GSR’s research and advisory teams reviewed token listing records across major exchanges dating back to 2013 and said low-float, high fully diluted valuation (FDV) launches have repeatedly produced weak follow-on performance. The dataset covers more than 2,300 token issuances and tracks performance, initial circulating supply, listing FDV, and sector classification for each deal.
The article, written by Josh Riezman, GSR’s chief legal and strategy officer, and Slater Santer, a research analyst at GSR, and translated by ChainCatcher, says the study includes tokens that later lost active trading or were delisted. In its view, that avoids overstating results through survivor bias. On a median basis, tokens fell below their listing price within three days of exchange trading and were down 50% within 90 days.
Initial float was cut back while valuations did not fall with it
GSR says early token issuance models had plenty of flaws, but they did place assets in public hands earlier. In 2017 and 2018, the median initial circulating supply at first listing ranged from 38% to 41%.
As enforcement tightened, fundraising shifted toward private rounds and issuance structures changed with it. According to the article, venture rounds increasingly set valuation benchmarks, while points systems and airdrops replaced public sales. By 2020, the median initial circulating supply at listing had dropped to about 13%. It later recovered somewhat, but in most years remained in the teens or just above 20%.
The report says looking at circulation alone understates the problem because float has to be read together with valuation. Releasing 5% of supply for a token with an FDV below $50 million is very different from releasing 5% for one listed at a $1 billion FDV.
Its grouped data shows the same pattern clearly:
- Tokens listed below a $10 million FDV had a median initial circulating supply of 97%.
- Tokens listed between $10 million and $100 million had a median of 28%.
- Tokens listed between $500 million and $1 billion had a median of 16%.
- Tokens listed above $1 billion had a median of 13%.
GSR says this was not a coincidence. In its reading, the market gradually settled into a model where higher valuation came with thinner tradable supply.
Why these structures keep producing losses
The article argues that when only a small share of total supply is available for trading, even limited demand can push up the valuation implied for the entire token. Listing participants can all benefit on day one. Venture investors get their holdings marked to the listing price, teams can value retained allocations at the same level, and trading venues get a headline-grabbing high-valuation asset. Buyers, by contrast, would only benefit from a lower entry price.
Then the unlock schedule starts to matter. Tokens that were not part of the initial float enter the market over time on a public timetable and can be sold against a price first established by a much smaller circulating base. GSR says this outcome does not require bad intent from any party. The structure itself is enough to align incentives toward the same result.
Median post-listing performance in the study was weak throughout the first year. Tokens dropped below issue price within three days, were down about 20% to 25% after one month, and fell close to 50% after 90 days. In the group of projects listed above a $1 billion FDV, $1 invested was worth only $0.19 after 360 days, equal to a median one-year return of -81%.
The same split appears when the sample is grouped by initial float. Tokens with less than 20% circulation at listing were worth about $0.23 to $0.26 per $1 invested after a year. Tokens with 30% to 50% initial circulation retained about $0.55 per $1, more than double the lower-float group.
GSR adds one qualification. The pattern does not hold once initial circulation approaches 100%, because that bucket is made up mainly of low-cap tokens and meme coins. Even so, within the part of the market that attracts the most attention, projects that launched with broader distribution and higher initial circulation outperformed those that tried to manufacture scarcity through low float.
GSR draws a parallel with the IPO market
The firm says low initial float and high FDV should not be treated as a crypto-only issue. In the article, it argues that the equity market has also been moving in a similar direction.
It points to companies such as SpaceX staying private for as long as a decade, while insiders and later-stage funds accumulated positions as valuations rose. By the time shares reached the public market, only a small portion of the company was made available to outside investors. Measured on a three-year buy-and-hold basis, each annual IPO cohort since 2019 has underperformed the market, and the most recent groups have been among the worst on record.
That, GSR says, makes the token issuance problem part of a broader issue in modern new-issue markets, though crypto moves faster because token unlocks happen more quickly and disclosures are thinner.
Three areas the article says need to change
GSR says there is no single structure that solves every issuance problem, but its review of hundreds of launches points to several areas where the setup can be improved.
Pricing should leave room for holders and traders
The article says durable communities tend to form around assets that the public can buy early and at lower prices. If a project prices the first public allocation at the highest private-round valuation, the effect is the opposite: holders start from an entry price that may disappoint, and traders step away.
GSR writes that a token that falls from day one will struggle to sustain two-way trading and will not offer enough reason for short-term traders to participate. When holders want to sell, there may not be enough bids in the market. In that framework, the two groups support each other: traders provide liquidity and price movement, while holders create a stable base of demand that makes the market worth trading. If the offering price works only for insiders, the project risks losing both groups.
Its conclusion on this point is straightforward. Projects should sell to the community earlier and at lower prices, rather than waiting until valuation peaks before giving the public its first access to the asset.
Enough supply should be released for real price discovery
GSR says the amount released at listing should sit well above the 13% to 20% range seen from 2020 to 2022, and it should always be judged together with valuation rather than on a standalone percentage basis.
As a reference point, the article says stock IPOs typically sell about 30% of shares to the public, while 50% would already be considered high. For large crypto assets, releasing more than half of supply at listing would not usually be appropriate either. The objective is to make day-one circulating supply large enough that the opening market price carries real informational value.
Broader participation should come earlier
The article says access matters as much as initial circulation. In recent years, co-investment platforms have expanded and gained traction, letting smaller investors participate on venture-style terms. It also points to token allocations for real users screened by reputation, public sale platforms, onchain auctions, and full-float fair launches.
GSR says each model involves trade-offs, but all of them push participation wider.
On regulation and compliance, the article notes that the European Union’s Markets in Crypto-Assets regulation, or MiCA, already allows issuers to sell tokens directly to the public. In the United States, the current draft of the CLARITY Act is described as considering capped direct sales to retail investors.
According to GSR, if that bill passes, the claim that securities law forces projects into a private accumulation model would lose much of its force. At that point, token issuance structure would become less a passive result of regulatory constraint and more an active design choice for project teams.
The article also discloses that GSR is active in token issuance and secondary market business lines, including market making and liquidity support for foundations, project teams, and early investors, as well as issuance and listing advisory, OTC execution, and block trading services.