November 2021

There is a gathering trend in retail investing interest in cryptocurrency that has been building for several years, but the recent crash and burn of the SQUID token is a cautionary tale. SQUID was marketed as a gaming-style token inspired by the Netflix series, Squid Game. Off the back of the popular series, SQUID was able to garner instant retail investing interest. The token was marketed as a “play-to-earn’ crypto to use within a soon-to-be-developed online Squid Game.

The ICO was marketed as a penny stock and within a week each Squid Token was valued at $2,856. Unfortunately for retail investors there were no market sellers, and the Squid Token promoters were suddenly unavailable for comment with the website dismantled. This was a “rug pull” scam from the crypto developers. They promoted a token, and then trading activity suddenly stopped with the developers clearing out any money invested. There was no intent to develop the crypto any further, leaving investors with a worthless token. The Squid Token value has now dropped 99.99% and trading back at $0.01 – not a great return for retail investors.

This is an important lesson for retail investors in the crypto market, especially in the unregulated Wild West of newly-minted cryptocurrencies. It’s a suitable warning too, that the terms “being rugged” or a “rug pull” are commonly-used phrases in the crypto world for an Initial Coin Offering [ICO] that is spruiked but is actually worthless. The Squid Token rug pull was all over in a week or so, with a relatively small retail loss of about $3.3m USD, but certainly painful for the investors caught in the scam. Notably, the cumulative value of digital asset scams is now growing into the hundreds of millions each year, so the regulators are watching this issue closely.

While it can be tempting to invest in an early coin offering, with no prior trading history, this is akin to a risky bet on an absolute long-shot at the track with very low prospect of any return. Crypto investing is already very high-risk, but trading in a well-established token or coin with deep trading liquidity and some form of institutional support is probably a better plan to avoid similar Squid Token rug-pulls.