The importance of exchanges in resolving the “high FDV dilemma” – DiarioBitcoin

CoinEx reflects on the dilemma of fully diluted valuation (FDV), which is the market value obtained by multiplying the current token price by circulation.

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On May 22, 2024, an important discussion started by CoinEx in X (CoinEx Global) titled “ETH ETF VS. The High Cap Dilemma: Where is the Market Headed?” has caught the attention of cryptocurrency investors and has spread rapidly in some communities. Thanks to the recent increase in attention and debate on topics such as “The Ethereum ETF”, “The High FDV Dilemma”, “High Market Cap and Low Circulation” and “VC Projects” in the cryptocurrency space, attention about this event continues to grow at the time of writing.

In the discussion led by CoinEx, guests agree that the market has high expectations for the approval of the Ethereum ETF, although they are not sure when it will happen.

WoShy @bc1qWorkShy confirmed expectations citing Ethereum’s recent price surge and adding that every SEC decision on crypto assets in history has had a significant impact on the long-term price of cryptocurrencies.

VIP3 @web3vip stated that former US President Donald Trump’s endorsement of cryptocurrencies provides support to the cryptocurrency market and would have multiple impacts on the price of Ethereum or even other cryptos in the future.

High Cap Value Dilemma: Questions and Explorations

FDV, i.e. fully diluted valuation, refers to the total diluted value of a token, which is the market value obtained by multiplying the current token price by circulation. During industry upcycles, most investors consider FDV to be an important investment criterion. Among the various discussions, a main point of controversy is that some believe that because the current circulation of many VC projects is only one-tenth or even less than the total circulation, the valuation after complete dilution of the tokens is already It has become inflated. In the short term, looking at FDV has no practical reference value. Relying on FDV as a key factor in investment decisions will only lead to losses, which is undoubtedly a major investment trap for new investors.

On the other hand, opponents argue that this is completely determined by market supply and demand and cannot be intervened. Especially in light of the recent downturn in the market, which exposed a number of VC projects being eliminated, the fundamental reason is the lack of liquidity in the industry. Additionally, the industry is moving toward specialization, and the logic and standards of “double discovery” (price and value discovery) crucial to investment exploration are also changing. The problem cannot simply be attributed to the high FDV of projects with rigid thoughts and perspectives.

In fact, for the cryptocurrency industry to develop positively, the increase is a necessary consideration. With the tireless efforts of numerous advocates and pioneers both within and outside the industry, the successful approval of the BTC ETF has brought sustained incremental growth to the industry, raising the total global cryptocurrency market capitalization to $2.6 trillion, with the value Bitcoin market share at $1.37 billion, ranking ninth globally (according to data from companiesmarketcap.com). The subsequent approval of the Ethereum ETF will inevitably attract even more increases, not only in funds but also in investors and users. Therefore, how to avoid the High Cap Value Dilemma has become a strong demand for many new investors and even some industry veterans.

How the right exchange can free you from the high FDV dilemma

ETFs will undoubtedly attract new users and additional funds, while the “High FDV Dilemma” will lead to a drawdown of existing assets. This increase in new investors and the decrease in circulation are not conducive to the normalization, scalability and sustainable development of the cryptocurrency industry in the long term.

To address the high cap value dilemma, we need to understand why VC projects tend to set the expression “low circulation, high valuation” as it relates to the decline in market demand, caused by short-term liquidity shortages. Term, lower circulation of the project’s tokens is more conducive to establishing token prices. Here, we have to mention three roles: exchanges, new users and VC. We know that professional traders and investors have their own set of comprehensive investment philosophies and are naturally excluded from this problem. The establishment of “low circulation, high cap value” by VCs for the project tokens is mainly to have greater pricing power in the launch of tokens to better achieve the goal of boosting cap value. Therefore, the key role in truly addressing the “High Cap Value Dilemma” faced by new users can only be played by exchanges.

As a leading global cryptocurrency asset trading platform, dedicated to simplifying cryptocurrency trading, CoinEx believes that to ensure the quality of our services to our clients, we must continually focus on refining products and services, improving customer experience user and constantly introduce high-quality assets to meet the various investment needs of our users. In this process, project selection is key, therefore, exchanges must fully play their role to free more investors from the “High Cap Value Dilemma.” CoinEx has been continuously optimizing its project selection criteria, gradually forming a listing mechanism based on “good, fast and complete”, and focusing on discovering and paying attention to high-quality innovative projects with low valuations and high growth, gaining the favor of a wide range of investors (especially new investors).

As TMJ said at the CoinEx-led X Space event, “Those projects would have their own price discovery; all they need is time.” We are all eagerly waiting for the future of the cryptocurrency industry.

About CoinEx

Founded in 2017, CoinEx is a global cryptocurrency trading platform with a user-centric brand ethos. It offers a variety of products and services, including spot, Futures, Margin Trading, crypto loans and Strategic Trading. With a user-driven market orientation, diverse product features, and a commitment to continuous improvement in product services, CoinEx has become an exchange that supports more than 1,000 cryptocurrencies, offers more than 1,500 trading pairs, and serves to more than 5 million users in more than 200 countries and regions around the world. We provide our users with a simple, intuitive, professional and stable platform for cryptocurrency trading, ensuring a smooth journey in their crypto endeavors.

Press release

Disclaimer: This is a press release produced by the team at CoinEx. DailyBitcoin was not involved in its production and does not endorse or promote the commercial offers and/or promotions cited throughout the text.

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