The value of a digital token based on the famous South Korean Netflix comedy Squid Game has plummeted after it was proven to be a hoax.
Squid, which advertised itself as a “play-to-earn cryptocurrency,” had seen its price surge by thousands of percent in recent days.
However, as reported by the BBC, it has been chastised for not allowing users to resell their tokens.
Crypto investors refer to this type of swindle as a “rug pull.”
This occurs when the promoter of a digital token attracts buyers, then suspends trading and withdraws the funds received from sales.
According to the technology website Gizmodo, Squid’s developers got off with an estimated $3.38 million (£2.48 million).
People who acquire “play-to-earn” cryptocurrency can earn more tokens by playing online games, which can then be swapped for other cryptocurrencies or national currencies.
Squid was trading at just one cent on Tuesday. Its value had risen to over $2,856 in less than a week.
According to cryptocurrency tracking website CoinMarketCap, its value has now dropped by 99.99 percent.
Squid was described as a currency that could be used in a new online game based on the Netflix series, which follows a group of people who are compelled to play dangerous children’s games for money. The game was supposed to launch this month.
Cryptocurrency specialists, on the other hand, had warned of multiple red flags indicating it was most likely a hoax.
The fact that people who bought Squid tokens were unable to sell them was very telling.
Critics also pointed out that the company’s website had numerous typos and grammatical issues. The website has gone offline, as have the social media profiles that promoted the tokens.
According to Cornell University economist Eswar Prasad, “it is one of many scams by which naive retail investors are pulled in and exploited by evil crypto promoters.”
Professor Prasad said that when purchasing cryptocurrencies, purchasers should be aware that there is essentially no regulatory control.
“In reality, blatant pump and dump schemes are common in the crypto realm, with investors often jumping in blindly, hoping to ride the wave and dump their holdings for a quick profit before prices crash,” he said.
Squid was available for purchase on decentralized cryptocurrency exchanges such as PancakeSwap and DODO, which allow buyers and sellers to connect directly without the use of a central authority.
“New coins can now be offered on decentralized exchanges on the day they are generated, without any regulation or due diligence,” said Jinnan Ouyang of Singapore-based crypto firm Openmining.
“As a result, you could be purchasing coins from anyone with any motive.”
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