On May 22, 2024, a major discussion initiated by CoinEx on X (CoinEx Global) titled “ETH ETF VS. High FDV Dilemma: Where Market Goes Next” has attracted the attention of crypto investors and quickly spread in some communities. Thanks to the recent high level of attention and discussion among investors on topics such as “Ethereum ETF,” “High FDV Dilemma,” “high market capitalization and low circulation,” and “VC projects” in the cryptocurrency field, as of the time of drafting, the attention on this event is still fermenting.
In the discussion led by CoinEx, guests all agree that the market has high expectations for the approval of the Ethereum ETF, though they are unsure when it will happen, tomorrow or soon later.
WoShy @bc1qWorkShy confirmed the expectations by citing the recent price surge of Ethereum and adding that every SEC’s decision on crypto assets in history has had a significant impact on the long term price of cryptocurrencies.
VIP3 @web3vip stated that the endorsement of cryptocurrencies by U.S. former President Donald Trump gives support to the crypto market and would have multiple impacts on the price of Ethereum or even other cryptocurrencies in the future.
High FDV Dilemma: Questions and Explorations
FDV, namely Fully Diluted Valuation, refers to the fully diluted value of a token, which is the market value obtained by multiplying the current token price by the circulation. During the industry’s upward cycles, most investors consider FDV to be an important criterion for investment. Among the various discussions, a major point of contention is that some believe that due to the fact that the current circulation of many VC projects is only one-tenth or even lower than the total circulation, the valuation after full dilution of tokens has already 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 pitfall for new investors.
On the other hand, opponents argue that this is entirely determined by market supply and demand and cannot be intervened with. Especially in light of the recent downturn in the market, which exposed a series of VC projects being cut off, the fundamental reason is the lack of industry liquidity. Furthermore, the industry is moving towards specialization, and the logic and standards of “dual discovery” (price and value discovery) crucial for investment exploration are also changing. The issue cannot be simplistically attributed to the high FDV of projects with rigid thinking and perspectives.
Indeed, for the cryptocurrency industry to develop positively, increment 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 Bitcoin’s market value at $1.37 trillion, ranking ninth globally (according to data from companiesmarketcap.com). The subsequent approval of the Ethereum ETF will inevitably attract even more increments—not just in funds but also in investors and users. Therefore, how to avoid the High FDV Dilemma has become a strong demand for many new investors and even some industry veterans.
A Right Exchange Choice: Key to Avoiding High FDV Dilemma
Undoubtedly, ETFs will inevitably attract incremental users and funds, while the “High FDV Dilemma” ultimately leads to a reduction in existing stock. One increase, one decrease—this is not conducive to the normalization, scaling, and sustainable development trend of the cryptocurrency industry in the long run. To address the High FDV Dilemma, we need to understand why VC projects tend to set “low circulation, high valuation”: because 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 and investors have their own set of comprehensive investment philosophies and are naturally excluded from this issue. The setting of “low circulation, high FDV” by VCs for project tokens is mainly to have higher pricing power at the launch of tokens in order to better achieve the goal of boosting FDV. Therefore, the key role in truly addressing the “High FDV Dilemma” faced by new users can only be played by exchanges.
As a globally leading cryptocurrency asset trading platform dedicated to making cryptocurrency trading simpler, CoinEx believes that to ensure the quality of our services to our customers, we must continuously focus on refining products and services, improving the user experience, and constantly introducing high-quality assets to meet the diverse investment needs of our users. In this process, project selection is a major key, and exchanges need to fully play their role in order to free more investors from the “High FDV Dilemma.” CoinEx has been continuously optimizing its project selection criteria, gradually forming a listing mechanism based on “good, fast, and comprehensive,” and focusing on discovering and paying attention to innovative high-quality projects with low valuations and high growth, winning the favor of a wide range of investors (especially new investors).
As TMJ said in the X Space event led by CoinEx, “Those projects would have their own price discovery; all they need is time.” We are all eagerly awaiting the future of the cryptocurrency industry.
About CoinEx
CoinEx, founded in 2017, is a global cryptocurrency trading platform with a “user first” brand ethos. It offers an array 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 1,000+ cryptocurrencies, offers 1,500+ trading pairs, and serves over 5 million users in 200+ countries and regions worldwide. We provide our users with a simple, intuitive, professional, and stable platform for cryptocurrency trading, ensuring a smooth journey in their crypto endeavors.
