Binance, the world’s largest crypto exchange, is speaking out against the trend of new projects with low float and high fully diluted valuations (FDVs).
Float refers to the number of circulating tokens, while the FDV refers to the market capitalization when taking into account 100% of the maximum supply of tokens.
The combination of a low float and a high FDV may result in excessive selling pressure in the future and therefore be unfavorable for private investors.
Say Binance,
“In recent months we have observed a trend of tokens being launched at high valuations with low initial circulating supplies…
To promote a healthy industry with a variety of market participants, including projects with lower to medium valuations, Binance is taking the lead in taking on small to medium-sized projects…
Launching tokens with a high, fully diluted valuation and low circulating supply could result in dilutions from future unlocks, which could put selling pressure on tokens. Such a market structure can be unfavorable for private investors and loyal members of the project’s community. We are committed to reshaping this trend and promoting a more diverse market environment for our users and 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 calling for “small to medium valuations relative to competitors in their respective industries” to apply for a possible listing on the exchange.
Projects from any sector are welcome to apply, but there must be a significant token allocation reserved for community users, a “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 mitigating some of the risks we have observed in certain aspects of the market. We invite all eligible projects to apply to list on Binance as we collectively strive to promote a more balanced and robust market environment.”
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