Are Low Circulating Supply and High Valuation Making New Tokens Unsustainable?

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The cryptocurrency market in 2024 has seen a growing trend among newly launched tokens: high valuations paired with low initial circulating supply. While this structure may create short-term price excitement, Binance Research highlights that it poses long-term risks to both token price stability and protocol sustainability. This article explores the implications of this emerging model, why it's become so prevalent, and how investors can navigate it wisely.

👉 Discover how market dynamics shape token value and where to spot real opportunities.

The Rise of High-FDV, Low-Circulation Tokens

Understanding the Supply-Valuation Paradox

A growing number of high-profile tokens launched in 2024—such as STRK, ALT, JUP, and W—share a common trait: minimal initial circulating supply with large portions of their total supply locked for future release. This design significantly inflates Fully Diluted Valuation (FDV) while keeping market capitalization artificially low.

Data shows that the average ratio of market cap to FDV for tokens launched in 2024 stands at just 12.3%, the lowest in recent history. This means that only a small fraction of the total token supply is available for trading at launch, creating scarcity-driven price surges even without strong fundamentals.

However, this scarcity is temporary. Over the coming years, vast amounts of locked tokens will unlock, flooding the market unless matched by proportional demand growth. To maintain current price levels, the market would need to absorb approximately $80 billion in new token supply—a challenge given current liquidity conditions.

This structural imbalance raises concerns about long-term price sustainability. While low circulation can boost early momentum, it often leads to prolonged downward pressure post-unlock, discouraging long-term holding.

Why Meme Coins Are Gaining Appeal

Interestingly, this trend has contributed to the rising popularity of meme coins. Unlike many venture-backed projects, meme coins often feature fair launches and high or even 100% initial circulation, minimizing future sell-offs from team or investor unlocks.

With no large overhang of vested tokens, meme coins avoid the looming downward pressure that plagues many "serious" protocols. Combined with strong community engagement, this makes them more predictable in the short term—even if less fundamentally grounded.

Moreover, low liquidity amplifies price movements. When demand meets scarce supply, prices spike dramatically, further inflating FDV and attracting speculative interest. But as unlocks begin, the lack of sustained demand often results in steep corrections.

Why Are New Tokens So Highly Valued?

Overvaluation Relative to Established Protocols

Recent token launches aren’t just low in circulation—they’re also launching at sky-high valuations. Take Celestia (TIA) and Jupiter (JUP), ranked #62 and #63 by market cap shortly after launch. They’ve surpassed well-established projects like Lido (LDO) at #65 and Aave (AAVE) at #76—despite Lido and Aave ranking first and third in Total Value Locked (TVL) across all blockchain protocols.

This disconnect between valuation and actual usage suggests a market increasingly driven by hype rather than utility. While innovation should be rewarded, existing protocols have proven their resilience, adoption, and revenue generation over time. Their lower valuations reflect conservative pricing based on performance—not speculation.

Launching a token with a billion-dollar FDV at inception is akin to a startup pricing itself at unicorn status during seed funding. Without explosive growth or unique advantages, such valuations become hard to justify—and harder to sustain.

👉 See how real-world adoption impacts token performance beyond initial hype.

Why Is This Trend Happening Now?

Surge in Venture Capital Investment

One major driver behind inflated token valuations is the influx of venture capital into crypto. Since 2017, crypto projects have raised over $91 billion from VCs—a figure that continues to grow.

Venture capital firms often secure large token allocations at discounted prices during private sales. These early investors benefit from massive returns at launch, while retail buyers enter at much higher public sale or exchange prices.

This dynamic means much of the upside is captured before the token even hits exchanges. For retail investors, this leaves limited room for gains—and increased risk when unlocks begin.

Furthermore, VC-backed projects often delay significant token releases over multi-year schedules, contributing to the low initial float. While intended to align incentives, this structure can backfire if market demand doesn’t keep pace with supply growth.

Heightened Market Speculation

The broader crypto market’s strong performance in 2024 has fueled aggressive investor sentiment. Bullish momentum encourages risk-taking, leading investors to accept higher valuations for unproven projects.

Fear of missing out (FOMO) drives demand for new launches, especially those backed by知名 names or trending narratives like modular blockchains or liquid restaking (LRT). As more capital chases fewer “hot” listings, prices rise—even without corresponding utility or revenue.

This speculative cycle reinforces the high-FDV, low-circulation model: teams and investors know they can raise big valuations early, so they design tokenomics accordingly.

What Should Investors Do?

Recognize the Long-Term Risks

For retail investors, the key takeaway is clear: holding low-circulating, high-FDV tokens long-term carries significant risk.

Binance Research estimates that $155 billion worth of tokens will unlock between 2024 and 2030. Without equivalent inflows of new capital, this flood of supply will likely depress prices across many projects.

If demand stagnates or declines, even fundamentally sound protocols may struggle to maintain valuation. Investors should assess not just current price, but also unlock schedules, vesting cliffs, and historical trading patterns post-unlock.

Adjusting portfolio allocations to limit exposure to overvalued early-stage tokens can help mitigate downside risk.

Seek Innovation, Not Imitation

In a market saturated with copycat projects, differentiation matters more than ever. Many new protocols—especially in trending sectors like LRT—lack meaningful innovation. Their tokens may launch with fanfare but fail to retain value once speculation fades.

Instead of chasing trends, investors should focus on projects with:

Projects solving genuine problems with novel approaches are more likely to generate lasting demand—even as supply increases.

👉 Explore platforms that help identify truly innovative blockchain projects before they go mainstream.

Frequently Asked Questions (FAQ)

Q: What is the difference between market cap and FDV?
A: Market cap reflects the value of currently circulating tokens (price × circulating supply). FDV estimates total value if all tokens were circulating (price × max supply). A large gap between the two signals future sell pressure.

Q: Why do low-circulating tokens lead to price drops later?
A: When large amounts of locked tokens unlock, they increase sell-side pressure. If demand doesn’t rise proportionally, prices tend to fall.

Q: Are all high-FDV tokens bad investments?
A: Not necessarily. High FDV isn’t inherently negative if matched by strong fundamentals, growing demand, and gradual unlocks. The risk lies in overvaluation without substance.

Q: How can I check a token’s unlock schedule?
A: Tools like TokenUnlocks.app or project whitepapers typically provide detailed vesting timelines for teams, investors, and ecosystem funds.

Q: Is fair launch better than VC-backed launch?
A: Fair launches reduce early concentration and sell pressure but may lack funding for development. VC-backed launches offer resources but often prioritize early investors’ returns.

Q: What does “low float” mean in crypto?
A: Low float refers to a small percentage of total tokens available for public trading. It increases volatility and susceptibility to manipulation.

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