Exit Liquidity? 80% of Binance’s New Tokens Lost Value Despite Market Rally

Investors purchasing the latest cryptocurrency listings on the leading cryptocurrency exchange Binance over the last six months would be down by over 18% in the last six months, despite a wide cryptocurrency market rally over that period, as over 80% of these tokens saw their values drop after listing.

According to analysis conducted by cryptocurrency researcher Flow, out of 31 tokens listed on the leading cryptocurrency exchange Binance only five – including a memecoin dubbed MEME, the Ordi token (ORDI), Solana-based Jupiter (JUP), Jito (JTO), and Dogwifhat (WIF) – managed to buck the trend and appreciate in value.

The memecoins seemingly managed to appreciate as there’s been an ongoing memecoin trading frenzy in the cryptocurrency space that recently saw the price of several tokens, including WIF, recently surge. Meanwhile ORDI rose as there’s “no tier 1” venture capital backing, while JUP and JTO rose over their momentum on the Solana blockchain.

Per the analyst, the tokens are being listed on Binance with sky-high valuations, with the average fully diluted valuation (FDV) exceeding $4.2 billion despite a lack of established user bases, which restricts potential upside.

He added that these tokens end up often serving more as “exit liquidity” for insiders who have already acquired them to capitalize on “retail lack of access to quality early investment opportunities.”

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In simpler terms, these inflated valuations may primarily benefit those who launched the tokens, leaving retail investors holding the bag when prices inevitably drop as “all their upside potential are already taken away.”

Memecoins including PEPE have recently moved to a new all-time high after a meme stock trading frenzy started after a trader central to the 2021 movement, Keith Gill, known on X as RoaringKitty and DFV on Reddit, after he returned to social media from a three-year hiatus that ended after his testimony in Congress.

The trader’s return saw the price of GameStop (NYSE: GME) surge as a wave of retail traders drove up the price of the video game retailer in a move that led to widespread media coverage. The firm’s stock price rally two years ago had a similar effect and even led to a Netflix series, a movie, and considerable financial scrutiny.

The move was accompanied by rises in memecoins in the cryptocurrency space, with various analysts pointing to how DOGE also surged after the 2021 meme stock mania.

Featured image via Unsplash.

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• Source: https://www.cryptoglobe.com/latest/2024/05/exit-liquidity-80-of-binances-new-tokens-lost-value-despite-market-rally/