Since last Friday, OKB (OKB 0.26%), the native cryptocurrency of the crypto exchange OKX, has risen close to 108% as of 1:22 p.m. ET Thursday. The main reason for the move is because OKX plans to eliminate tens of millions of OKB tokens.
A key part of one of the largest crypto exchanges
The San Jose-based OKX crypto exchange is the second-largest cryptocurrency exchange in the world based on daily trading volume. In 2018, the exchange launched a native token called OKB with a fixed supply of 300 million that is regularly reduced through burning and repurchases. OKB started as an ERC-20 token, meaning it was built on Ethereum's blockchain. However, the token eventually left Ethereum and started trading on OKX's own blockchain.
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OKB is used by OKX for different programs on the exchange, and has been integrated by financial service providers, payment processors, and even some merchants, among other businesses.
However, the big reason for OKB's move this week is linked to OKX's decision to eliminate over 65 million OKB tokens through a one-time burn from previous repurchases and Treasury reserves. Following this, OKB will have a total supply of 21 million. This likely created a strong move based on completely new supply-and-demand dynamics.
Scarcity is a powerful tool
I find it interesting that the new fixed supply of OKB is similar to that of Bitcoin, the world's largest cryptocurrency.
CRYPTO: OKB
Key Data Points
As of this writing, OKB trades for $93, which is much cheaper than Bitcoin. Could investors who believe in Bitcoin as a form of digital gold latch on to OKB as a cheaper crypto hedge against inflation? It's possible, but I still can't say with any certainty that any cryptocurrency including Bitcoin can actually hedge inflation.
While I do see some attractive characteristics associated with OKB, I am still advising caution after such a big move. It's still too early to invest anything more than a smaller, more speculative position that you are prepared to lose.
