Recently, amid the general market slump, there has been widespread belief that excessive listing of “VC tokens” on exchanges has drained market liquidity. Anti-VC rhetoric has first emerged since the inscription era, and became a banner and slogan during the rise of memes. This decline has intensified this contradiction to a new level.
Odaily will explain in this article whether VC coins have sucked the market, whether exchanges have promoted this process, and what demands users have for currency listing.
Are "VC tokens" siphoning market funds?
Regardless of the impact of whether the exchange lists "VC tokens" or not, since the core way for users to enter Crypto is still to purchase $USDT or $USDC, the total amount of stablecoins represents the total on-site liquidity to a certain extent. Therefore, we simply make a preliminary comparison between "increment of stable currency" and "increment of VC token market value".
Where did the incremental funds go?
A year ago, $USDT had a circulating market capitalization of $83.2 billion. It currently stands at $112.7 billion, a growth of $29.5 billion. $USDC rose from $28.4 billion to $32.6 billion, an increase of $4.2 billion. The total increase in the two in one year was $33.7 billion.
The following are selected ten VC tokens that have been launched in the past six months, with a total circulating market value of 5.47 billion (the following units are all in US dollars): $PYTH (1.1 billion), $ENA (950 million), $STRK (900 million), $ZRO ( 670 million), $ZK (600 million), $ETHFI (360 million), $DYM (270 million), $ALT (270 million), $ATH (250 million), $EZ (100 million).
In the second half of 2023, there will still be giant tokens such as $TIA (1.17 billion) and $SEI (1.05 billion). And this is calculated on the basis that the circulating market value has fallen by at least 20% -30% in recent weeks. Therefore, we can draw a preliminary conclusion that at least 50% of the incremental funds were obtained by dozens of "VC tokens".
Stock tokens suck blood together
$ARB was launched in March 2023 with an initial circulation of 1.275 billion. Calculated at a price of 1.25 $USDT, the initial circulation market value was 1.02 billion. The current circulating market value of $ARB is 2.5 billion, but the token price has dropped by about 40%. If the increase in circulation market value is understood as a net inflow of funds, but currency holders are still losing blood, then funds can only flow to the unlocked part.
Exchange Role
In the previous section, we concluded that “VC tokens” do have a significant siphoning effect on funds. So, do exchanges promote this process?
Regarding this issue, Binance Alliance He Yi expressed his views on the X platform: "The currency circle is a free market, and the liquidity and trading volume of various trading platforms are shared. Even if Binance does not list new projects, these projects still exist , funds will also be diverted to the entire industry. In addition to the unlocking of VC-invested projects, meme coins, on-chain naughty dogs, Lumao, and fund disks will also be diverted. After the ETF is approved, the traditional financial market will also be diverted and flow directly to the currency circle. funds."
A brief summary of his views can be translated into "Tokens that are not listed on exchanges can also be dumped by VCs in other places" and "Fund diversion cannot only be attributed to VC unlocking". We have already proved who is the latter through data in the previous section. The main role of capital diversion. As for the former point of view, Odaily Planet Daily believes that it ignores two important factors: "user attributes in different scenarios" and "leverage ratios in different scenarios".
In the on-chain scenario, except for users who focus on DeFi Farming or masturbating, most traders have a "disgust" towards high-market value projects due to the low profit-loss ratio and the ability to ship quickly through AMM features. If a project has a circulating market value of hundreds of millions, and FDV is even higher than the sky, in the eyes of users on the chain there will be no difference from the reserved 90% SCAM tokens, and the willingness to undertake it will decrease significantly.
On the other hand, the exchange provides a much higher leverage function than on-chain, with leverage up to dozens of times, providing sufficient counterparty liquidity for "shipping". The on-chain undertaking capacity is far inferior to that of the leveraged centralized trading market. .
Therefore, the "user attributes" and "leverage ratio" in different scenarios significantly affect the willingness and ability of VCs to unlock tokens. If the project's transactions are conducted outside CEX, the price is more likely to quickly return to a reasonable range, rather than randomly. As the unlocking slowly declines, perhaps the situation where the circulating market value increases and the token price falls will not occur. It cannot be said that centralized exchanges have no impact on the VC unlocking process.
Can exchanges do better?
For exchanges, "king-level" projects such as ZKsync and LayerZero have no possibility of not being online as long as the project team does not run away and hackers do not rob them. However, in other currencies, users have many demands and transactions There are still many better options.
Give opportunities to “value” projects
Some value projects can themselves generate extremely high profits and cash flow. For example, the recent popular project Pump.fun has an annual revenue of up to US$219 million. Many users are looking forward to its currency issuance and are willing to buy it. Or projects such as BananaGun and Whales Market, which have market values of US$160 million and US$40 million.
The data of these projects are not constructed by VCs and robbers, but are truly needed by users. They have grown from small market capitalization to large market capitalization projects step by step. In the last bull market, $SOL and $MATIC were able to sell in thousands of dollars. With a market value of US$10,000, it will develop after being listed on the exchange. However, this round we have not seen these projects have the same opportunities and benefits.
Compared with projects that are empty after the currency is issued, giving more opportunities to value projects is one of the fundamental demands of the majority of users.
Establish clearer standards
How to determine value items? Judgment through financial data is a very direct and effective method. The financial data here does not refer to indicators such as the number of addresses and interactions that are easy to brush up, but more practical data such as TVL and project income. Some users question that this may lead to entrepreneurship on exchanges. However, traditional markets such as the US stock market will not decline because of clear standards, but will allow real value projects to gain more opportunities, rather than some arbitrage. AI projects, game-saving, and brushing projects.
Furthermore, delisting standards can even be set for these projects to "leave liquidity to those in need" and guide the healthy development of the market.
More transparent information disclosure
There is no way to query the token operating data and when it will be unlocked. Of course, the current market generally believes that this is not the obligation of the exchange.
The power to open long or short positions is entirely in the hands of traders, but if the exchange has clearly informed users that operating data has declined and large amounts are about to be unlocked, but still chooses to take over the order, then there is no way to "pass the blame".
Conclusion
It is certainly not a completely correct conclusion to blame all the market decline on the exchange, but it is not the best way to educate users thinking that they are completely right. As the party with the largest voice and traffic in the industry, the exchange may still have many better choices in guiding the healthy and rapid development of industries and projects.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reproduced with permission from: "Deep Wave TechFlow"
Original author: Nan Zhi, Odaily Planet Daily
