The world’s largest cryptocurrency exchange by trading volume, Binance has urged small and medium-sized projects in the industry to tackle low float and high fully diluted valuation (FDV) trends. The firm made the disclosure via an official blog post on Monday.
More so, in the post, Binance invited small and medium-sized startups to register for its listing programs. According to the cryptocurrency exchange, the focus on supporting small and medium projects with sustainable models is an attempt to push the cryptocurrency landscape to a new height.
The exchange went on to underline how the development of the blockchain sector can manifest through the support for small and medium-sized projects. In addition, Binance added that projects with strong fundamentals, a vast community, a sustainable business model, and a committed team can help foster development in the crypto sphere.
Binance Explains How Tokens with Low Circulating Supply Could Spell Doom for the Crypto Market
However, the recent move from Binance is perceived to be a response to the emerging trend of how a host of projects are launching at high market capitalization whilst most of their tokens are locked. Recall that last Friday, the research organ of the exchange revealed that there is a growing trend in which many token projects are launching with low-circulating supplies.
According to Binance Research, a substantial portion of the token supply of these projects is often allotted to future releases. As a result of the limited liquidity during their launching and the present bull market, Binance Research added that most of the tokens usually enjoy an explosive price increase.
Furthermore, the exchange described how most of these tokens often dip and struggle to maintain their price growth by the time they unlock the rest of the locked coins. In reference to token unlocks and data from CoinMarketCap, Binance calculated that up to $155 billion worth of cryptocurrencies will unlock between 2024 to 2030.
Going by that number, the cryptocurrency exchange stated that the number of tokens that are about to flood the market will put a noticeable sell pressure on the market. Also, Binance added that the released tokens will not correspond with the demand and capital flows which could birth huge dangers.
Supporting the submission of Binance Research is Pseudonymous crypto researcher, Flow, who also revealed that in the last six months, 80% of tokens listed on Binance have dipped since their launch. The analyst explained that a substantial part of the newly launched tokens often serve as “exit liquidity” for insiders. These insiders, according to the Pseudonymous crypto researcher, mostly capitalize on the scarcity of retail access due to the low initial circulating supply of the tokens.