On May 22, 2024, a discussion titled “Ethereum ETF vs. High FDV Dilemma: What is the Future Market Direction?” initiated by CoinEx on X (CoinEx Global) drew the attention of cryptocurrency investors and quickly spread in some communities. Due to the recent high interest and discussion among investors in the cryptocurrency field regarding topics such as “Ethereum ETF,” “High FDV Dilemma,” “High market value and low circulation,” and “VC projects,” the level of attention for this event is still escalating as of the time of writing.
In the discussion led by CoinEx, the guests unanimously agreed that the market has high expectations for the approval of Ethereum ETF, but they are unsure when it will be approved, whether it is tomorrow or in the near future. WoShy @bc1qWorkShy believes that the recent surge in the price of Ether validates this expectation and adds that every decision made by the SEC regarding cryptocurrencies in history has had a significant impact on the long-term price of cryptocurrencies.
VIP3 @web3vip stated that the recognition 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 price of Ether and other cryptocurrencies in the future.
Regarding the High FDV dilemma: questioning and exploration
FDV refers to the Fully Diluted Valuation of tokens, which is the market value obtained by multiplying the current token price by the circulation. In the rising cycle of the industry, most investors consider high FDV as an important investment indicator. Among the various discussions, a major point of contention is that some people believe that due to the low circulation of most VC projects, which is only one-tenth or even lower than the total circulation, the valuation after complete dilution of tokens has already become a bubble. In the short term, high FDV has no practical reference value, and relying on high FDV as a decision-making factor for investment will only lead to failure. This is undoubtedly a major investment trap 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 regarded as interference. Especially with the recent phenomenon of VC projects being cut off due to insufficient liquidity in the market, the fundamental reason is the lack of industry liquidity. Moreover, the industry’s development tends to be specialized, and the logic and standards of “price and value discovery” in investment exploration are also changing. The problem cannot be simply attributed to the high FDV of projects with rigid thinking and perspectives.
Indeed, the development of the cryptocurrency industry requires incremental considerations. With the unremitting efforts of numerous evangelists and pioneers inside and outside the industry, the successful approval of BTC ETF has brought continuous increment to the industry and pushed the overall global cryptocurrency market value to $2.6 trillion, with Bitcoin’s market value being $1.37 trillion, ranking ninth in the global asset ranking (according to data from companiesmarketcap.com). The subsequent approval of Ethereum ETF will undoubtedly attract more increments, not only in terms of capital, 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.
Overcoming the High FDV Dilemma: The key lies in exchange project selection
There is no doubt that the ETF will inevitably attract incremental users and incremental capital, while the “High FDV Dilemma” ultimately leads to a reduction in stock, resulting in a net increase or decrease. In the long run, this is not conducive to the normalized, scaled, and sustainable development trend 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: 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 talk about 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 topic. The setting of “low circulation, high FDV” for project tokens by VCs is mainly to have higher pricing power at the beginning of token launch in order to better achieve the goal of raising FDV. Therefore, the key role that can truly solve the “High FDV Dilemma” for new users can only be exchanges.
As a global leading cryptocurrency exchange platform dedicated to making cryptocurrency trading easier, CoinEx believes that only by continuously focusing on improving products and services, enhancing user experience, and persistently launching high-quality assets to meet the diverse investment needs of users, can it serve more cryptocurrency users. In this process, project selection is a key factor, and exchanges need to fully play their role to help more investors avoid the “High FDV Dilemma.” CoinEx has been continuously optimizing project selection standards 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 TMJ, a guest in the CoinEx-led X Space event, said:
“The future of the cryptocurrency industry is something we all eagerly await.”
About CoinEx
CoinEx was founded 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, leveraged trading, staking loans, and strategy trading. With user-driven market orientation, diverse product functions, and excellent product services, CoinEx has become an exchange supporting 1,000+ currencies, 1,500+ trading pairs, serving over 5 million users in 200+ countries and regions worldwide, providing them with concise, intuitive, professional, and stable cryptocurrency trading services, and escorting their cryptocurrency journey.
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