Boom and bust of Squid Game memecoin reveal dark side of cryptocurrency

(Natural News)
The boom and bust of memecoin sensation Squid Game or Squid revealed the dark side of cryptocurrency.

According to CoinMarketCap pricing, Squid – inspired by the Netflix hit series “Squid Game” – surged more than 230,000 percent in the past week to $2,861.80 only to plunge 100 percent to less than half a cent as of Monday, Nov. 1.

“Betting on the right coin can lead to jaw-dropping riches,” said Antoni Trenchev, co-founder of crypto lender Nexo. “The problem is, what goes up in a straight line tends to retreat in a similar fashion. You hear that some memecoin investors don’t care about the losses. But once the selling starts, a cascading effect can play out. So it’s wise to only use money you can afford to lose.”

However, investors cannot be faulted for betting on Squid.  The S&P 500 Index more than doubled in the past five years, and Bitcoin rocketed more than 80-fold – albeit with much of the rally occurring in the past year. Memecoins like Dogecoin and Shiba Inu have also surged, often for no particular reason.

Some digital assets have had eye-popping gains, with the past year’s bull market spreading beyond the likes of Bitcoin and Ether to other tokens, decentralized finance projects and more. Dogecoin, which started in 2013 as a joke, has soared 10,000 percent in the past year, according to CoinGecko pricing. Shiba Inu, which was created just last year, has soared more than 90,000,000 percent.

What happened to Squid revealed another side of the cryptocurrency frenzy. There’s always the possibility for demand to suddenly dry up or for developers to abandon a project and abscond with the funds in a scam known as a rug pull. (Related: The bitcoin bubble explained: Understanding the mathematics of the inevitable bitcoin crash.)

Whether that’s what happened with Squid is still unclear. But even before the drop, there were inconsistencies around trading. CoinMarketCap posted a warning that it had received “multiple reports” that users weren’t able to sell the token on PancakeSwap, a decentralized exchange.

“Please do your own due diligence and exercise extreme caution. This project, while clearly inspired by the Netflix show of the same name, is not affiliated with the official IP,” it says at the top of the Squid page, referring to intellectual property.

Cryptocurrency frenzy driven by younger people willing to take risks

Raoul Pal, the co-founder of crypto investment platform Real Vision Group, said that the cryptocurrency frenzy is part of a seismic shift driven by younger people who aren’t looking for modest returns, but are instead willing to take huge risks in order to make huge amounts of money.

Others trace the speculative frenzy to the mountains of cash floating around the global financial system as the Federal Reserve and other central banks keep monetary spigots open to counter the effects of the Wuhan coronavirus COVID-19 pandemic. But these easy-money policies have an eventual expiration date.

“There’s just a lot of money looking for the best theme. Silly or otherwise. The ‘hot ball of money’ effect,” said Jonathan Cheesman, head of over-the-counter and institutional trading at crypto derivatives exchange FTX.

One consequence is that crypto projects that have invested significant time and energy from knowledgeable people who want to apply the technology to create utility – whether it’s in financial tools like with DeFi, or ownership rights like with NFTs or countless other potential areas – find themselves outranked by tokens that were seemingly created with almost no effort at all.

“It is somewhat intellectually insulting to see a meme coin like #SHIB have a higher market cap than other projects like #Algorand, #Avalanche #Polygon #Stellar where years of R&D, innovation and PhD talent and time has been dedicated to advancing this space,” PwC Global Crypto Leader Henri Arslanian said.

Crypto has delivered some wild rides. This reality may be easy to forget with Bitcoin and Ether both trading near all-time highs. Bitcoin, for example, dropped more than 80 percent from high to low between December 2017 and December 2018.

One doesn’t need to go back that far to find another example. Just look at Dogecoin earlier this year.

“On April 13 it was priced at 7 cents; 25 days later it peaked at 74 cents, and raced into the top 10 cryptos before slumping almost 80% in the next six weeks,” Nexo’s Trenchev said. “That’s how fast the crypto market can turn against you.”

Investment history is strewn with examples of booms and busts. The verdict on this current craze has yet to be determined, but individuals who are piling in now risk learning a hard lesson somewhere down the line. Squid investors already did.

Follow BitcoinCollapse.news for more news related to the boom and bust of cryptocurrencies.

Sources include:

Finance.Yahoo.com

AnandMarket.in

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