Binance Research warns of the risks of investing in projects with large amounts of blocked tokens

The material is not an investment recommendation and is published for informational purposes only.

What’s new? The prevalence of tokens with high value and low initial supply raises concerns that such tokenomics leaves little chance for sustainable growth, analysts at the crypto exchange Binance write. They noted that between 2024 and 2030, $155 billion worth of various tokens will be unlocked, but without a corresponding increase in demand and capital inflows, this situation will turn into selling pressure.

Binance’s report

What else is known? Binance Research notes that various development teams are increasingly issuing tokens with a small initial circulating supply, locking up a large portion of the total supply for gradual unfreezes in the future.

Analysts acknowledge that these tokens can rise in price quickly under favorable market conditions due to limited supply and liquidity at launch, but such price increases are unsustainable as huge amounts of additional coins enter the market after unlocks.

As an example, Binance Research cited projects such as ZK, STRK, SAGA, ENA, MERL, ALT, ETHFI, MAVIA, VENOM, ZETA, MODE, JUP, ONDO, SLN, and W. In the case of these projects, only 6-18% of the total coins are in circulation, while 82-94% are on the blockchain until a certain date.

“Understanding token unlock schedules and tracking them is essential for investors to prevent being caught off guard when a token undergoes a significant unlock,” analysts say.

In contrast, experts mentioned meme tokens: most of these projects have no blocked coins, all assets are sent into circulation immediately after launch. This excludes pressure from sellers due to future unblocking. In their opinion, this fact partly influences the growing popularity of meme tokens, “especially as awareness of the implications of significant token unlocks increases.”

The analysts cited an influx of venture capital, which influences the formation of valuations in the crypto market, as the reason for the growing popularity of token launches with large amounts of locked coins. “Effectively, massive private market raises lead to multi-billion dollar valuations at launch, making it more challenging for public market investors to profit from future growth,” Binance explained.

Finally, the analysts emphasized that the current market structure forces investors to be more selective and choosy when investing in projects with a large volume of coins on the blockchain:

“The probability of making sustainable returns by “ape-ing” into new tokens is low, considering that many projects have high valuations right out of the gate. Most of the upside and easy money would likely already have been made by early private market investors.”