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token burn: why are they important for investors

In the world of cryptocurrencies, the combustion of tokens is a key concept that can considerably affect investors. So what exactly are the token burns?

What is the token lamb?

A burning token is an event in which cryptocurrency tokens have been destroyed or « burned » to reduce its food in circulation. This procedure implies the transfer of a large exchange tokens, such as Coinbase or Binance, to a secondary market such as decentralized grants (DEX) or private sales platforms.

Why are essential burns for investors?

Token burns can have large -scale consequences for investors in several ways:

• Draft support: When chip burns occur, it reduces the offer of tokens available on the market. This can lead to an increased demand and price while the owners seek to buy their tokens.

• Pike Pike : The chip burn can cause significant price jumps because investors react to a sudden reduction in the offer. In some cases, this can lead to a sudden increase in the value of the tokens.

• Handling the market : A large token lamb can be considered as manipulation with the manipulation of the exchange market or other parties. Indeed, it creates an artificial rarity of token, which then quickly sold at swollen prices.

• Risk in liquity : The combustion of tokens can also create the risks of liquidity for investors, in particular those who have long positions in the cryptocurrency. If a large number of carriers sell their chips to make the combustion event, liquidity can be reduced, which makes it difficult to buy or sell tokens at favorable prices.

• Regulatory risks : While governments and regulatory organizations are beginning to notice the growing use of the crypto-valid, they can impose more strict regulations with exchanges and other participants in the tokens burning markets.

Types of chip burns

There are several types of token burns that investors should be aware:

• Burn Burning : They occur when a great exchange, like Coinbase or Binance, embarks on a major token combustion event.

• Secondary burial market : this occurs when secondary platforms on the market, such as dexis or private sales platforms, participate in token burns for the purchase of token and then sell them at swollen prices.

• Brusters of private sale : they occur when the investor buys his tokens from another investor or another company.

Examples of chip burns

Certain notable examples of token burns include:

• Coin supported by the FBI (FBC) : 2020. The FBI withdrawn $ 5 billion in assets with a CRIPTO currency associated with FBC, an excluded exchange due to its role in the facilitation of money laundering.

• Coinbase Burn : In January 2019. Coinbase bought an important part of his own token as part of his transition to a decentralized exchange (DEX).

• Huobi Burn : In November 2020. Huobi, the main exchange of cryptocurrencies, burned more than $ 100 million in one day.

Investor strategies

In order to effectively move the Burns token, investors must:

• Diversify your portfolio : Distribute the investment in several cryptocurrencies to reduce losses due to a token combustion event.

• Be in progress with the news market : Stay informed of token burns to come and other market events.

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• pay attention to large large -scale tree exchanges

  : pay attention to the exchanges that participate in large chip burns, as this may indicate a market manipulation.

Conclusion

The burning token is a key aspect of the cryptocurrency currency landscape, with large-scale consequences for investors.

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