Market Watch

Why Investors Are Unanimous In Their Backing Of Token Splits

  • Decentral Games is the second blockchain project to launch a token split referendum after its $DG community voted overwhelmingly in favour 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 $250 per token, for example, each $DG will be worth $0.45. Therefore, an investor with 10 $DG in their wallet at a $450 per token valuation has assets totaling $4,500. After the token split, that same investor would have 10,000 $DG worth $0.45 each for a total of the same $4,500.

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. In DG’s case, their price will be at around $0.45 after the split, and old school gamers who remember dropping quarters in arcade machines as kids will find that price particularly nostalgia-inducing,” summarized Fernandes.

“The bottom line is that the token split helps make $DG more accessible by the retail market to create a more equitable balance of power and governance. It will provide greater marketability and liquidity, and if history is any indication of the future, there is a good chance $DG will see growth,” concluded Miles, ahead of the 23rd November 1:1000 token redenomination.