In the past few weeks, many people have written articles on the topic of low circulation/high FDV tokens. Here, I would like to supplement some insights with two charts.
Not Circulating Supply and Recent Performance
The following image shows the percentage of circulating supply of tokens and the market performance over the past 3 months. The color of the circles represents the number of months since the project was launched (lighter/darker circles represent more recent/older projects).
What can we observe?
1/ Memecoins perform the best. Their total supply has been circulating since day one. Interestingly, both old Memecoins (SHIB, FLOKI) and new Memecoins (BOME, WIF, PEPE) have performed exceptionally well.
2/ The worst-performing projects are newer VC projects, among which the "Non-Circulating Supply (NCS)" portion is very high.
3/ Interestingly, there are some outliers.
Both projects are scheduled to be listed in January 2024. This indicates that new projects with a high circulating supply that have not yet been traded can still perform well.
Why can these tokens stand out? The answer is narrative (introduced later in the text).
Now exclude the abnormal values of Memcoin and let's take a closer look at the distribution.
Careful observation reveals that although projects with higher NCS tend to underperform, there is no clear distribution pattern in projects with extremely low or high NCS.
For example, the market performance of high-quality projects with lower NCS, such as FXS (NCS 20%), MASK (NCS 4%), and RPL (NCS 0%), in the past 3 months were -44%, -10%, and -22% respectively.
From a positive perspective, we observe that projects with lower NCS tend to perform better regardless of project duration.
My conclusion is that in general, market conditions and narratives are the main factors determining asset performance. However, high NCS projects tend to perform poorly and are usually better options during hedging or bear markets.
Low Circulation / High FDV vs. High Circulation / Low FDV
If "low circulation / high FDV" is not good, then what about "high circulation / low FDV"?
I checked the top 500 projects ranked by market capitalization in 23/24 and classified projects with NCS higher than 80% as low circulation.
Let's take a look at the specific data.
It can be seen that the performance of projects with low circulation / high FDV is quite poor, with only two clear exceptions: ONDO and JTO (guess why).
On the other hand, ignoring a few Memecoin outliers, projects with high circulation and low FDV typically perform better.
So what?
Finally, back to the question that concerns all of us: which altcoins should we buy?
Low circulating supply / high FDV projects tend to perform poorly. Of course, there are 2 or 3 exceptions, but are you willing to make the effort to find these exceptions? You can, but it takes a lot of effort and there is no guarantee of success.
Meanwhile, although the data shows that Memecoin performs well in this regard, you may be reluctant to trade Memecoin.
What should I do?
1/ Become a Narrative Trader
I have said it many times. If a project has enough demand, any selling pressure will be absorbed. And this high demand only comes from catalysts and narratives. Since I have extensively discussed this point, I will not elaborate on it here.
2/ Find the optimal balance point
There are two extremes: Memecoin's NCS is 0%, while the new VC token has a high FDV and over 80% NCS.
Assuming the best point is a project with NCS between 10% and 50%. Here are the top-performing projects recently.
FET, FTM, PENDLE, RNDR, AGIX, and AKT are all part of this category.
Now, by combining it with some basic narrative transactions, you can get even better results.
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
Low circulating/high FDV tokens have no prospects? Then how should we choose altcoins?
Words: Crypto Koryo
Compiled by: Luffy, Foresight News
In the past few weeks, many people have written articles on the topic of low circulation/high FDV tokens. Here, I would like to supplement some insights with two charts.
Not Circulating Supply and Recent Performance
The following image shows the percentage of circulating supply of tokens and the market performance over the past 3 months. The color of the circles represents the number of months since the project was launched (lighter/darker circles represent more recent/older projects).
What can we observe?
1/ Memecoins perform the best. Their total supply has been circulating since day one. Interestingly, both old Memecoins (SHIB, FLOKI) and new Memecoins (BOME, WIF, PEPE) have performed exceptionally well.
2/ The worst-performing projects are newer VC projects, among which the "Non-Circulating Supply (NCS)" portion is very high.
3/ Interestingly, there are some outliers.
Both projects are scheduled to be listed in January 2024. This indicates that new projects with a high circulating supply that have not yet been traded can still perform well.
Why can these tokens stand out? The answer is narrative (introduced later in the text).
Now exclude the abnormal values of Memcoin and let's take a closer look at the distribution.
Careful observation reveals that although projects with higher NCS tend to underperform, there is no clear distribution pattern in projects with extremely low or high NCS.
For example, the market performance of high-quality projects with lower NCS, such as FXS (NCS 20%), MASK (NCS 4%), and RPL (NCS 0%), in the past 3 months were -44%, -10%, and -22% respectively.
From a positive perspective, we observe that projects with lower NCS tend to perform better regardless of project duration.
My conclusion is that in general, market conditions and narratives are the main factors determining asset performance. However, high NCS projects tend to perform poorly and are usually better options during hedging or bear markets.
Low Circulation / High FDV vs. High Circulation / Low FDV
If "low circulation / high FDV" is not good, then what about "high circulation / low FDV"?
I checked the top 500 projects ranked by market capitalization in 23/24 and classified projects with NCS higher than 80% as low circulation.
Let's take a look at the specific data.
It can be seen that the performance of projects with low circulation / high FDV is quite poor, with only two clear exceptions: ONDO and JTO (guess why).
On the other hand, ignoring a few Memecoin outliers, projects with high circulation and low FDV typically perform better.
So what?
Finally, back to the question that concerns all of us: which altcoins should we buy?
Low circulating supply / high FDV projects tend to perform poorly. Of course, there are 2 or 3 exceptions, but are you willing to make the effort to find these exceptions? You can, but it takes a lot of effort and there is no guarantee of success.
Meanwhile, although the data shows that Memecoin performs well in this regard, you may be reluctant to trade Memecoin.
What should I do?
1/ Become a Narrative Trader
I have said it many times. If a project has enough demand, any selling pressure will be absorbed. And this high demand only comes from catalysts and narratives. Since I have extensively discussed this point, I will not elaborate on it here.
2/ Find the optimal balance point
There are two extremes: Memecoin's NCS is 0%, while the new VC token has a high FDV and over 80% NCS.
Assuming the best point is a project with NCS between 10% and 50%. Here are the top-performing projects recently.
FET, FTM, PENDLE, RNDR, AGIX, and AKT are all part of this category.
Now, by combining it with some basic narrative transactions, you can get even better results.