On May 22, 2024, a discussion titled “Ethereum ETF vs. High FDV Dilemma: Future Market Trends” initiated by CoinEx on X (CoinEx Global) attracted the attention of cryptocurrency investors and quickly spread in some communities. Due to the recent high attention and discussion among investors on topics such as “Ethereum ETF,” “High FDV Dilemma,” “High Market Cap, Low Circulation,” and “VC Projects” in the cryptocurrency field, as of the time of writing, the attention to this event is still escalating.
In the discussion led by CoinEx, the guests unanimously agreed that the market has high expectations for the approval of the Ethereum ETF but are unsure of when it will be approved, whether it will be tomorrow or in the short term. WoShy @bc1qWorkShy believes that the recent surge in the price of Ether has validated this expectation and added that historically, every decision by the SEC regarding cryptocurrencies has had a significant impact on their long-term prices. VIP3 @web3vip stated that the endorsement of cryptocurrencies by former US President Trump is a form of support for the cryptocurrency market, and it may have a multiplied effect on the prices of Ether and other cryptocurrencies in the future.
Regarding the High FDV dilemma: questioning and exploring, FDV refers to the fully diluted valuation of a token, which is the market value obtained by multiplying the current token price by the circulating supply. In the upward cycle of the industry, most investors consider high FDV as an important indicator for investment. Among the various discussions, a major disagreement lies in the fact that some people believe that the valuation of tokens after complete dilution has already become a bubble due to the current low circulation of most VC projects, which is only one-tenth or even lower than the total circulation. They argue that high FDV has no practical reference value in the short term, and investors who rely on high FDV as a basis for investment decisions will only stumble into a major investment trap, especially for new investors.
On the other hand, opponents believe that this is entirely determined by the market’s supply and demand relationship and cannot be considered as interference. Especially during the recent market downturn, a series of VC projects were cut off, which was primarily caused by insufficient industry liquidity. Moreover, the industry’s development tends towards specialization, and the logic and standards of “price and value discovery” in investment exploration are changing. It is not appropriate to simply attribute the problem to the high FDV of projects with rigid thinking and perspectives.
Indeed, the cryptocurrency industry is developing well, and incremental growth is a necessary consideration. Through the unremitting efforts of numerous evangelists and pioneers within and outside the industry, the successful approval of BTC ETF has brought continuous incremental growth to the industry, pushing the total global market capitalization of cryptocurrencies to $2.6 trillion, with Bitcoin’s market value at $1.37 trillion, ranking ninth globally in terms of assets (according to data from companiesmarketcap.com). The subsequent approval of Ethereum ETF will undoubtedly bring more incremental growth, not only in terms of funds but also in terms of investors/users. Therefore, how to avoid the trap of high FDV has become a strong demand for many new investors and even some industry veterans.
To overcome the high FDV dilemma, the key lies in the selection of exchange projects. Undoubtedly, ETFs will inevitably attract incremental users and funds, while the “High FDV Dilemma” ultimately leads to the reduction of existing tokens, resulting in a situation of one gain and one loss. In the long run, this is not conducive to the normalization, scaling, and sustainable development trends of the cryptocurrency industry. To solve the high FDV dilemma, we need to understand why VC projects tend to have a “low circulation, high valuation” setting: under the established market demand, due to the scarcity of short-term market liquidity, a lower circulation of project tokens is more conducive to setting token prices. Here, we have to mention three roles: exchanges, new users, and VCs. We know that professional traders/investors have their own set of investment concepts and are naturally excluded from this discussion. The setting of “low circulation, high FDV” for project tokens by VCs is mainly to have a higher pricing power at the initial listing of tokens in order to better achieve the goal of pushing up FDV. Therefore, the key role in solving the “High FDV Dilemma” for new users can only be played by exchanges.
As a globally leading cryptocurrency exchange committed to making cryptocurrency trading easier, CoinEx believes that only by continuously focusing on refining products and services, improving user experience, and persistently launching high-quality assets to meet the diverse investment needs of users, can more cryptocurrency users be served. In this process, project selection is a key factor, and exchanges must play a full role to help more investors avoid the “High FDV Dilemma.” CoinEx has been continuously optimizing its project selection criteria and gradually forming a listing mechanism based on “good, fast, and comprehensive.” It focuses on discovering and paying attention to innovative high-quality projects with low valuations and high growth, which has gained the favor of a large number of investors, especially new investors.
As guest TMJ said in the CoinEx-led X Space event:
“The future of the cryptocurrency industry is something we all eagerly anticipate.”
About CoinEx:
CoinEx was established in December 2017 and has always adhered to the brand concept of “user-first,” providing various products and services such as spot trading, perpetual contracts, leverage trading, staking loans, and strategy trading. With a user-driven market orientation, diverse product features, and excellent product services, CoinEx has become an exchange supporting 1,000+ coins, 1,500+ trading pairs, and serving over 5 million users from more than 200 countries and regions worldwide. It provides them with concise and intuitive, professional and stable cryptocurrency trading services, escorting them on their cryptocurrency journey.
This article is provided by the official source and does not represent the position and investment advice of this platform. Readers must conduct their own careful evaluation.
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