Recent market conditions have seen a surge in tokens launched with high Fully Diluted Valuation (FDV) and low initial circulation. These tokens have often underperformed, leading to growing frustration among retail investors and sparking intense debate within the crypto community. Prominent venture capital firms and industry participants have joined these discussions, reflecting broader concerns about market fairness and sustainability.
In response to these trends, major exchanges like Binance and OKX have begun adjusting their token listing policies. These changes are designed to promote healthier market structures and protect investors from the potential downsides of high FDV, low circulation token models.
How Exchanges Are Adapting Listing Strategies
On May 20, Binance announced a new open application program for token listings. In its statement, the exchange highlighted that launching tokens with high valuations and low circulating supply often leads to significant sell-pressure during unlock events. This market structure, they argued, is ultimately harmful to both retail participants and long-term project supporters.
To foster a more sustainable ecosystem, Binance is now prioritizing small to mid-sized cryptocurrency projects with strong fundamentals. The exchange is inviting qualified teams to apply for listings through various methods, including direct listing, Launchpool, and Megadrop. The goal is to support projects that demonstrate organic community growth, viable business models, and a clear sense of responsibility within the industry.
Shortly after, OKX also published updates to its own token listing process. The exchange emphasized that all new listings undergo an extensive review and must comply with local regulations. OKX also committed to improving communication with its users to provide more detailed information about new listings.
These adjustments have generated significant discussion. Some analysts believe the changes will create more opportunities for application-layer projects with strong technical execution. For example, Allen Ding, Founding Partner of Nothing Research, noted that this could be a major positive shift, especially for founders with Chinese backgrounds, who often exhibit strong product execution capabilities.
Others, like Ignas, Co-Founder of Pink Brains, suggested that Binance’s move could set a new industry standard—rewarding genuine users, reducing allocations for insiders and VCs, and listing at lower market caps to allow room for price appreciation.
However, some community members remain skeptical, arguing that the fundamental issue is a lack of liquidity in the market. Simply listing smaller projects does not guarantee positive secondary market performance, and what retail investors truly need is upward price momentum.
Understanding the Rise of High FDV and Low Circulation Models
The practice of launching tokens with low circulation and high FDV isn’t new. It was previously used by FTX and Alameda to accumulate large asset reserves. Today, it has become a common—though controversial—model.
Recent data reveals that among the top 100 cryptocurrencies by market cap, seven have a circulation rate below 50%, with tokens like JUP, STRK, ENA, and WLD all under 20%. A study from CoinGecko earlier this year showed that 21.3% of the top 300 cryptocurrencies by market cap have low circulation rates. This means that for every five tokens, one has the majority of its supply still locked, resulting in a market cap to FDV ratio of less than 0.5.
Most low-circulation tokens are relatively new, and the impending unlocks are expected to add continued selling pressure to the crypto market. A report from Binance Research corroborates this, noting that the trend of low circulating supply and high valuation at launch is growing. From 2024 to 2030, approximately $155 billion in tokens are scheduled to be unlocked. Without a corresponding increase in demand and capital inflow, this could lead to persistent downward pressure on prices.
Analysts point to two main reasons behind this trend: a significant mismatch between the rapid growth of Web3 capital markets and the scarcity of high-quality projects, and a disconnect between market speculation and actual value creation.
Some, like popular commentator Cobie, argue that the phenomenon is partly natural. In modern markets, price discovery often occurs off-market, with valuations being set privately long before a token is publicly traded. Higher FDVs can also reflect increased demand—today’s crypto market is much larger, with more stablecoin liquidity and greater appetite for new tokens. Low circulation itself isn’t inherently bad; it is the misuse of the model that causes issues.
Strategies for Projects and Retail Investors
In light of these market conditions, several institutions have offered advice for various stakeholders.
Binance recommends that projects carefully design their tokenomics, considering allocation, unlock schedules, and vesting periods. Burning tokens can help increase circulation and reduce FDV. Most importantly, projects should focus on building viable products that create real value, retain users, and support sustainable growth. This, in turn, can justify higher valuations and contribute to better token performance. Venture capitalists are also encouraged to conduct thorough due diligence and advocate for fair token distribution and reasonable valuations.
Dragonfly also published suggestions for exchanges, projects, and retail investors. Exchanges should list tokens at lower prices, enforce standard lock-up periods, and provide better investor education on FDV and token unlocks. Project teams are advised to release a larger percentage of tokens at launch, conduct fair airdrops, and concentrate on building products with real utility. VCs should maintain price discipline and encourage realistic valuations. For retail investors, the advice is simple: be cautious of oversimplified narratives and never invest more than you can afford to lose.
One analyst, Chen Jian, offers more direct guidance for retail participants: avoid chasing new tokens on major exchanges beyond a 2x gain, and be wary of any token on OKX with a market cap over $1 billion due to insufficient liquidity. He also recommends focusing on projects that have been on the market for at least one cycle and have more than 50% of their tokens already unlocked. Most importantly, investors should pay close attention to major unlocking events and avoid believing narratives that suggest prices will rise post-unlock.
Since the current rules of the game are unlikely to change soon, the best approach for retail investors is to become active participants—moving closer to the primary market where possible, rather than remaining passive holders vulnerable to market volatility.
Haotian, an independent researcher, emphasizes that tokenomics should be centered around value creation and distribution. A healthy ecosystem requires both external value discovery—often facilitated by exchanges providing liquidity and leverage—and internal value support, where tokens are used utility-rich environments like DApps for mining, earning, and arbitrage. This two-sided growth supports a reasonable FDV growth curve and avoids a disconnect between internal utility and external market valuation.
👉 Explore advanced tokenomics strategies
Frequently Asked Questions
What does FDV mean?
FDV stands for Fully Diluted Valuation. It represents a token's total market cap if all its tokens were in circulation. It is calculated by multiplying the total token supply by the current market price. A high FDV with low circulation can indicate future selling pressure.
Why are exchanges changing listing policies?
Exchanges are adjusting policies to address community concerns about tokens with high FDV and low circulation. These tokens often lead to poor market performance and negative investor experiences. The new policies aim to promote healthier projects and market conditions.
How can retail investors identify risky tokens?
Look for tokens with a large percentage of supply still locked and a high FDV relative to market cap. Avoid tokens with imminent unlock events and those with limited utility or community engagement. Always do your own research and consider sticking to assets with longer track records.
What should project teams focus on?
Teams should prioritize fair token distribution, reasonable valuation at launch, and genuine product development. Building organic community support and ensuring sustainable tokenomics are crucial for long-term success.
Are all low circulation tokens bad?
Not necessarily. Low circulation can be part of a healthy token model if used responsibly. The problem arises when high FDV and low circulation are combined with excessive unlocks and no fundamental value support.
How can I stay updated on token unlock schedules?
Use data platforms like Token Unlocks, CoinGecko, or DeFiLlama to track upcoming events. Many exchanges and projects also provide official calendars detailing vesting and unlock timelines.