According to a new announcement on its official website, Binance has unveiled a new plan it intends to adopt to develop a welcoming and sustainable market environment.
Notably, the exchange noted that the motivation for its latest initiative stems from the desire to discourage the common crypto trend, which entails launching tokens with an incredibly high fully diluted valuation (FDV) and a low initial circulating supply pool.
Low Circulating Supply And A FDV Impacting Market Dynamics Negatively
Per a report titled “Low Float and High FDV: How Did We Get Here?” Binance explained how launching tokens at an exceedingly high FDV and a limited circulating supply could backfire.
The report noted that at the initial stage of token release under the above conditions, the coins tend to record remarkable price increments, which invariably stem from its limited supply pool following its launch.
The published document added that the price appreciation would be transient as negative price pressure would set in once the much larger reserves are released. “A significant amount of token supply is expected to be released in the coming years, and without a corresponding inflow of capital, many will be under significant selling pressure,” the report read in parts.
In its announcement to users describing the kind of market structure that could arise from a reduced circulating supply and a high FDV, Binance noted, "Such a market structure can be unfavorable for retail investors and loyal community members of the project. We are committed to reshaping this trend and fostering a more diverse market environment for our users and all market participants."
Binance's Proposals For Latest Initiative
Disclosing its plans to mitigate the unfavorable market influence emanating from releasing tokens at an increased FDV and a depleted circulating supply, Binance stated that it would henceforth engage small to medium valuation projects to apply for listing programs on the exchange, which includes direct listing, Launchpools, Megadrops, etc.
"We hope to enhance the development of the blockchain ecosystem through our support to small and medium-sized projects with strong fundamentals, an organic community base, a sustainable business model, and a dedicated team acting as responsible industry participants," the exchange added.
Interestingly, Binance specified that while the new strategy will focus on projects with small to medium valuations, similar establishments from other sectors would also be accommodated once they meet the criteria highlighted by the trading platform in the notice released to users earlier today.
Some spotlighted conditions include reserving significant token size for community users, moderate token float during token generation events (TGE), lesser token allocation for non-community users, self-sustaining business model, organic user base, sustainable user growth, sound regulatory compliance records, etc.
