The expert also warned of the risks of the growing popularity of launching projects with high fully diluted valuations

Flow analyst: 80% of tokens listed on Binance have fallen in value in the last six months

20.05.2024 - 11:15

107

3 min

What’s new? Crypto analyst under the nickname Flow has studied the situation with new tokens on the largest centralized crypto exchange (CEX) Binance. He came to the conclusion that over 80% of the coins listed on the platform in the last six months have fallen in value since the start of trading. Thus, out of 31 coins, only five assets are showing positive dynamics: MEME, ORDI, JUP, JTO, and WIF.

Source: Twitter.com

What else is known? The analyst noted that if a user invested an equal amount with each new listing on Binance, the value of such a portfolio would decrease by 18% in six months.

“So yes, more often than not, tokens launching on Binance are not investment vehicle anymore — all their upside potential are already taken away. Instead, they represent exit liquidity for insiders who capitalize on retail lack of access to quality early investment opportunities,” Flow emphasized.

He noted that this situation is the result of venture capital teaming up with centralized exchanges, in which projects launch tokens with the highest possible Fully Diluted Value (FDV) on a tier-1 platform, providing insiders with exit liquidity.

Thus, most of the recently listed tokens on Binance were backed by top venture capital firms and launched with “crazy” valuations. The average FDV of new projects is $4,2 billion, some coins have an index exceeding $11 billion. At the same time, such projects often do not have real users and a strong community, emphasizes the analyst.

FDV is calculated by multiplying the price of a token by the total supply of tokens and allows you to put together an idea of how much a crypto project will cost when all its tokens are released into circulation.

According to Flow, launching a project with a high FDV is an unsustainable approach and discredits the industry. He stated that retail traders are “tired of being the exit liquidity of insiders and slowly, they are waking up to this non-sense.” The analyst believes that if the situation does not start to change towards providing equal investment opportunities, it will have long-term negative consequences for the industry.

It is noteworthy that earlier Binance analysts also issued a report warning about the risks of projects with high FDV.

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

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

Analysts note that from 2024 to 2030, tokens worth $155 billion will be unlocked

Read more

In early January 2023, Ren & Heinrich analysts released a report where they analyzed 26 coins listed on Binance in the last year and a half. At that time, they concluded that the value of tokens increased by an average of 41% on the first day after listing on the exchange and began to decline 22 days later.

Subscribe to Getblock Magazine and stay up to date with the latest news from the world of cryptocurrencies and the digital economy