Over 80% of the newly listed cryptocurrencies on Binance, the world’s largest digital asset exchange by trading volume, have declined in value.
In the past six months, these tokens have plunged in value since listing on the exchange, raising concerns for investors seeking out the latest cryptocurrencies.
Most New Binance Token Listings Trading in Red
According to a May 17 post by pseudonymous crypto researcher Flow on X, only five of the 31 tokens analyzed have appreciated in value: the meme coin (MEME), the Ordi token (ORDI), Solana-based Jupiter (JUP), Jito (JTO), and Dogwifhat (WIF).
Every one is talking about the VC + CEX cartel where teams are pushed to launch at the highest possible FDV on tier-1 CEX and provide exit liquidity for VC and insiders
The result: New coins are not great investment anymore
But how real is this? I crunched the number for you 👇
— flow (@tradetheflow_) May 17, 2024
Despite lacking venture capitalist (VC) backing, the Ordi token was the most profitable, with an increase of over 261% since its launch. The controversial meme coin Dogwifhat followed in second place, surging more than 117%.
Flow noted that top-tier venture capitalists back most new Binance listings and launch at inflated valuations. The average fully diluted valuation (FDV) on the Binance listing date exceeds $4.2 billion, with some tokens reaching over $11 billion. Often, these projects lack real users or a strong community.
According to Flow, if investors had made equal investments in each of the new Binance listings over the past six months, their portfolio would have declined by over 18%. This, Flow adds, suggests that many tokens launching on Binance are not viable investment vehicles, as their upside potential is already exhausted. Instead, they are exit liquidity for insiders who exploit retail investors’ limited access to early investment opportunities.
Flow also criticized the current market dynamics, citing economist Alex Kruger’s earlier observations on X. Kruger noted that many tokens are designed to pump and then dump due to short vesting schedules, fake metrics, and a focus on hype rather than user acquisition.
New Token Launches Causing Market Harm
According to crypto researcher Flow, the current token launch meta is damaging to the crypto market, and a new approach to token launches is needed. Releasing tokens at high, fully diluted valuations (FDVs) leads to value erosion and minimal market interest, ultimately causing the token to plummet. He added that this approach not only harms the token but also discredits the entire crypto industry.
He highlighted an earlier post by Crypto_McKenna, who criticized the practice of pushing protocols to launch at high FDVs to benefit pre-seed and seed investors. McKenna noted that launching at a lower FDV allows secondary market traders to profit from repricing and helps generate momentum and interest.
This is quite concerning for anyone looking to invest in new tokens on Binance. Over 80% of newly listed cryptocurrencies have declined in value, which is a tough pill to swallow for investors chasing the latest trends. Flow’s analysis shows that only five out of 31 tokens have actually appreciated, with Ordi and Dogwifhat being the most notable.
It’s clear that many of these tokens are launching with inflated valuations, often backed by top-tier venture capitalists, but lacking real user bases or strong communities. This trend of high FDVs and the subsequent market performance really underscores the need for a change in how new tokens are launched. As Flow and Crypto_McKenna pointed out, launching at more reasonable valuations could create a healthier market dynamic and benefit both investors and the broader crypto ecosystem.
We need to be cautious and perhaps rethink our approach to new investments on major exchanges like Binance. The data suggests that the current model isn’t sustainable and might be more about providing exit liquidity for insiders rather than offering solid investment opportunities for the wider community.