Binance, a leading cryptocurrency exchange, has issued a call to action for small and medium-sized projects to address the issue of low float and high fully diluted valuations (FDV) in the crypto industry.
On May 20, Binance announced that it is inviting small and medium-sized projects to participate in its listing programs. The exchange believes that supporting these projects, which have sustainable models, will contribute to the overall development of the crypto ecosystem. In its statement, Binance stated:
“Our decision to support small and medium projects with sustainable models is a response to the growing trend of projects launching with high market capitalizations while a large number of tokens remain locked.”
Binance Research, the research arm of the exchange, recently highlighted the increasing prevalence of token projects launching with limited circulating supplies. These projects allocate a significant portion of their token supply for future releases. As a result, these tokens experience rapid price appreciation in bullish market conditions due to the limited liquidity during the initial launch.
However, Binance cautions that this price growth is not sustainable when a wave of token supply hits the market upon unlocking. According to pseudonymous crypto researcher Flow, 80% of tokens listed on Binance in the past six months have fallen in value since their launch. Flow emphasizes that most newly launched tokens serve as “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 such as Sui and Pyth Network are expected to unlock over $1 billion in crypto tokens allocated to various crypto holders, including early investors. Binance estimates that a total of $155 billion in tokens will be unlocked from 2024 to 2030, posing significant sell pressure on the market without a proportional increase in demand and capital flows.
In light of these findings, Binance is urging small and medium-sized projects to consider the potential consequences of launching with limited circulating supplies and to adopt strategies that promote a healthier and more sustainable growth trajectory for the crypto industry.