Why StarKnet Token Sinked After Airdrop?

StarKnet, a layer-2 has dropped significantly in the last 24 hours after listing its airdrop. It is currently trading at $1.87 but has dropped more than 40% from yesterday. This has happened StarKnet token (STRK) got listed on large centralized exchanges like Bitcoin and KuCoin. At the time of listing it was trading at $2.387 and peaked at $3.66 within 60 minutes. From its all-time high, it has dropped by 40% in 24 hours, concerning the investors about the token’s long-term performance.

The drop is caused because of the recent airdrop of the token on various platforms after its launch. For this airdrop, 728 Million STRK tokens were unlocked by the satarknet team which is 7.3% of the total supply.

The airdrop was received by StarKnet and StarkEx, early adopters, Ethereum community members, a few developers, and the authors of EIP.

The airdrop helped in plummeting the number of StarKnet users. By 14 February, the network crossed around 225,000 active wallet mark. Because of this, StarKnet announced for distribution of tokens and rewards for its 1.3 Million users but on the day of token distribution, the active users dropped to 84,260.

The airdrop faced some issues as the users encountered errors and network congestion.

StarKnet is a layer 2 solution designed for delivering high scalability and flexibility. It works on a proof of work (POW) consensus mechanism and allows multi-token transactions.

StarKnet debuted with a $1.5 Billion market cap and on the first day only, its trading volume reached $900 Million. It is available on both decentralized and centralized exchanges as on Uniswap and Binance.

Over five million native StarKnet tokens were claimed within the first few minutes. A million tokens per minute were claimed by the crypto investors.

Why Do We See So Frequent Airdrops in the Market?

Airdrops are a way to attract investors and form a community when the token is new. It creates a name for the token in the market as people prefer to get free cryptocurrency and the token company can turn them into forever users. Another reason is to increase the number of tokens or overall supply.

Airdrops are known to create volatility in the market and in most cases, the price might decrease. This happens because the availability of tokens decreases the scarcity of tokens leading to reduced demand.

The same happened with the StarKnet token as the price dropped soon after the airdrop. But there were many who managed to gain profit before that as at the time of the launch on centralized exchange the price was low and soon hiked by 7%.

Conclusion

StarkNet token gained an instant hike but within a day lost that by more than a 20% drop because of airdrop. The sudden volatility decreased the price of the STRK token and at the time of writing is trading at $1.87 with a trading volume of $1,872,988,344. It was recently added to many large centralized exchanges like Binance and Kucoin. This recent hike and drop within a small duration is common during the time of listing and airdrop.