AI Tokens Plummet on Binance Perpetual Contracts: A Death Trap for New Listings

The AI token market has witnessed a significant downturn, with several tokens experiencing substantial declines following their listing on Binance's perpetual contracts. The ai16z token, which reached a peak of $2.42 on January 2nd, has plummeted by over 84%, now trading at a mere $0.38. Similarly, the Venice Token (VVV) has seen its value fall by 67%, from over $18 at the end of January to its current level of $5.82.

Ilya Paveliev, Founding Partner at Arete Capital, has warned about the perils of Binance's perpetual contracts for recently trending tokens. He describes the contracts as a potential "death trap," suggesting they fail to promote healthy price movement. Traders can short these tokens aggressively while liquidating their spot positions, leading to further price instability.

The perpetual contract market differs significantly from the spot market, as it enables traders to influence prices with lower capital investment. This disparity creates volatility, as market makers often withdraw their participation after listings, exacerbating price instability.