Arslan Barzow

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Cryptocurrencies are known for their volatility, but the recent failure of Squid Game tokens has brought to light a major problem in the cryptocurrency community: what happens when a cryptocurrency dies?
How dead cryptocurrencies appear
Creating your own fiat currency is almost impossible, but when it comes to cryptocurrencies, the barrier to entry is much lower - just look at the number of tokens on the market. Since 2017, the number of initial coin offerings (ICOs) has been growing, with over 8,000 cryptocurrencies listed on CoinMarketCap at the time of writing.
The rise in dead coins has been compared to the dot-com bubble of the late 1990s, when investors drove up the prices of Internet company stocks before the bubble burst, creating a bear market. A similar “bubble collapse” is now happening with cryptocurrencies. Roughly 69% of the 8,000 currencies listed on CoinMarketCap are worth less than $1. Many of them have failed and are of no use to anyone.
Why cryptocurrencies are dying
Fraud, unfortunately, is one of the main reasons for the appearance of “dead coins”. Fraudsters lure investors with the promise of high returns, then cash out once the price rises. Analysts at Satis Group in 2018 found that 80% of ICOs in 2017 were actually fraudulent projects.
Another reason for the emergence of “dead coins” are hackers who identify flaws in blockchains and profit from them. Recently, attackers have been using instant loans (flash loans) to manipulate prices and even steal from crypto storage. This caused prices to collapse and caused many unsuccessful cryptocurrencies to crash in 2021.
Luis Carranza, cryptocurrency expert and founder of NFT platform Fayre
Even if a project has good intentions, it can still join the ranks of failed tokens. “Most projects start with a dream of taking over the world and creating large-scale products for a huge audience,” says Luis Carranza, cryptocurrency expert and founder of NFT platform Fayre.
He suggests that tokens fail for two reasons: launch errors and problems with the cryptocurrency itself.
Others, according to Carranza, fail due to specific problems associated with cryptocurrencies, such as poor “tokenomics” (characteristics of the supply and demand of a cryptocurrency, a kind of business plan for a token - Ed.). “This can happen when a token is structured in such a way that it has low liquidity, short vesting cycles and short-sighted planning,” he explained.
Dead dreams
#Squid game token
Of all the dead coins in 2021, Squid Game is the most infamous. A South Korean series on Netflix was the inspiration for the token, which launched in late October and has stolen millions of dollars from users. The goal of the project was to use tokens in a play-to-earn game that had not yet been launched. The most alarming signal was that the tokens could not be sold after purchase.
The token debuted on the market at $0.04 on October 27 and rose to $35 by October 31. After the token attracted more investors, it soared to a peak of $2,856 on November 1 before falling to $0.002 on the same day, according to data from CoinMarketCap. The founders cashed out, leaving other investors in despair.
This type of scam is called rug pulling, and it thrives on decentralized exchanges because it allows users to list tokens for free without any auditing. The key feature of such a scam is a sharp jump in price within 24 hours, as it exploits the interest of people who do not want to stay away from a popular asset.
The developers of the Squid Game token cashed out at the peak of the price and earned $3.7 million, according to the BscScan transaction. Some investors have lost thousands of dollars in the scheme, with one investor telling CNBC that he invested his $28,000 savings in the token and lost it all.
How to Avoid Failure
“When it comes to new cryptocurrency “projects,” you need to understand that many of them are complete scams. “Many projects have no team, no technology, no value - they’re just a group of people wanting to create hype for a brand and grab some money,” commented Charlie Barton, investment specialist at UK financial platform Finder.
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