Binance encourages small to medium-sized crypto projects to manage low float and high FDV

Last updated: May 20, 2024 3:33 pm EDT | 2 minute read

To promote a healthier and more sustainable crypto ecosystem, Binance, the world’s largest cryptocurrency exchange, on Monday urged small and medium-sized crypto projects to address the prevailing trend of low float and high fully diluted valuations (FDV).

The exchange invites these projects to apply for its listing programs, emphasizing the importance of strong fundamentals and sustainable models.

Binance has committed to supporting projects to address the trend of low float and high FDV

Binance has highlighted its commitment to supporting projects that demonstrate strong fundamentals, maintain an organic community base and operate a sustainable business model.

“We hope to enhance the development of the blockchain ecosystem through our support of small to medium-sized projects with strong fundamentals, an organic community base, a sustainable business model, and a dedicated team that acts as responsible industry participants.”

The call to action responds to a growing trend where new projects launch with high market caps but keep much of their token supply locked up, leading to low buoyancy.

On May 17th, Binance Search reported that launching with low-circulation supplies has become increasingly common. Limited liquidity at launch causes rapid price appreciation in bullish market conditions. However, such price growth is often unsustainable when many tokens are unlocked and flood the market.

The trend of token unlocking is set to continue, with the release of approximately $3 billion worth of acquired crypto tokens 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 approximately $155 billion in tokens will be unlocked between 2024 and 2030.

Over 80% of Binance tokens have been rejected

Pseudonym cryptocurrency researcher Flow noted that 80% of tokens listed on Binance have declined in the last six months since their launch. Flow described these newly launched tokens as “exit liquidity” for insiders taking advantage of limited retail access due to low initial circulating supply. He suggests that the growth of many projects listed on Binance may be slower than in previous bull periods.

Despite limited venture capital support, tokens like Ordi have seen huge profits, up more than 261% since launch, while memecoins like Dogwifhat have also surged.

Retail interest has been a driving force behind the success of memecoins, which operate independently of traditional altcoin markets. Lian explained that many retail investors are attracted to memecoins for their long-term holding potential, which is evident in the significant trading volumes of coins like WIF.

The recent rise in memecoin prices, including Pepe’s all-time high, coincided Keith Gill’s return to social media. Gill was a key figure in the 2021 GameStop short squeeze.

Concerns persist regarding the high initial fully diluted valuations of new tokens listed on Binanceaveraging over $4.2 billion, despite the tokens’ need for a substantial user base.

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