Crypto exchange Binance has called on small and medium-sized projects to combat the low float and high fully diluted valuations (FDV) trend within the crypto space.
On May 20, Binance invited small and medium-sized projects to apply for its listing programs. The exchange said that the move to support small and medium projects with sustainable models will help enhance the crypto ecosystem. It wrote:
“We hope to enhance the development of the blockchain ecosystem through our support of small and medium-sized projects with strong fundamentals, an organic community base, a sustainable business model, and a dedicated team acting as responsible industry participants.”
The move seemingly responds to a trend of projects launching at high market capitalizations while many tokens remain locked.
On May 17, Binance Research highlighted that launching with low circulating supplies has become increasingly common in token projects. These projects allocate a large portion of the token supply for future releases.
According to the report, these tokens experience rapid price appreciation under bullish market conditions. This is attributed to the limited liquidity available during the launch.
“However, it is apparent that this kind of price growth is unsustainable when a wave of token supply hits the market upon unlocking,” Binance wrote.
Pseudonymous crypto researcher Flow posted on May 17 that in the last six months, 80% of tokens listed on Binance have fallen since their launch.
Flow highlighted that most newly launched tokens function as “exit liquidity” for insiders capitalizing on the lack of retail access because of the low initial circulating supply.
In May 2024, about $3 billion worth of vested crypto tokens were scheduled to be unlocked. Projects like Sui and Pyth Network are expected to unlock over $1 billion in crypto tokens allocated to various crypto holders, such as early investors.
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Citing Token Unlocks and CoinMarketCap data, Binance estimated that about $155 billion in tokens will be unlocked from 2024 to 2030.
The exchange noted that the number of tokens set to be released will put significant sell pressure on the market without a corresponding increase in demand and capital flows.
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