainable once a large number of tokens enter the market.
On May 17, Flow, an anonymous crypto analyst, reported that 80% of tokens listed on Binance over the past six months have witnessed a decline since their introduction. Flow indicated that most newly listed tokens operate as 'exit liquidity' for insiders who capitalise on the limited availability due to the small initial circulating supply.
In May 2024, an estimated $3 billion in vested crypto tokens are slated for release. Notable projects like Sui and Pyth Network are projected to release more than $1 billion in crypto tokens to various stakeholders, including early investors.
Basing their estimation on data from Token Unlocks and CoinMarketCap, Binance projected that around $155 billion in tokens will be released between 2024 and 2030. Binance observed that the substantial number of tokens set to be released could put considerable downward pressure on the market unless balanced by a corresponding increase in demand and capital inflow.
Published At
5/20/2024 3:43:08 PM
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