On July 7, trading on the ICO TenX went live. TenX allows people to purchase tokens, but their market changing plan is to provide users with a debit card that operates on digital currency. Think replace your bank’s debit card with a new debit card anchored in digital currency.
Following a fast token sale (sold out in 7 hours) trading on the TenX tokens opened on July 7. On the same day, someone placed a large sell order driving the price from a possible high of $80 to $1. To put it another way, as much as 99% of the value of TenX disappeared in one day. A situation like this can happen when a large sell order is placed all at once.
The large sell order may have been placed because the investor was not sophisticated and was trying sell all the TenX tokens at the height of the market. This causes the supply to be greater than the demand driving the price down. A few years ago the price of corn was high causing farmers to produce more corn. The supply of corn overwhelmed the demand and the price of corn cratered. The price of corn still has not recovered.
The large sell order may also have been placed because the investor was attempting to short the market. The high price at the start of trading was probably inflated, but the attempt to sell such a large block of tokens could have been due to an attempt to drive the price down. However, it doesn’t appear that there is a futures market for ICOs at this point so shorting the market was probably not the intention.
As the ICO market becomes more established situations like this may become less common. More experienced currency traders will enter the marketplace and mistakes like dumping large sell orders which craters the market should happen less. However it should be expected that a futures market will be established, which will lead to shorting.
What does this mean for TenX? TenX offers an amazing service if they can pull it off. If TenX can be the first ICO to crack the digital currency based debit card, TenX will have a lot of value and a robust marketplace. This was reflected with how quickly their token sale went, and the high price point at the open of trading. This starting price was inflated, but the value of the tokens at the end of trading yesterday is also probably below the true value. Unless this causes TenX to fold, the price of tokens should recover, but it may be a while before the price is back to the initial trading price.
If you do not have the stomach for large value swings, investing in an ICO is not for a you. These are not traditional investments. Some investors purchase the tokens during the initial sale with the sole idea of selling them off when trading begins. But therein lies opportunity if the ICO is solid.
Edit: A previous version of this article stated the highest price point of TenX was $80. This has been updated to reflect a possible high of $80.