Under the pressure of monopoly groups, project teams are sacrificing small investors in order to provide sufficient “exit liquidity” to early investment institutions and internal personnel. In this article, data analysis is conducted to determine whether investing in new coins is a good investment.
(Data support from @tradetheflow_ perspective)
Recent market discussions have focused on the pressure faced by project teams from venture capital (VC) and centralized exchanges (CEX) to provide sufficient liquidity for early investment institutions and internal personnel. They launch the tokens on CEX with as high of a Fully Diluted Valuation (FDV) as possible, making small investors the “bagholders”.
Haseeb Qureshi, the Managing Partner of Dragonfly, responded to this in his article “VC Perspective: What Causes the Decline of Low Circulating Supply/High FDV Tokens?” and provided data support. His core argument is that the underperformance of tokens with low circulating supply/high FDV is a self-correcting process in the market.
On the other hand, the founder of Ambient presents a perspective from an “ETH-centric” standpoint, stating that the FDV of newly issued tokens is not significantly different when measured in ETH.
To assess the actual situation, Odaily Star Planet conducted data updates, supplements, classification, and interpretation based on the research of @tradetheflow_, a user of the X platform. By comparing two bull market cycles, the conclusion drawn is that buying new coins on top-tier CEX is no longer a good investment.
Looking back at all the newly listed tokens on Binance, the largest CEX, in the past 6 months, we noticed that over 80% of the token prices have declined since their listing. The few exceptions are:
$MEME: a meme coin
$ORDI: a fair launch without participation from top-tier VCs
$JUP: strong support from the Solana ecosystem
$JTO: also strong support from the Solana ecosystem
$WIF: another meme coin
Most of the newly listed tokens on Binance are supported by top-tier VCs and are listed at extremely high valuations. The average FDV of these tokens on their listing day exceeds 4.2 billion USD, and some tokens even reach an absurd FDV of over 11 billion USD.
However, these projects usually lack real users or strong community support.
By conducting a simple backtest, if you hold a portfolio and invest the same amount in every new token listed on Binance, your losses in the past 6 months would exceed 18%.
Therefore, the conclusion is clear: the new coins launched on Binance in the past six months are no longer good investment options. Their upside potential has been exhausted in advance. Instead, these new coins represent the exit liquidity of insiders, who take advantage of the opportunity to obtain quality early investment opportunities that retail investors cannot access.
From many perspectives, the current token issuance mechanism is manipulated and does not benefit the cryptocurrency industry. Listing new coins with high FDV will only lead to market hemorrhage and loss of trust, ultimately making new coins a sword of Damocles hanging over the market. But more importantly, this path is unsustainable and will damage the reputation of the entire cryptocurrency industry.
Retail investors are tired of being the exit liquidity for insiders. Slowly, retail investors are starting to realize the absurdity of this situation. The current situation needs to change, otherwise our industry will pay a long-term price for the short-sighted behavior of market manipulation.
Most of the tokens currently being issued rely on the bullish sentiment to drive up prices, and they will inevitably be dumped when the market cools down.
One reason for this is that founders have set very short cash-out timetables for investment institutions and other early angel investors, and have provided false indicators of diluted ownership to investors. Projects are focused on marketing hype rather than discovering real users. To make matters worse, “scientists” and market makers occupy advantageous ecological positions in the secondary market. The cryptocurrency industry urgently needs a new method of token issuance and distribution.
Many attempts have been made, and investors hope to participate in this market in a fair manner. This explains why BRC-20 tokens with innovative asset issuance methods (Fair Launch) have become popular.
It seems that everyone has forgotten CZ’s wise advice from a few years ago – he set the price of BNB very low so that more investors would participate in the community building of BNB, resulting in a highly active and high-quality community.
From another perspective, while many projects in the bull market have delivery and token listing requirements for VCs, can the current liquidity support the continuous listing of new coins on Binance almost every one to two weeks?
Some tokens (such as NFP and ACE) have gone through many cycles of bull and bear trends in just a few months. Without a significant increase in on-chain funds other than BTC, high FDV, low market cap tokens will eventually collapse.
In this cycle, it is particularly accurate to speculate on old coins rather than new ones. Compared to the high FDV new coins waiting for massive unlocks in this cycle, it is more ideal to gamble on already unlocked old coins (AR, NEAR, etc.).
In the previous bull market cycle (January 14, 2021, to September 19, 2021), the opening market value of 14 projects launched on the Binance Launchpool was similar to the opening market value of 15 projects in the current bull market cycle (October 31, 2023, to April 17, 2024). Based on this, we divided the table into two regions to observe the changes in “new projects” market value and FDV in the two cycles.
If we refer to the trends of tokens launched on Binance during the previous bull market cycle within the specified time frame, shorting any newly listed token on Binance within the first week would result in a return of over 80% in two years.
This only captures the tokens launched on Launchpool and does not include tokens already listed on other exchanges (such as WIF, METIS) and first-minted tokens (such as TNSR, W).
As for whether exchanges (and project teams) should be “responsible” for token price trends, whether the timing of listing is not well balanced between institutions and retail investors, and whether landing on large exchanges and achieving more efficient pricing, this “ultimate question” is not extensively discussed in this article. However, it is clear that Binance is also paying attention to the discussions in the market.
On May 20, Binance released a report summarizing that the unlocking of low circulating supply and high FDV tokens may trigger sell-offs, with an estimated $155 billion in tokens to be unlocked from 2024 to 2030. VCs continue to play an important role in the crypto industry and can work with project teams to ensure fair supply distribution and reasonable valuations.
On the evening of May 20, Binance released an announcement in response to the questions and doubts:
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