Small and medium-sized enterprises have been urged by cryptocurrency exchange Binance to counteract the trend of high fully diluted valuations (FDV) and low float in the industry. Small and medium-sized projects were invited by Binance to apply for its listing initiatives on May 20.According to the exchange, the decision to assist small and medium-sized enterprises that have viable business plans would improve the cryptocurrency ecosystem. It stated.
“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.”
This appears to be a reaction to a pattern where projects are being launched with large market capitalizations but with a large number of locked tokens. On May 17, Binance Research brought attention to the growing trend of token projects launching with low circulating supplies. A significant amount of the token supply is set aside by these projects for upcoming 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.
According to a May 17 post by pseudonymous crypto researcher Flow, 80% of tokens listed on Binance have decreased in value since their inception during the previous six months. According to Flow, the majority of recently released tokens serve as “exit liquidity” for insiders who profit from the limited availability of these tokens to the general public due to their low initial circulation supply. It was planned to unlock roughly $3 billion worth of vested cryptocurrency tokens in May 2024. It is anticipated that initiatives like Pyth Network and Sui would release over $1 billion in cryptocurrency tokens that have been distributed to different cryptocurrency holders, including early investors.
Citing Token Unlocks and CoinMarketCap data, Binance estimated that about $155 billion in tokens will be unlocked from 2024 to 2030.
The exchange warned that the quantity of tokens scheduled for release will significantly boost sell pressure on the market in the absence of a comparable rise in capital flows and demand.