Token split proves to be an exciting addition to the ever-evolving cryptocurrency space. The concept shows similarities to corporate stock splits, attracting attention from new investors. In addition, it is a good way for projects to increase their market capitalization and improve overall liquidity.
Token Splits Are The New Paradigm
Finance enthusiasts may be familiar with the concept of a stock split. Such a measure is often deployed to attract new investors and tap into additional liquidity for the stock. Of course, there will be some potential market volatility following a split, and the price will head in a particular direction. However, it is a viable way of bringing stocks to smaller investors, as it becomes more affordable to invest in companies. As a result, stock demand will rise when new investors come in, and the prices will increase.
There is a similar trend in the cryptocurrency world, known as a token split. While it is not a standard method yet, some intriguing examples are. For instance, Polkadot's DOT token noted a price increase by over 100% in the days after its 1:100 token split. Moreover, the individual price of DOT increased by 800% in the first half of 2021, confirming there is a benefit to using such a concept.
Decentral Games, a metaverse and play-to-earn platform is the most recent project to introduce a token split. The team consulted the community first through a referendum regarding the 1:1000 token split. Over 99.5% of all $DG holders voted in favor of the split. It will not affect the market capitalization of Decentral Games or the market value of the $DG asset. Although a $500 $DG token will be worth $0.50 after the token split, investors will see the number of tokens they hold increase to maintain the same portfolio value.
There are several benefits to performing such a token split. The price per $DG token will become a lot more affordable for mainstream adoptions, it also makes working toward a future price increase more straightforward. Additionally, the split will provide a better token distribution for governance purposes, creating a more democratic and decentralized decision-making process. One has to consider Decentral Games opted for a 1 million $DG token supply, which is very low. Splitting the tokens makes sense, given how other gaming-related tokens are set up.
An Overall Boost For Decentral Games
There are several crucial takeaways from the Decentral Games (https://decentral.games/) token split voting. A first note is how the community overwhelmingly voted in favor of this idea. It is evident they see the benefits of making the tokens more accessible and distributed, both for price and governance purposes alike.
Decentral Games CEO and Founder Anthony Miles comments:
"We firmly believe the $ DG's community vote in favor of the token split paves the way to a stronger adoption of Decentral Games for years to come. It will also increase the overall mainstream accessibility of $DG, and incentivize greater participation in Decentral Games' governance process."
A second remark show Decentral Games communicated their plan rather well. As over 99.5% of $DG (https://coinmarketcap.com/currencies/decentral-games/) holders vote in favor, investors have little to no confusion. Getting the message across correctly and concisely is crucial when dealing with novel concepts like token splits. Moreover, there is a chance this decision will have a price impact at some point. NFT Technology CBO Jason Fernandes weighs in:
"A token split, when coupled with the correct messaging, will almost always result in a price uptick in the medium to long term. In gaming, particularly, a token split makes sense because gamers tend to think in terms of whole tokens as opposed to fractions. In DG's case, their price will be at around $0.50+ right after the split, and old school gamers who remember dropping quarters in arcade machines as kids will find that price particularly nostalgia-inducing."
A Tried And Tested Concept
There are many reasons why lower prices can attract new investors for projects like Decentral Games. Over time, a stock split has become apparent to attract more investors because of the lower entry value. The human psyche seems to favor such conditions, even though there is no change on a company's overall valuation or market capitalization.
Quantum Economics Founder and CEO Mati Greenspan adds:
"Increasing supply by decreasing value per share isn't supposed to have any effect on the price per share or the value of the overall market capitalization. However, for some reason, it works almost flawlessly every single time."
Following the $DG token split, there is more potential to 20x or more, per Jason Fernandes. In his opinion, lower-value tokens are less burdened by psychological factors. As a result, anything priced in cents or a handful of dollars will often display a higher potential for price growth. The $DG token will become more accessible and benefit from greater marketability and liquidity after the 1:1000 token redenomination on November 23, 2021.