Binance Research News: How do we go to low circulation/high FDV tokens
1. Points of this article
In recent months, the hotspots of the encrypted community discussion are those tokens with high valuations and low initial circulation. This market structure has triggered concern for traders after TGE.
The data of CoinMarketcap and Token UNLOCKS confirmed that the trend of tokens was increasingly apparent to the trend of low circulation and high valuation issuance. It is worth noting that from 2024 to 2030, tokens worth about $ 155 billion will be unlocked. If the buyer's demand and capital inflow have not increased accordingly, such a large number of tokens into the market will cause selling pressure.
Factors such as private market capital influx, radical valuations, and optimistic market emotions have contributed to the trend of tokens issued by highly fully diluted valuation ("FDV").
The current market conditions make investors more picky and prudent, and consider the basic aspects of the project, such as token economics, valuation and products. The project team may also need to consider the long -term impact related to the design of the tokens.
VC continues to play an important role in our industry, and can cooperate with the project team to ensure fair supply distribution and reasonable valuation.
Second, market observation
In recent months, the hotspots of the encrypted community discussion are those tokens with high valuations and low initial circulation. This market structure has triggered concern for traders after TGE.
This kind of concern is not unfounded. Tokens are issued with low circulation, and most tokens have become a common phenomenon in the future. In the bull market conditions, due to limited liquidity available for transactions at the time of issuance, these tokens may rise rapidly. However, it is clear that when a wave of tokens are unlocked, this price growth is unsustainable.
In addition, the FDV of the newly issued tokens is equal to the establishment of 1 layer or DEFI tokens that have been tested after the test and the user's attractiveness. In general, market participants are now aware of the influence of low circulation and high FDV tokens.
In this report, we will discuss this market trend more in detail. We first introduce our observations of more and more high FDV tokens and discuss potential market impact and its significance. Then, we analyze the root cause of this trend, especially private market activities may be a factor. Finally, we put forward some suggestions to identify and reduce the negative impact of this trend, focusing on tailor -made suggestions for investors and project teams.
2.1 Low circulation, high FDV
One obvious trend is that the recently issued tokens issued high valuation and low circulation. This is particularly obvious when we compare the tokens that have been issued in the past few years -the ratio of the tokens ("MC") and FDV issued by the tokens issued in 2024 are the lowest. This shows that a large number of tokens will be unlocked in the future.
On May 18, the US SEC announced in a statement that the well -known cryptocurrency critic, Heather Slavkin Corzo, will resign from his policy director. SEC Chairman Gary Gensler appointed Corzo in April 2021. During his tenure, Corzo played a key role Protecting and simplifying capital formation process is praised. The subsequent SEC financial adviser Corey Klemmer will take over CORZO, and it is expected that SEC will maintain a doubt about cryptocurrencies.
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I think this should be shared with you
Unpopular opinion:
We have seen a huge dispersion of returns this cycle in crypto. Few cryptos have outperformed BTC since Oct 23 cycle low and on a YTD basis. Many market participants have referred to the altcoins market now as a "PVP" market.
Snapshot of the top 20 crypto returns across different periods (190D is cycle low) below from Messari Screener: Notice some have negative YTD returns despite BTC hitting ATH!
But this is healthier and better for the crypto market in the long run.
We don't need another 2021-like crazy bull run where everything pumps off the roof regardless of their fundamentals (for lack of better terminology, my definition of fundamentals doesn't just refer to fees/earnings/revenue multiple, etc but includes a lot more other factors that we look at).
The high dispersion market situation also significantly rewards better token selection, especially for investing in crypto besides BTC. This creates a much stronger case of active investment management in crypto as the performance between good and bad liquid crypto investors will be even more apparent.
The market has become more efficient thus making it harder now to make generational wealth just by being lucky and I am all for it.
Will this continue? We can obviously have another round of crazy bull markets given a huge number of positive surprises ahead and the structural bull market in crypto. But would we be fine if a 2021-like bull run never happened again?
Yes, and that is actually better for the market in the long term.
Ordinals developer Leonidas said RuneStone is about to be auctioned. At present, the maximum bid of RuneStone 63,140, 674 on the Ord City is 0.26 BTC, about $ 17,261.61. Leonidas said that all the income of this auction will be used to pay Bitcoin network costs related to the RuneStone airdrop and donate to Bitcoin miners.
In addition, Leonidas added that the Runes protocol was launched on the 840,000 block of Bitcoin L1, which is expected to be around April 20, 2024.