Low Liquidity, High FDV New Token Problems Will Be Resolved By Market Itself: Analysis

Low Liquidity, High FDV New Token Problems Will Be Resolved By Market Itself: Analysis

Low Liquidity, High FDV New Token Problems Will Be Resolved By Market Itself: Analysis The recent problem of low initial liquidity and overvalued FDV (Fully Diluted Valuation, market price x total supply) of new tokens listed on Binance has emerged as a hot potato in the industry. However, the free market will resolve these problems on its own. Venture Capital (VC), Influencers (KOL), etc. threw it at retail investors? There are always malicious VCs who dump on retail investors. However, these are low-tier VCs, and most teams that work with such VCs fail to get listed on Tier 1 exchanges. Top-tier VCs apply a minimum 1-year cliff and multi-year vesting terms before receiving tokens. A 1-year cliff is mandatory under SEC Rule 144a. OTC hedging or emergency unlocking are also prohibited by investment contract. All newly listed tokens on Binance have been issued within less than 1 year of Token Generation Event (TGE), and all VCs subject to the 1-year cliff are in a lock-up state. Retail investors who were disillusioned with VC investment coins moved en masse to meme coins? If the above narrative were true, the price of new tokens should have fallen when retail investors moved en masse to meme coins. For example, in the case of Shiba Inu (SHIB), which is a representative meme coin, the timing is wrong. The meme coin market has been enthusiastic since March, but the price of new tokens began to plummet in earnest in mid-April. The volume is too small to accurately assess the value? It is a somewhat plausible theory. The initial circulation of Binance's newly listed tokens is around 13% on average. This is much lower than previous listing cases. However, among the tokens listed on Binance last year, IMX, APE, OP, etc., showed continuous growth with even less circulation. Of course, excessively low initial circulation is an absolute problem. In the case of WLD, the initial circulation was only 2%, and FIL and ICP also drew unsightly charts due to lack of circulation. From an overall perspective, the initial circulation of around 13% on the first day of recent newly listed tokens on Binance is within the normal range. Also, there is no correlation that the circulation volume has a direct impact on the coin price, and the prices of all tokens have plummeted regardless of the circulation volume. Advice for VCs, Exchanges, and Project Teams VCs: Keep up with market trends and act wisely. Give projects more realistic valuations. Don't expose locked tokens to the market. If you think it is a 'deal you can't lose', you will probably regret it. Exchanges: Lower the listing price. Consider setting the token listing price through a public auction, not the last VC round. Do not list tokens without a market-standard lock-up schedule. Show the FDV depletion chart to retail investors and educate investors on lock-up release. Project team: Try to distribute more tokens on the first day of listing. Providing less than 10% of the total supply is too little.