Binance, a popular cryptocurrency exchange, is urging small and medium-sized projects to address the issue of low float and high fully diluted valuations (FDV) in the crypto industry.
On May 20, Binance announced that it is inviting small and medium-sized projects to participate in its listing programs. The exchange believes that supporting these projects, which have sustainable models, will contribute to the growth of the crypto ecosystem. Binance expressed its intention in the following statement:
In response to a growing trend of projects launching with high market capitalizations while keeping a significant number of tokens locked, Binance Research highlighted the issue on May 17. These projects reserve a large portion of their token supply for future releases.
The research report points out that tokens with limited circulating supplies tend to experience rapid price appreciation in bullish market conditions. This is due to the scarcity of available tokens during the initial launch.
However, Binance warns that this price growth is not sustainable when a large amount of tokens are suddenly released into the market. The exchange emphasizes the need for a balance between supply and demand.
On May 17, a crypto researcher known as Flow revealed that 80% of tokens listed on Binance have fallen in value since their launch in the past six months. Flow suggests that newly launched tokens often serve as an opportunity for insiders to exit their investments, taking advantage of the limited access for retail investors caused by the small initial circulating supply.
In May 2024, approximately $3 billion worth of vested crypto tokens are scheduled to be unlocked. Notable projects like Sui and Pyth Network are expected to release over $1 billion worth of tokens, which were allocated to early investors and other crypto holders.
According to Binance’s analysis of Token Unlocks and CoinMarketCap data, it is estimated that around $155 billion worth of tokens will be unlocked between 2024 and 2030.
Binance points out that the large number of tokens set to be released will create significant sell pressure in the market, without a corresponding increase in demand and capital inflows.
In conclusion, Binance is urging small and medium-sized projects to address the issue of low float and high fully diluted valuations in order to ensure a sustainable and balanced growth of the crypto industry.