This prediction highlights the growing trend of tokens launching with high valuations and low initial circulating supply, a topic that has sparked considerable discussion within the cryptocurrency community.
Recent data from Token Unlocks confirms an important trend in the cryptocurrency industry. Many tokens are entering the market with low circulation but high value. This market structure raises concerns about traders’ sustainable upside following the Token Generation Event (TGE). According to a report by Binance Research, up to $155 billion worth of tokens are expected to be unlocked between 2024 and 2030, which will create significant selling pressure unless buy-side demand and capital flows increase. Emphasizes that there are risks.
Understand market dynamics
Looking at the market cap to Fully Diluted Valuation (FDV) ratio, tokens launched in 2024 account for a significant portion of the supply that has yet to be released. Many recently launched tokens often have a circulating supply of less than 20%. This low float combined with high FDV explains why many new tokens have high valuations comparable to existing layer 1 or DeFi tokens, despite lacking proven user traction.
For these tokens to remain price stable over the next few years, approximately $80 billion in new investment will be needed to balance the increased supply. This is a particularly difficult task due to market fluctuations.
Several factors have influenced this trend. An influx of private capital has led to aggressive valuations, and optimistic market sentiment has supported these high valuations.
Implications for investors and project teams
Current market conditions require investors to be more selective. To navigate this environment, investors must focus on a few key areas. It is important to analyze the unlock schedule and vesting schedule to understand the potential increase in supply and resulting selling pressure.
Comparing valuation ratios such as FDV/Revenue and FDV/Total Value Locked with competitors and historical data can provide better insight than looking at FDV alone. It is also important to evaluate the development stage of the project and signs of market fit, such as daily active users and trading volume. Additionally, the skills of the project team and the level of community involvement are important factors in determining future success.
On the other hand, the project team must keep token economics design in mind. It is important to balance initial supply with future unlock schedules to avoid sudden selling pressure. Transparency in how tokens will be launched can help build trust with investors.
It is also important to stick to the basics. The project must ensure that the product is well developed and meets market needs. Strong user engagement and a strong team can attract and retain investor attention.
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