But then, the tables suddenly turned, and the price of Squid crashed, hard.
What happened? Why did Squid crash? In this article, we’ll examine what caused the swift rise and fall of the Squid and what we can all learn from this financial disaster.
Why Was the Squid Crypto Created?
The Squid cryptocurrency was created ostensibly as the exclusive crypto of an online play-to-earn game called the Squid Game Project, which was supposed to launch in November 2021.
Play-to-earn games allow users that play the game regularly to earn crypto and NFTs that can be sold on crypto exchanges in exchange for other cryptocurrencies or fiat currencies. The player needs to put up an initial investment by purchasing the characters and items needed to play the game to participate. The exclusive cryptocurrency for the Squid Game Project was the Squid token.
The Squid Game Project was designed to imitate the six rounds of games in the hugely popular Netflix show with the same name. However, it was not officially affiliated with the Netflix show in any way. Its creators simply wanted to ride the wave of popularity of the Netflix show. Prospective players would be required to buy into the game by paying a preset price in Squid tokens and purchasing NFTs. These NFTs featured characters from the real Netflix show.
The game developers were supposed to get 10% of all fees raised while the rest went to the reward pool to give to the game’s winners. However, the Squid cryptocurrency crashed before the game went live, leaving investors holding the bag.
Why Did Squid Collapse?
Squid was launched on October 20, 2021.
At launch, it was worth one penny per Squid on the crypto exchanges PancakeSwap and DODO. A mere eight days after launch, one Squid was trading at $2.22, while the cryptocurrency reached a capitalization above $174 million. 11 days after launch, on the morning of November 1, the Squid was trading at the eye-popping value of more than $2,860 per token.
But this did not last long.
Just a few hours later, on the afternoon of November 1, a digital wallet dumped an enormous amount of Squid tokens and cashed out millions of dollars. Suddenly, the value of the Squid came crashing down from a high of over $2,680 per token to $0. Just like that, Squid was worthless, and over 40,000 Squid investors had lost their money.
The whole debacle, from launch to collapse, lasted just 11 days.
It is widely believed the dump was executed by the unknown creators of the cryptocurrency, who cashed out at least $3.38 million and vanished, a practice known as a “rug pull” (as in pulling the rug from under the feet of investors). The Squid website is now offline, and all its social media accounts have vanished. Its Twitter page is restricted due to what Twitter called “unusual activity.”
The Three Warning Signs Squid Investors Ignored
Hindsight is always 20/20, but a number of clues on Squid’s website should have put investors on high alert.
The website claimed to be in partnership with Netflix and Microsoft, a fact that was not corroborated by either company and which could easily have been fact-checked. Squid’s white paper (a document that is always published at the launch of a new cryptocurrency to describe the project to investors) was plagued with spelling errors. Investors were blocked from selling their Squid tokens in the open market unless the ratio of buyers to sellers was 2:1.
New cryptocurrencies are easy to create and list on cryptocurrency exchanges because there is no government oversight or regulation (part of which makes the crypto space so exciting but also dangerous). As a result, many naïve investors have been exploited by sharp crypto scammers. According to a Federal Trade Commission report, nearly 7,000 people reported losses of more than $80 million to crypto-related scams between October 2020 and March 31, 2021.
Therefore, the great Squid rug pull will be followed by others. Before buying into a new cryptocurrency, read its white paper thoroughly and perform due diligence on the founders to ensure they are people of integrity. And even then, invest only the money you can afford to lose. Not your life savings.
