Background
Recently, due to the fact that "high FDV + low circulation" tokens have flooded the market and generally performed poorly, the community has become strongly dissatisfied with VC (venture capital) and value coins. This phenomenon has not only aroused controversy between MEME coins and VC/value coins, but has also attracted the attention and participation of investment institutions including a16z and Dragonfly.
Exchange Adjustments: New Strategies for Binance and OKX
In this context, crypto exchanges Binance and OKX have adjusted their listing strategies. On the evening of May 20, Binance released a public recruitment plan for listing projects. The announcement pointed out that tokens with high valuations and low circulation will bring huge selling pressure when they are unlocked in the future, which is not good for ordinary investors and loyal community members of the project. To this end, Binance decided to take the lead in supporting small and medium-sized cryptocurrency projects and encourage high-quality teams to apply for listing, including direct listing, Launchpools and Megadrops. Binance hopes to promote the development of the blockchain ecosystem by supporting small and medium-sized projects with good fundamentals, organic community foundation, sustainable business model and industry responsibility.
Following this, OKX also updated its token listing process, emphasizing that all listed tokens are subject to strict review and are subject to local legal restrictions. In the future, OKX will improve customer communication to inform users of listings in more detail.
Community Response and Suggestions
The prices of tokens with low circulation and high FDV models continue to be sluggish, and a large number of retail investors have become "victims" of liquidity withdrawal. The exchanges' adjustments to listing rules have sparked widespread discussion.
Some industry insiders believe that this adjustment will bring more opportunities to application projects with technical capabilities and product execution. For example, Allen Ding, founding partner of Nothing Research, said that the low circulation and high FDV game has become one of the main reasons for the market's bleeding. Binance's coin listing public recruitment plan may bring spring to application layer projects, especially for entrepreneurs with Chinese backgrounds, because they are mostly product and technical teams. Although they have weak storytelling skills, they have strong technical and product execution.
Ignas, co-founder of Pink Brains, believes that Binance’s move will be the beginning of a new trend by identifying and rewarding real users, allocating more token shares to the community, reducing the shares of insiders and venture capitalists, and leaving room for new buyers to rise.
Rui, investment director of HashKey Capital, suggested that exchanges could improve project transparency and credibility by publishing due diligence reports on 3-5 coins and opening a reporting channel to allow community members to report the misconduct of the project owners.
Causes of high FDV and low circulation trends
The low circulation and high FDV model was originally used by FTX/Alameda to build a huge reserve asset, and has now become the mainstream gameplay in the market. According to statistics, as of May 21, there are 7 projects with a circulation rate of less than 50% in the top 100 by market value, and the circulation rate of many projects is even less than 20%. Cryptocurrencies with low circulation in the market account for 21.3% of the top 300 by market value. This phenomenon is mainly caused by the prosperity of the Web3 capital market, the scarcity of high-quality projects, and the growth of market demand.
The latest report from Binance Research also confirms this trend, predicting that tokens worth about $155 billion will be unlocked between 2024 and 2030. If buyer demand and capital flows do not increase accordingly, a large number of tokens entering the market will create selling pressure. Analyst Chen Jian believes that this is mainly due to the mismatch between the prosperity of Web3 capital market development and the scarcity of high-quality projects and their actual value creation.
Strategies for project owners and retail investors
Faced with this market environment, many institutions have proposed improvements and countermeasures. Binance recommends that project owners carefully consider token distribution, unlocking and vesting time in token economics, and that they can increase circulation and reduce FDV by destroying some tokens. At the same time, project owners need to focus on creating viable products to justify high valuations, thereby increasing the intrinsic value of tokens and contributing to the price performance of tokens.
Dragonfly made suggestions to exchanges, project parties and retail investors respectively: exchanges should list tokens at lower prices and adhere to market standards for token lock-up periods when listing; project teams should strive to release more tokens on the first day and conduct healthy airdrops; VCs should listen to the voice of the market, maintain price discipline, and encourage founders to be realistic about valuations.
Analyst Chen Jian recommends that retail investors pay attention to projects that were issued in the previous round and have unlocked more than 50%, strictly monitor large unlockings in the holdings list, and try to participate in the primary market to become NPCs in this game rather than monsters used for leveling up.
Independent researcher Haotian believes that blockchain Tokenomics should focus on "creating and distributing value" and build an ecosystem that can motivate all parties to participate in common contributions and benefits. External channels such as exchanges should provide liquidity and be responsible for "value discovery", while the community ecology itself should be responsible for "value support" to ensure the benign linkage of tokens in internal and external markets.
in conclusion
In the current crypto market environment, the "high FDV + low circulation" model has attracted widespread attention and discussion. The adjustment of Binance and OKX's listing strategy has injected a new trend into the market, and small and medium-sized projects may usher in new development opportunities. Project owners and retail investors need to actively adjust their strategies, adapt to market changes, and jointly promote the healthy development of the blockchain ecosystem.