What happened
The price of the cryptocurrency KuCoin Token (KCS) spiked today after the KCS Management Foundation, the governing entity of KuCoin and its community, said today that 20 million KCS coins will be permanently burned. This term refers to the action of permanently taking coins out of circulation.
News of this move by the KCS Management Foundation pushed KuCoin's price up by 7.8% over the past 24 hours.
So what
The KCS Management Foundation released a white paper today, along with a press release, saying that it will build a payment system and expand the coin's ecosystem, with the eventual goals of building decentralized digital identities (DIDs), non-fungible token ownership rights, and the "construction of a metaverse network platform."
Image source: Getty Images.
KuCoin CEO Johnny Lyu said in a statement that the management team will "build a bridge between the centralized and decentralized world by connecting KuCoin and the KCC community, and lead the way for the creation of a self-circulation ecosystem with the community support and bring the blockchain from the geeks to the masses."
While expanding the coin's ecosystem could help eventually help increase the use of KuCoin, it's likely that the price of the token jumped today because 20 million of the coins will be permanently burned.
When this happens, it's similar to a company buying its own shares. The move adds immediate value to existing coins by reducing the amount that are in circulation.
Now what
It's not surprising to see the price of KuCoin jump today on this news. Crypto investors like to see the governing bodies of their tokens work to expand their usefulness, and they really like to see a coin's value increase by reducing its supply.
While KuCoin investors should be glad to see the cryptocurrency's price rise today -- adding to the token's 2X price increase over the past six months -- they should also remember that investing in cryptocurrencies is still pretty speculative right now and dramatic price swings are always possible.
