One of the big movers in the crypto market over the past week has been little-known Floki Inu (FLOKI-USD). Like other meme tokens, the Floki Inu crypto has seen incredible interest this year, as investors look for ways to play the recent rally in risk assets. However, for investors in this lesser-known meme token, there’s another catalyst worth keeping an eye on right now.
A recent governance proposal that was passed by the Floki Inu community stipulates that an upcoming $100 million token burn will take place on Feb. 9. Additionally, the FLOKI transaction tax is scheduled to be lowered to only 0.3% on Feb. 3. Investors hope these moves will increase demand for these tokens in the near term.
A cross-chain bridge will be used to complete this burn, which will see 4.2 trillion FLOKI tokens effectively disappear. This burn event will reduce the overall supply of FLOKI, a method typically used to drive prices higher.
Let’s dive into what investors should make of this key catalyst.
Floki Inu Crytpo Soars Ahead of Feb. 9 Catalyst
Similar to share buybacks, token burns are commonly used by certain crypto projects to keep prices elevated. By reducing overall supply, assuming demand remains constant, prices should increase. It’s a strategic move often seen as necessary for certain projects with highly inflationary models.
However, the question remains as to how sustainable this catalyst is. While FLOKI tokens have soared more than 100% over the past week, it’s hard to say how much value is really being created by this early stage meme token. Outside of the Floki Inu community, few are using this token as a means of transferring money or performing utility-creating transactions.
One of the reasons for this proposal has been the potential for Floki Inu to see fewer risks tied to bridge-related exploits. By reducing tokens on the project’s primary cross-chain bridge, risks of catastrophic events are limited. Thus, perhaps there’s another reason why this announcement is driving interest.
Personally, I’m on the sidelines with these meme-token projects for now. Until there’s some serious utility generated, it’s unclear how sustainable these rallies can be. That said, for traders, this could certainly be a token to keep an eye on. I expect more volatility on the horizon as we learn more about how this burn is executed.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
