Thread by @jacobkxyz

A good read by @BinanceResearch on the current state of low float high FDV token launches and their implications.

A crazy stat from this report? There is $155b FDV of token supply unlocking over 2024 to 2030.

TLDR of the article & some thoughts:🧵👇

First, you can access the report here:
public.bnbstatic.com/static/files/r…

1/ Over the last three years, the amount of circulating supply projects launch at has been steadily decreasing.

According to the report, today we see ~12.7% circulating supply on launch vs ~41% two years ago.

2/ A month ago @ThorHartvigsen highlighted that $70b of unlocks were scheduled for this year alone.

3/ The current state of play shows many projects with low float & high FDV

The higher the value a protocol launches at, the greater the need for there to be actual protocol utility & value accruing to users

In other words, the higher the launch, the bigger the (potential) fall

4/ Hype & demand grows on launch but supply is constrained leading to nosebleed valuations.

Some of these projects have hit & surpassed levels comparable with other protocols that have been around for years and have volume & PMF (e.g. @Uniswap ~$7.5b, @chainlink $16b)

5/ So what's coming next?
According to the report there is $155b of unlocks scheduled for the next 6 years (!)

And this doesn't include the large number of projects who are rushing out token launches in the next 6 months, hoping to catch favorable market conditions.

6/ Interestingly, meme coins (which typically have all their supply unlocked and circulating) tend to perform better given they have less selling pressure.

While they are cultural torchbearers, meme coins don't exactly solve the utility point either (fight me)

7/ So what's driving this phenomenon?
- Influx of private capital & VC funding
- Aggressive valuations due to the market rally in December 2023 fueled by the BTC ETF and sidelined crypto investors weighing back in (interestingly, retail flows haven't really returned)

8/ VCs are incentivized to continue deploying capital in this manner in bullish conditions.

As long as subsequent rounds get priced higher they get a markup✅on their books which are nice medals for their fundraising efforts (many funds are raising now and in 2H24)

9/ So how do we navigate from here?

For investors it means being selective, discerning & focused on fundamentals of project tokenomics, valuation, product & most importantly community

(Fundamentals in crypto? haha!)

Also, not being seduced by the short-term paths

10/ For projects it means being focused on the long-term: building a sustainable product, protocol & ecosystem + tweaking tokenomics to incentivize the right behaviors / acquire the users you need and ultimate create value for your community

11/ Community are your users, best supporters & force multipliers, even if you don't have the best product/tech

If you don't leave enough upside for them to win you cripple your power base & alienate your entire reason for existing, making you a zombie

12/ Of course, focusing on fundamentals isn't going to solve the current meta overnight as long as there's money to be made.

Some in the industry are trying to think through solutions for this meta:

13/

14/ Great article by @cobie on the low float high fdv phenomena

Nice except here on how low float high FDV rounds were numerous last cycle too, just masked by many new shiny projects following the same approach

Leading to a VC fomo frenzy cobie.substack.com/p/new-launches…

15/ In particular this graphic from his article highlights that over time (from ETH to Starkware) returns are mostly being captured by private rounds

This is just more motivation for VC to aggressively deploy earlier and play these games