Recently , the market has been hotly discussing that under the pressure of interest monopoly groups such as venture capital (VC) and CEX, the project team will provide sufficient exit liquidity for early investment institutions and internal personnel, and will trade on CEX at the highest possible price. The fully diluted valuation (FDV) was launched, turning small and medium-sized investors into "takeovers".
Haseeb Qureshi, managing partner of Dragonfly, in "VC Perspective: "High FDV, Low Circulation" What is the cause of the decline of tokens? "Respond and provide data support. His core point is that the general underperformance of low-circulation/high-FDV tokens is a self-correcting process by the market.
The founder of Ambient expressed his view from an "ETH-based" perspective: If priced in ETH, the FDV of newly issued tokens is not much different from the past.
What is the actual situation? Based on the research basis of X platform user @tradetheflow_ , Odaily Odaily updated, supplemented, classified and interpreted the data, and compared the two bull market cycles, and concluded that buying new coins in top CEX is no longer a good idea. invest .
Data support (from @tradetheflow_ perspective)
Looking back at all the newly listed tokens on Binance, the largest CEX, in the past 6 months, we noticed that more than 80% of the tokens have experienced price declines since the date of listing. The few exceptions are:
- $MEME : a meme coin
- $ORDI : Fair launch, no involvement of Tier 1 VCs
- $JUP : Strong support of Solana ecosystem
- $JTO : It is also a strong support of the Solana ecosystem.
- $WIF : Another meme coin
Most of the newly listed tokens on Binance are backed by top VCs and listed at crazy valuations. The average FDV of these tokens on the day they were listed on Binance exceeded $4.2 billion, and some new coins were even ridiculous to the extent that the FDV exceeded $11 billion.
However, these projects often do not have real users or strong community support.
Doing a simple backtest, if you held a portfolio with a strategy of investing the same amount on every new Binance listing, you would have lost over 18% over the past 6 months.
So the conclusion we get is very clear, the new coins launched on Binance in the past six months are no longer good investments - all their upside potential has been overdrawn in advance. Rather, these new coins represent exit liquidity from insiders taking advantage of the lack of access to quality early-stage investment opportunities for large numbers of retail investors.
In many ways, the current token issuance mechanism is rigged and does not serve cryptocurrencies in this way.
Crazy listing of new coins with high FDV will only lead to blood loss and loss of trust in the market, which will eventually make the new coins become the sword of Damocles hanging in the market. But more importantly, this path is unsustainable and will damage the reputation of the entire crypto industry.
Retail investors are tired of being insiders exiting liquidity. Slowly, retail investors began to realize that this kind of thing was extremely ridiculous. The current status quo needs to change, or our industry will pay the long-term price of these short-sighted market abuses.
extended view
Most of the tokens currently being issued are taking advantage of bull market sentiment to drive up prices, and will eventually be sold off (when the market cools).
One of the reasons why this happened is that the founder set a very short redemption timetable for investment institutions and other early angel investors, and provided investors with false and watered-down indicators. The project focused on marketing hype rather than to discover real users . What’s worse is that “scientist” Bots and market makers will seize the advantageous ecological niche of the secondary market. Cryptocurrencies desperately need a new way to issue and distribute tokens.
Everyone has made a lot of attempts, and investors hope to participate in this market in a fair way, which also explains why the BRC-20 tokens that have made innovations in asset issuance methods (Fair Launch) are popular.
It seems that everyone has forgotten CZ's wise suggestion a few years ago - he set the price of BNB very low, so that more investors will participate in the construction of the BNB community, so that he will have a very active And a quality community.
From another perspective, it is true that many projects in the bull market have demands for VC income delivery and token issuance, but can the current liquidity really support Binance to launch a new coin almost every two weeks for many months?
Some tokens (such as NFP and ACE) have completed a bull-bear trend for many tokens in just a few months. On the premise that there is no significant increase in on-site funds outside of BTC, tokens with high FDV and low market capitalization will eventually end up falling apart.
In this cycle, it can be said that it is particularly correct to speculate on the old rather than the new. Compared with piling up new high FDV coins that are waiting to be unlocked in this cycle, the profit and loss ratio of gaming the old coins that have been unlocked (AR, NEAR, etc.) is more ideal.
Data support
The opening market capitalization of 14 new projects on Binance Launchpool in the previous bull market cycle (January 14, 2021 to September 19, 2021) and the current bull market cycle (October 31, 2023 to April 17, 2024 The opening market values of the 15 projects in Japan are similar. We divide the table into upper and lower areas to observe the changes in market value and FDV of "new projects" in the near and far cycles.
If we refer to the trend of new tokens on Binance in the last bull market during the statistical time period shown above, short any new token on Binance within the opening week will make more than 80% of the profit within two years.
This only captures new tokens on Launchpool, and does not include newly launched tokens on Binance that have been listed on other exchanges (such as WIF, METIS) and tokens that were first launched (such as TNSR, W, etc.).
Regarding whether the exchange (and the project team) should be "responsible" for the currency price trend, whether the timing of currency listing does not balance the interests of institutions and small and medium-sized investors, whether a more effective price is achieved after being logged on to a large exchange and fully traded, etc." "Ultimate question", this article will not discuss it too much. But obviously, Binance is also paying attention to the discussions in the market.
Binance’s response to the above voices
On May 20, a report released by Binance concluded that the unlocking of low-circulation and high FDV tokens may trigger selling pressure, and it is expected that US$155 billion in tokens will be unlocked from 2024 to 2030; VC continues to expand in the crypto industry Plays an important role in working with project teams to ensure fair supply distribution and fair valuations.
On the evening of May 20, Binance released an announcement in response to questions:
"Binance will be the first to support small and medium-sized cryptocurrency projects. We sincerely invite high-quality teams and projects to apply for Binance currency listing projects, including: Direct Listing, Launchpools, Megadrops, etc. We hope to have good fundamentals through strengthened support , organic community foundation, sustainable business model and industry-responsible small and medium-sized cryptocurrency projects to promote the development of the blockchain ecosystem.
Launching a token with a high fully diluted valuation and low circulation model will lead to huge selling pressure when it is unlocked in the future. Such a market structure is detrimental to ordinary investors as well as loyal community members of the project. Binance is committed to reshaping this trend and creating a diverse market environment for our users and all market participants. "
