Binance, the largest crypto exchange in the world, is speaking out against the trend of new projects listing with low float and high fully diluted valuations (FDVs).
Float refers to the amount of circulating tokens while the the FDV refers to the market capitalization if 100% of the maximum supply of tokens are taken into account.
The combination of low float and high FDV may result in overly high sell pressure in the future and therefore be unfavorable to retail investors.
Says Binance,
“In recent months, we have observed a trend of tokens launching at high valuations with low initial circulating supplies…
To foster a healthy industry with a variety of market participants, including projects with lower to medium valuations, Binance is taking the lead to engage small to medium projects…
Launching tokens at a high fully diluted valuation and low circulating supply can result in dilutions from future unlocks which can place selling pressure on tokens. Such a market structure can be unfavorable for retail investors and loyal community members of the project. We are committed to reshaping this trend and fostering a more diverse market environment for our users and for all market participants.”
The exchange also wrote a full report on the topic called “Low Float & High FDV: How Did We Get Here?”
In response to the issue, Binance says it is putting out a call for “small to medium valuation relative to competitors in their respective sectors” to apply for possible listing on the exchange.
Projects from any sector are welcome to apply but should have significant token allocation reserved for community users, “moderate” token float during token generation events, and smaller allocations to non-community users.
“Actively supporting small to medium capitalization projects is one of our approaches to mitigate some of the risks that we have observed in certain aspects of the market. We invite all eligible projects to apply for listing with Binance, as we collectively strive to foster a more balanced and robust market environment.”
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The post Binance Warns Against Low Float/High Valuation Coins, Puts Out Call for Small Projects With Strong Fundamentals appeared first on The Daily Hodl.
