- The depreciation of almost 80% of new coins on Binance after their listing makes them unwise investments.
- For long-term detrimental effects to be avoided, the cryptocurrency sector must guarantee equal access to investment possibilities.
Talks on how centralized exchanges (CEX) and venture capital (VC) affect new token releases have been raging in the cryptocurrency world.
Flow, a crypto and macro researcher, has highlighted a concerning pattern in which teams are under pressure to release tokens on top-tier CEX platforms at the maximum fully diluted valuation (FDV), therefore offering VC and insiders exit liquidity. It begs the question: Is buying new coins still a wise investment?
Realities of Recently Listed Tokens
Flow’s analysis of new listings over the previous six months has revealed a harsh truth to one of the biggest CEXs, Binance. Almost eighty percent of these tokens have lost value after their listing. The sole exclusions have been MEME, ORDI, JUP, JTO, and WIF.
The majority of these new listings are tokens that elite venture capitalists supported and floated at astronomical prices. On dates of Binance listing, the average FDV is more than $4.2 billion; some even surpass $11 billion. These ventures are frequently bad long-term investments since they lack actual users or a strong community.
Should an investor have invested the same amount in every new Binance listing to diversify their portfolio, they would have lost more than 18% in the last six months. This suggests that fresh token offerings on Binance are no longer enticing investment opportunities.
Rather, it seems they provide insiders who benefit at the expense of ordinary investors with an exit option, echoing earlier coverage by ETHNews on the BOME token.
The Unfair Game of the Sector
Noted cryptocurrency expert Alex Kruger agreed, pointing out that most new tokens are made to pump and later dump.
Founders frequently falsify metrics, arrange short vesting periods, and put more effort into creating buzz than into recruiting users. Worse, market makers and botters take advantage of these debuts, severely hurting individual investors.
“Launching at a high FDV just results in bleed and zero mindshare,” Flow explains, which finally brings the token to its demise. This strategy is not long-term and damages the standing of the cryptocurrency sector.
Increasingly tired of being used as exit liquidity, retail investors are starting to see through these schemes.
An Appeal for Action
The study by Flow makes it rather evident that the way token launches are now done needs to be changed. The industry has to concentrate on making tokens great once more and guaranteeing fair access to investment possibilities. The whole cryptocurrency ecosystem may suffer long-term if the present behaviors are carried on.