Cryptocurrencies are in much wider use than ever before. The public attitude towards them has changed, and the average user is now familiar with the technology and isn’t afraid to use it. This has led to a proliferation of crypto tokens.
It’s estimated that there are over 13.000 different tokens in circulation at this point. Therefore, there’s a lot of talk among experts about merging different tokens together and making the market more manageable. Most of the tokens are small enough and have a small enough base of users for this to work.
What you'll learn 👉
The State of the Market
The market cap for the 13.000 different tokens is $2.5 trillion at the time of this writing. Some of the altcoins are widely used in many different industries. When going through crypto gambling platforms overview, users can find platforms that support dozens of different currencies.
However, there’s not nearly enough utilization and adoption to cover such a huge number of potential altcoins. Therefore, chances are that smaller tokens will start to merge and combine their services to accommodate the needs of the market.
The Dot Com Bubble
There’s precedent for the state of the industry, even though Bitcoin is a later invention. In the 1990s, the Dot Com market became saturated very quickly, as everyone with some extra cash and an idea, tried to create a site of their own. It was an exciting time, and in a way, it has shaped the internet as we know it, but it didn’t last long.
Once venture capitalists got interested in the market, they needed to adapt to the flow of capital and become more efficient. This meant that many small businesses in the field merged and started operating as any traditional company.
Three Altcoins Decided to Merger
Fetch.ai is discussing merging SingularityNET and Ocean Protocol tokens into an ASI token. The new token will have a value of $7.5 billion. All three companies utilize blockchain technology and are based on AI, and the merger will help them improve the core features of their platforms.
The companies will continue to operate as separate entities after the merger, and not much should change for the actual users because of the merger. They will, however, collaborate under the guidance of the Super Intelligence Collective, led by SingularityNET founder and chief executive officer Ben Goertzel. The value of all three coins rose after the news.
A New Market
Given how many tokens are there, some may wonder, while the news such as these are still rare and there are no more mergers. Some argue that the reason lies in how young the crypto industry is. Mergers are complex and involve a lot of moving parts.
The industry still doesn’t have a rulebook on how to do them. The only thing to do is to mimic the rules that are used for mergers in different industries. This isn’t always suitable as Bitcoin depends on new and innovative technology.
Deals Instead of Mergers
One way to go is to have deals between different crypto token companies rather than mergers in the way we know them from the financial industry. That way, the two coins will share an ecosystem and support each other, but they will continue to operate as separate companies.
In the long run, such deals will provide additional benefits to the end users and BTC holders by making the system more decentralized. A network effect can also have a positive effect. However, such deals may seem like centralization to some users, and that’s a tough sell to make for an industry that has become popular because of how centralized it is.
The Difference between Short and Mid-Term Effects
Mergers have already been shown to have a positive short-term effect on the value of the coins. That’s what happened when SingularityNET, Ocean Protocol, and Fetch.ai tokens merged. The Bitcoin market reacted to the news, partly because of the novelty of such a move.
However, there are fears that in the mid-term, the effects could go the other way. M&A in crypto may lead to a diluted value in the long run. Without the presence of clear, non-redundant roles and responsibilities for the company, teams, and personnel, it may be difficult to reach efficient management.
Who Will Make the Call?
The holders are the ones to decide on deals and mergers. For most coins, this means that founders, investors, or teams that control the bulk of circulating supply need to come together and decide on mergers.
For small coins and ventures, this can be a close circuit of decision-makers, and deals are relatively easy to make in such conditions. It’s also important to take into account if a merger will make a coin more visible in an already crowded market. This is something that no one can really predict, and it’s up to the stakeholders to make a judgment call.
New Rise of the Meme Coin
Meme coins were popular for a while, but they lost their place in the industry once the industry became more respected and more mainstream. However, in the last couple of months, meme coins have been rising. These are often connected to political causes and online communities created around them.
It’s still too early to tell if meme coins will affect mergers, but many believe that the popularity of meme coins will make mergers less likely. The whole reason meme coins are popular is because they are unique, and mergers make them less so.
Regulations
In traditional markets, the complexity of regulations is usually the biggest reason why mergers don’t go through or why they take a long time. This isn’t an issue with crypto coins because the industry is too young and is still not heavily regulated, so there are no laws to slow the mergers down.
This, too, has started to change in the last couple of years now that BTC has gone mainstream. The EU has come up with a complex set of crypto regulations, and other big markets will follow along.
How Should the Investors React?
Investors are paying attention to smaller altcoins as they are a way to diversify a portfolio and get in on the ground floor. Mergers can be a way to quickly cash out on your investment and take advantage of the new momentum.
Knowing which small token coins are about to merge isn’t as easy as it seems since there’s a lot of inside baseball in the industry. It’s always a good idea to pay attention to coins that focus on the same market and the same customer base, such as the case with AI and when SingularityNET, Ocean Protocol, and Fetch.ai merge.
Conclusion
There are too many altcoins in circulation, and they are not being used enough. This has led to some token companies merging to form a more lucrative and efficient business. Similar things have happened before with the dot com market in the 90s.
There are no strict rules and regulations in this regard, as it’s a new field and mergers haven’t started yet, at least not in large numbers. It can be a way for investors to improve their position since, in the short term, the value of such coins will go up.
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