As a long-term crypto investor with experience dating back to the 2017 bull run, I can’t help but feel disappointed by the current state of tokens listed on Binance. In the past, these listings fueled long-term rallies for various projects, but things have changed significantly.
In the past, including 2017 and 2021, tokens listed on Binance served as catalysts for prolonged price surges in different tokens. However, the situation has evolved significantly since the early investor base has transitioned from individual investors to venture capitalists (VCs) and funds that rely on retail investors as their exit strategy.
It’s been widely discussed that there’s a collusion between venture capitalists (VCs) and centralized exchange CEOs (CEXs), leading teams to debut at sky-high fully diluted valuations (FDVs) on top-tier exchanges. This supposedly benefits VCs and insiders by ensuring an immediate liquid market for their investments. However, this trend raises concerns over the value of new coins as investments. But just how valid is this assertion? The data seems to support it.
A research study conducted by Researcher Flow examined the price evolution of 31 cryptocurrencies available on Binance over the previous six months, as mentioned by @tradetheflow. Among these tokens, a mere five experienced price growth: ORDI (+261.9%), JTO (+62%), JUP (+58%), and WIF (+117%). On the other hand, some of the most significant declines include NFP (-62%) and PORTAL (data not provided).
— Wu Blockchain (@WuBlockchain) May 19, 2024
As a research analyst, I delved into the price trends of 31 cryptocurrencies traded on Binance over the past six months under my persona @tradetheflow_. Among them, merely five coins displayed positive growth: ORDI with an impressive surge of 261.9%, JTO up by 62%, JUP gaining 58%, and WIF adding 117%. Conversely, the biggest losers were NFP (-62%), PORTAL (-69%), AEVO (-68%), SAGA (-63%), DYM (-55%), AXL (-55%), BOME (-55%), and W (-58%). Notably, when Binance first listed these tokens, their total fully diluted valuation (FDV) ranged as high as $4.2 billion.
The majority of recently introduced tokens on Binance have backing from top-tier venture capital firms and debut at overvalued prices. The average fair market value (FDV) for Binance listings is above $4.2 billion, with some exceeding an astonishing $11 billion. However, many of these projects lack substantial user bases or solid community engagement. Investing an equal amount in each new Binance listing would result in a loss of approximately 18% over the past six months.
In many cases, tokens debuting on Binance are no longer reliable investments with substantial growth potential. Rather, these tokens function as a means for insiders to cash out, taking advantage of the limited access retail investors have to promising early investment opportunities.
As a researcher studying the cryptocurrency market, I have observed that initiating an launch with high FDVs (Fully Diluted Valuations) often results in significant price declines for the token. This price erosion occurs due to various market forces and can lead to a lack of attention or interest from potential investors, ultimately contributing to the token’s downfall.
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2024-05-19 12:30