Netflix's Squid Game TV series has taken the internet by storm. Now, it has inspired a cryptocurrency named Squid Game (CRYPTO: SQUID), which has soared exponentially since its inception in late October before crashing. While it is tempting to jump on a hype train, the Squid token is a painful lesson for crypto speculators. Let's dig deeper.
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1. The rally was speculative
Premiering in September on Netflix, Squid Game is a South Korean survival drama in which adults play dangerous children's games for the chance to win a cash prize. The show has been a huge success, with over 142 million member households watching it in the first four weeks -- making it Netflix's most-watched series to date.
According to Netflix's management, Squid Game has "pierced the cultural zeitgeist," inspiring everything from Halloween costumes to viral videos on TikTok. Some of the hype bled into the cryptocurrency market with investors pouring into a token called Squid Game, which soared by over 400,000% since its Oct. 26 launch before falling 99.99% on November 1.
With a self-reported market cap of $360 billion before the crash (according to unverified data coinmarketcap.com), Squid Game may have been the third-largest cryptocurrency on earth, worth more than Netflix itself ($306 billion). But the rally had little fundamental basis. According to CNBC, Netflix has nothing to do with the token and doesn't endorse it. And the surge in popularity may have come from its viral promotion efforts (pumping) on platforms such as Twitter and Meta Platforms.
2. You might not be able to sell the Squid Game token
Emulating the Squid Game TV show, Squid token aims to build a decentralized play-to-earn ecosystem (without the violence). According to its developer's white paper, the platform will feature six games. Players must start from the first game and advance by winning (surviving) to reach later rounds. Each game will have an entry fee (paid in Squid tokens) that will form a reward pool for the winner at the end of the tournament.
Image source: Getty Images.
But while Squid token's proposed game could create value for gamblers, its developers have not revealed when they expect the project to launch or provided much light on their progress so far. Cypto news platform, Coindesk, reports that Squid's developers have abandoned the project after the Squid token's dizzying crash. Further, the asset has some troubling features that could harm investors.
According to coinmarketcap.com, multiple users have reported being unable to sell their Squid tokens. This problem may be due to the coin's "anti-dump mechanism," designed to reduce the number of Squid tokens investors can sell based on the value of its rewards pool (and it is unclear if the rewards pool currently exists). In the near term, this feature could help boost Squid token prices by reducing selling pressure. But investors found themselves locked into a crashing asset when sentiment soured. The tokens also seem to be removed from Pancakeswap, one of the few exchanges that hosted the coin.
A super-risky cryptocurrency
Many people are getting rich by betting on speculative cryptocurrencies, but the Squid Game token is an example of how risky it can be to try and find the next Dogecoin or Shiba Inu (SHIBA +0.00%). While Squid's developers presented a compelling plan to create a play-to-earn ecosystem, the coin's inflated valuation and questionable anti-dumping mechanism left investors badly burned and holding the bag when the token crashed.
