Binance, the popular cryptocurrency exchange, has urged small and medium-sized projects to address the issue of low circulating supplies and high fully diluted valuations (FDV) in the crypto industry.
On May 20th, Binance announced that it was inviting small and medium-sized projects to apply for its listing programs. The exchange believes that supporting these projects, which have sustainable models, will contribute to the growth of the crypto ecosystem. Binance stated:
“The aim is to combat the trend of projects launching with high market capitalizations while a large number of tokens remain locked.”
Binance Research, the research division of Binance, highlighted on May 17th that it has become increasingly common for token projects to launch with limited circulating supplies. These projects reserve a significant portion of their token supply for future releases.
According to the report, these tokens experience rapid price appreciation in bullish market conditions due to the limited liquidity available during the launch. However, Binance stated that this price growth is not sustainable when a wave of token supply hits the market upon unlocking.
Flow, a pseudonymous crypto researcher, pointed out on May 17th that in the past six months, 80% of tokens listed on Binance have experienced a decline in their value since their launch. Flow emphasized that newly launched tokens often serve as an “exit liquidity” for insiders who take advantage of the lack of retail access caused by the low initial circulating supply.
In May 2024, approximately $3 billion worth of vested crypto tokens are 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, including early investors.
Based on data from Token Unlocks and CoinMarketCap, Binance estimated that around $155 billion in tokens will be unlocked from 2024 to 2030. The exchange warned that the increasing number of tokens being released will exert significant selling pressure on the market without a corresponding increase in demand and capital flows.
In conclusion, Binance’s call for small and medium-sized projects to address the issue of low circulating supplies and high fully diluted valuations reflects the need for a more sustainable approach in the crypto industry. The excessive token supply hitting the market upon unlocking poses a threat to the stability and growth of the market.