Why Investors Are Unanimous In Their Backing Of Token Splits

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Decen­tral Games, a meta­verse and play-to-earn plat­form is the sec­ond blockchain project to launch a token split ref­er­en­dum after its $DG com­mu­ni­ty vot­ed over­whelm­ing­ly in favor of the mea­sure.

The first, Polka­dot token, DOT, saw its val­ue more than dou­ble in sev­en days fol­low­ing their token 1:100 token split. Token splits in the cryp­to sec­tor have been likened to cor­po­rate stock splits by experts.

Stock splits are known to attract new investors, dri­ve up com­pa­nies’ total mar­ket cap­i­tal­iza­tion, and increase their liquidity.

When a stock splits, it can also result in a share price increase—even though there may be a decrease imme­di­ate­ly after the stock split, accord­ing to Investo­pe­dia.  

It goes on to state that this is because small investors may per­ceive the stock as more afford­able and hence­forth buy the stock. That effec­tive­ly boosts demand for the stock and dri­ves up prices.

“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,” said Mati Greenspan, CEO and Founder of Quan­tum Eco­nom­ics and for­mer eToro Senior Mar­ket Analyst.

“I don’t know why but investors just seem to like to invest in things that are cheap­er for psy­cho­log­i­cal rea­sons,” Mr. Greenspan added.

Splits in crypto

So the ques­tion is, how does this trans­late to the cryp­to sphere? Mati Greenspan said it is dif­fi­cult to say as it is not com­mon in this bur­geon­ing sector. 

In cryp­to, splits are rare, but ear­li­er this year, the Polka­dot token, DOT, saw its val­ue more than dou­ble in sev­en days fol­low­ing their 1:100 token split.

In July, Forbes report­ed that ‘DOT prices have risen from $5 to $40 since a token rede­nom­i­na­tion last year.

This Sep­tem­ber, Decen­tral Games held a com­mu­ni­ty ref­er­en­dum to decide on a 1:1000 token split.

$DG investors vot­ed over­whelm­ing­ly (99.6%) in favour of the measure.

The Decen­tral Games token split does not affect its $DG mar­ket cap­i­tal­iza­tion or mar­ket val­ue. Once the token split comes into effect, its price is divid­ed by 1,000, which means that from $1000 per token, for exam­ple, each $DG will be worth $1.00.

There­fore, an investor with 10 $DG in their wal­let at a $1000 per token val­u­a­tion has assets total­ing $10,000. After the token split, that same investor would have 10,000 $DG worth $1.00 each for a total of the same $10,000.

Will decentral gamers see a token price increase?

“We firm­ly believe the $ DG’s com­mu­ni­ty vote in favour of the token split paves the way to a stronger adop­tion of Decen­tral Games for years to come,” said DG CEO and Founder Antho­ny Miles.

“It will also increase the over­all main­stream acces­si­bil­i­ty of $DG, and incen­tivize greater par­tic­i­pa­tion in Decen­tral Games’ gov­er­nance process.” 

Jason Fer­nan­des, NFT Tech­nolo­gies CBO and promi­nent cryp­to mar­ket ana­lyst, expressed his views on a token split. 

“A token with a low­er price has more poten­tial to 20x or even 30x than one that has a high­er price most­ly for psy­cho­log­i­cal fac­tors. Those tokens that cost frac­tions of cents rather mul­ti­ples of dol­lars have his­tor­i­cal­ly dis­played a greater poten­tial for price growth.”

When asked about Decen­tral Games’ $DG split, Fer­nan­des com­ment­ed: “The split will make it eas­i­er for them to increase the price of their token over time but per­haps, more impor­tant­ly, will also help with gov­er­nance. A split will help dis­trib­ute the token to a wider group of peo­ple, and that should make for a more demo­c­ra­t­ic deci­sion-mak­ing process among token hold­ers on mat­ters of governance.”

“When a blockchain project has a par­tic­u­lar­ly low max­i­mum token sup­ply, it could make sense to launch a token split,” explained Fernandes.

Decen­tral Games’ max­i­mum $DG token sup­ply is cur­rent­ly one mil­lion. “That is unusu­al­ly low based on cur­rent mar­ket con­di­tions, and so a split will help bring it in line vis-a-vis oth­er gam­ing tokens,” added Fernandes.

Always result in a price uptick

“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.” sum­ma­rized Fernandes.

It is report­ed that DG’s 1:1000 token rede­nom­i­na­tion will hap­pen on Novem­ber 23, 2021. 

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