The Floki project, riding a 100% price surge in the past month, has proposed burning 190.9 billion FLOKI tokens, roughly 2% of its circulating supply. This move aims to increase scarcity and enhance security, potentially impacting the token’s future value.
Scarcity and Security: The Dual Purpose of the Burn
Burning tokens permanently removes them from circulation, potentially influencing the price through classic economic principles of supply and demand. In Floki’s case, reducing the circulating supply by 2% could theoretically increase the value of remaining tokens.
Furthermore, the tokens targeted for burning originate from the now-defunct Multichain bridge, compromised in a 2023 hack. Removing these tokens from the collapsed bridge eliminates potential security risks associated with them.
Will the Burn Lead to a Price Increase?
While the January 2023 burn involving over $100 million worth of FLOKI tokens saw a subsequent 70% price rise, historical performance doesn’t guarantee future results. The upcoming burn’s impact remains uncertain, especially considering its lower value of approximately $11 million.
However, the broader crypto market’s current bullish sentiment could favor Floki. Additionally, a recent $10 million pledge from a market maker to buy FLOKI has already shown positive market response.
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Looking Forward: Hype and Potential Rise
The proposed burn, coupled with the general market sentiment and recent buying commitments, could lead to a significant rise for FLOKI. This could potentially help it regain lost ground and climb back from its current position as the 130th largest cryptocurrency by market cap.
However, it’s crucial to remember that the cryptocurrency market remains volatile, and investors should exercise caution and conduct their own research before making investment decisions.
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