Oversaturation of Tokens: Fragmented Volume in the Crypto Market
The number of new tokens on the crypto market is skyrocketing, already totaling over 37 million. Significant market fragmentation results from the daily introduction of new coins into the ecosystem. Due to investor interest and liquidity being dispersed throughout an expanding pool of assets, this overstock has caused trading volumes to become diluted.
Spreading trade volume across several tokens reduces liquidity for individual coins. Low liquidity makes it harder for traders to carry out significant transactions without affecting prices, which frequently results in increased price volatility. Institutional and ordinary investors may find it difficult to distinguish currencies with solid fundamentals from the number of new initiatives because of this fragmentation.
Source: Binance Research
The steep price declines that occur after TGE are one worrying trend in the cryptocurrency space. Following the launch of their tokens, well-known projects like Azuki, Story Protocol, and Berachain have had harsh dumps.
Following its TGE, the much-anticipated project Berachain had a sharp drop in price, resulting in significant losses for early investors. Story Protocol, which focused on content generation infrastructure, saw a similar drop in price following TGE and failed to sustain its initial enthusiasm. Azuki, which was well-known for collecting NFTs, also faced challenges; the token’s value plummeted soon after its launch.
These patterns indicate that the gap between pre-launch enthusiasm and post-launch results is widening. After a TGE, many tokens lose value, which begs the question of how useful they are and how much investors trust these kinds of enterprises.
Investor Sentiment Shifts Amid Market Saturation
Investors are becoming more cautious because of the increasing amount of tokens and the frequency of post-TGE dumps. Projects with sustainable models and validated use cases are becoming more and more popular. Since it is difficult to spot promising chances due to oversaturation, this change demonstrates a preference for quality over quantity.
Moreover, investors are growing cautious of speculative debuts. Projects that don’t stand out or make progress after TGE are probably going to lose favor. Because of this, it is now necessary for fresh tokens to exhibit distinct value propositions and strong foundations in order to garner sustained interest.
The quick growth of tokens has led to a fragmented trading environment, according to statistics from recent market reports. The average trading volume for individual tokens is decreasing as more tokens are introduced. This lowers the possibility of steady price stability in addition to having an impact on liquidity.
Hard dumps are occurring for projects that are unable to obtain robust community support and continued development after TGE, with prices falling by double-digit percentages. For example, within weeks of its inception, Azuki’s token fell by more than 50%, indicating a lack of trust in the project’s plan. Projects find it more difficult to restore momentum once these severe dumps deter potential investors.
Because of the state of the market, new projects need to be innovative and credible as in the case of Hyperliquid. Token launches must produce quantifiable results and surpass enthusiasm in a crowded market. To stand out, projects increasingly need to have strong community involvement, open communication, and obvious utility.
