Tokens with high FDVs, low circulating supply face fierce criticism from crypto community

Source Fxstreet
May 20, 2024 16:58
  • Crypto community continues to express harsh displeasure about the effects of tokens with high FDVs, low circulating supply.
  • Binance released a report pointing to VC effect as major cause of a bull market without buy-ins.
  • Binance has announced that it will support low and medium-valued crypto projects in a bid to fight off high FDVs.

Tokens with high fully-diluted valuations (FDV) have been subject to fierce criticism recently following a series of token unlocks that has caused losses for several investors. As a result, Binance has said in an announcement on Monday that it will give more focus to small and medium-valued crypto projects.

Read more: Week Ahead: Ethereum and DeFi to come under spotlight this week

High FDV projects face backlash from community

Several crypto community members have expressed concerns about the impact of tokens with high fully-diluted valuations (FDV) and low circulating supply on the market. The issue gained mainstream attention in recent months as most investors have seen a huge decline in their investments following token unlocks from these types of projects.

Additionally, with most new crypto projects increasingly employing the model in their launches, projects under such a category have faced a huge backlash from community members.

Some members of the crypto community have complained that these projects majorly benefit their founders and venture capitalists to the detriment of retail investors.

Also read: Top 5 AI, DePIN tokens hit by corrections ahead of key events, NVIDIA earnings this week

One X user @crypto_noodles share his thought:

Zach Rynes, community liaison at Chainlink, also said that low-float, high FDV launches are predatory tokenomics that have zero upside for retail investors.

In response to these concerns, Binance had previously released a report addressing the issue and highlighting factors such as an increase in private market funds, aggressive valuations, and positive market sentiment as contributors to tokens with high fully diluted valuations.

Most tokens launched since the beginning of the year carry high valuation and low circulating supply, according to data from CoinMarketCap and Token Unlocks. Tokens such as Jupiter (JUP), SLN and STRK fall into this category, with little market supply and high FDV.

Read more: Ethereum poised for high volatility as Grayscale CEO departs several days before SEC's ETF decision

Furthermore, the report identified VC investment as a major factor contributing to a bull market without sufficient buy-ins, especially due to private market investors, who purchase large amounts of the tokens before the token generation event takes place. Hence, this ultimately results in high selling pressure by the time the public market investors are involved.

In an effort to address these challenges, Binance has announced its support for low and medium-valued crypto projects to mitigate the impact of high FDVs. According to Binance, such project teams can apply to the exchange for their listing programs, which include launchpools, direct listings and mega drops.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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