The Binance report identified four investor themes from the crypto event, Token2049, that must be addressed to ensure cryptocurrency adoption.
Binance Holdings Ltd, the world’s largest cryptocurrency exchange in terms of daily traded volume and global registered users, has released its most recent market report derived from its analysis of recent crypto events. Market participants have expressed four primary concerns that must be addressed or investigated to guarantee safer investments in the future, as indicated by the Binance report.
Additionally, the ongoing regulations regarding cryptocurrency in various jurisdictions have prompted apprehensions regarding investor protection, a task that needs to be clarified by the underlying infrastructure. Furthermore, many investors have set aside their funds for alternative markets until specific conditions are met in the cryptocurrency sector.
Some new crypto projects are currently trading at a high valuation
The high valuation of certain new crypto projects launched with low circulating supply is the primary concern of most investors, as the Binance report indicates. In essence, the report underscored that certain new crypto projects at their Token Generation Event (TGE) have a high market cap, nearly identical to established projects, but a very low circulating supply.
Consequently, the value of the projects tends to decrease as early investors withdraw their funds to the limited secondary market during the subsequent token unlocks.
Risks of Centralization
Although the crypto industry has gained popularity due to its decentralized networks, a recent study indicates that certain crypto projects have a high concentration of top token holders.
For example, most tokens are held by early adopters, primarily developers and insiders, in specific meme coin projects.
It is intriguing that Binance observed that certain crypto projects have inflated the number of token holders through questionable methods. Additionally, on-chain data indicates that the transactions of the top account holders of certain crypto projects are highly interconnected, which suggests that a single entity is the owner.
The primary threat to governance is the high centralization of specific crypto projects, which leads to low community engagement.
Transparency of Funds Expended on Projects
Binance observed that investors need more transparency in expenditures even though most crypto projects, which have achieved greater decentralization, employ DAOs to manage funds. Binance observed that the majority of investors are drawn to projects that provide a more significant amount of financial transparency.
Polkadot, for example, has been the subject of intense market scrutiny following its most recent financial disclosure, which disclosed substantial expenditures on marketing initiatives that failed to generate results.
This year, the Ethereum Foundation has also been involved in numerous ETH sell-offs, with a total value of nearly $10 million. Nevertheless, the organization has disclosed that the funds are intended for grant financing and salaries.
“Enhanced transparency in the utilization of treasury funds promotes responsible financial management and encourages active engagement from governance token holders.” “We should endeavor to establish detailed fund disclosure as the standard,” Binance observed.
Rebranding
Throughout the years, numerous crypto projects have undergone rebranding efforts to attract new investors. The company’s name or native token may be incorporated into the rebranding. For instance, the native token of Polygon Network was recently rebranded from MATIC to POL. In addition, the Terra Luna network was rebranded as two networks following the significant collapse in 2022.
Nevertheless, Binance acknowledged that investors are apprehensive about projects that rebrand to conceal specific actions.