Does the cryptocurrency investment theory of "buy new, not old" still work?
In the new round of the cycle, the newly listed coins on major CEXs have greater downside potential...Author: Yan Chen, Odaily Planet Daily
Recently, the market has been hotly discussing how, under the pressure of VC and CEX monopolistic groups, project teams provide sufficient exit liquidity for early investors and internal personnel by launching at the highest possible FDV on leading CEXs, leaving small and medium investors to become "the ones left holding the bag."
Dragonfly Managing Partner Haseeb Qureshi responded in the article "VC Perspective: What is the Cause of the Decline of 'High FDV, Low Circulation' Tokens?" and provided data support. His core viewpoint is that the generally poor performance of low circulation/high FDV tokens is a process of market self-correction. Meanwhile, the founder of Ambient presented a perspective from an "ETH-centric" angle: when priced in ETH, the FDV of newly issued tokens is not significantly different from the past.
What is the actual situation? Odaily Planet Daily updated, supplemented, categorized, and interpreted data based on the research foundation of X platform user @tradetheflow_, and compared two bull market cycles, concluding that purchasing new coins on leading CEXs is no longer a good investment.
Data Support (from tradetheflow_’s perspective)
Looking back at all newly listed tokens on the largest CEX—Binance—in the past six months, we noticed that over 80% of the tokens have seen a price decline since their listing date.
A few exceptions are:
$MEME: A meme coin
$ORDI: Fair launch, with no participation from first-level VCs
$JUP: Strong support from the Solana ecosystem
$JTO: Also strong support from the Solana ecosystem
$WIF: Another meme coin
Recent statistics on new coins from Binance
Most of the newly listed tokens on Binance are supported by top VCs and are launched at extremely crazy valuations. The average FDV of these tokens on the day of listing on Binance exceeds $4.2 billion, with some new coins absurdly reaching FDVs of over $11 billion. However, these projects often lack real users or strong community support.
FDV-related data
To conduct a simple backtest, if you held a portfolio with a strategy of investing the same amount every time a new coin was listed on Binance, your loss over the past six months would exceed 18%.
Thus, our conclusion is very clear: the new coins launched on Binance in the past six months are no longer good investment products—they have already exhausted all their potential for price increases. On the contrary, these new coins represent exit liquidity for insiders, who take advantage of the fact that a large number of retail investors cannot access quality early investment opportunities.
In many ways, the current token issuance mechanism is manipulated, and this approach is detrimental to cryptocurrency.
Launching new coins at high FDVs will only lead to market bleeding and a loss of trust, ultimately turning new coins into a Damocles' sword hanging over the market. More importantly, this path is unsustainable and will damage the reputation of the entire crypto industry.
Retail investors are tired of being the exit liquidity for insiders. Gradually, retail investors are beginning to realize how absurd this situation is. The current state of affairs needs to change; otherwise, our industry will pay a long-term price for these shortsighted behaviors that abuse the market.
Our Extended Viewpoint:
Most of the tokens currently issued are taking advantage of the bullish market sentiment to inflate prices, which will inevitably lead to sell-offs when the market cools down.
One reason this happens is that the cash-out timeline set by founders for investment institutions and other early angel investors is very short, and they provide misleading indicators to investors, focusing on marketing hype rather than uncovering real users. Worse still, "scientist" bots and market makers seize advantageous ecological positions in the secondary market. The cryptocurrency industry urgently needs a new method for issuing and distributing tokens.
Many attempts have been made, and investors hope to participate in this market fairly, which also explains the popularity of BRC-20 tokens that innovate in asset issuance methods (Fair Launch).
It seems everyone has forgotten CZ's wise advice from a few years ago—he set the price of BNB very low so that more investors would participate in the community building of BNB, resulting in a very active and high-quality community.
From another perspective, while many projects have demands for VC returns and token issuance during a bull market, can the current liquidity truly support Binance in launching a new coin almost every couple of weeks for several months?
Some tokens (like NFP and ACE) have completed many cycles of bull and bear markets in just a few months. Under the premise that there is no significant increase in on-site funds outside of BTC, the ultimate fate of high FDV and low market cap tokens is to be mixed in with the rest.
In this cycle, it can be said that "buying old, not new" is particularly correct. Compared to crowding into high FDV new coins waiting for massive unlocks in this cycle, betting on already unlocked old coins (like AR, NEAR, etc.) has a more favorable risk-reward ratio.
Our Data Support:
Statistics on new coins from Binance
The opening market values of 14 new projects on Binance Launchpool during the last bull market cycle (January 14, 2021 - September 19, 2021) are similar to the opening market values of 15 projects in this bull market cycle (October 31, 2023 - April 17, 2024). We use this to divide the table into two sections to observe the changes in market value and FDV of "new projects" in the two cycles.
If we rigidly refer to the performance of tokens launched on Binance during the last bull market in the above statistical time frame, shorting any newly launched token on Binance within a week of its opening would yield returns exceeding 80% over two years.
This only captures the tokens newly launched on Launchpool and does not include tokens newly listed on Binance that have already been listed on other exchanges (like WIF, METIS) and tokens that are being launched for the first time (like TNSR, W, etc.).
Regarding whether exchanges (and project parties) should be "responsible" for price movements, whether the timing of listings has not well balanced the interests of institutions and small and medium investors, and whether effective pricing has been achieved after being fully traded on large exchanges, this article does not delve into too much.
However, it is clear that Binance is also paying attention to the discussions in the market.
Binance's Response to the Above Voices
On May 20, Binance released a report summarizing that low circulation and high FDV token unlocks may trigger sell pressure, with an estimated $155 billion in tokens expected to be unlocked from 2024 to 2030; VCs continue to play an important role in the crypto industry and can collaborate with project teams to ensure fair supply distribution and reasonable valuations.
On the evening of May 20, Binance issued an announcement responding to the concerns: "Binance will take the lead in supporting small and medium-sized cryptocurrency projects. We sincerely invite quality teams and projects to apply for Binance listing projects, including: Direct Listing, Launchpools, Megadrops, etc. We hope to promote the development of the blockchain ecosystem by strengthening support for small and medium-sized cryptocurrency projects with good fundamentals, organic community foundations, sustainable business models, and industry responsibility. Launching tokens at high fully diluted valuations and low circulation will lead to significant sell pressure upon future unlocks. Such a market structure is detrimental to ordinary investors and the loyal community members of the projects. Binance is committed to reshaping this trend and creating a diverse market environment for our users and all market participants."
