ai16z and VVV see double-digit price drops since ‘death-trap’ perps listings, analyst says

AI tokens like ai16z and Venice Token (VVV) have suffered severe price drops since their listings on Binance’s perpetual futures market. ai16z, which was priced at $2.42 on January 2, fell by over 84%, now worth just $0.38. Similarly, VVV, which was valued at over $18 at the end of January, has dropped by 67%, now trading at $5.82.In early January, Binance launched perpetual futures for ai16z — whose associated DAO has since been rebranded as ElizaOS — and later that month introduced VVV, the native token of the AskVenice AI infrastructure platform. These listings have raised concerns about their alleged role in exacerbating price volatility."Binance’s perpetual futures listings have become a death trap for many popular recent tokens, from ai16z to vine," Arete Capital founding partner Ilya Paveliev told The Block. "Instead of fostering healthy price discovery, these listings create an easy way for traders to short tokens aggressively while dumping their spot holdings."Perpetual futures markets, unlike spot markets, enable traders to influence prices with relatively low capital. While spot prices reflect organic buy demand, perpetual futures can allow significant market influence by large players, according to Paveliev. "Market makers, who should provide stability, often step back after listing, letting prices crash," he added.The Arete Capital founding partner said that introducing perpetual futures for low-liquidity tokens exacerbates price swings, favoring short-term traders over long-term holders. "Binance Alpha’s model prioritizes hype, following AI and meme trends, over fundamentals, leaving retail investors exposed," Paveliev said. "So, the industry has trust and reputation problem."Paveliev highlighted a broader issue with the current structure of centralized exchange listings, alleging that tokens are often subjected to aggressive market strategies with little regard for long-term sustainability.Binance was approached for comment regarding these concerns but did not respond by the time of publication.Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.© 2024 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.