While there’s a good chance you’ve heard of Immutable, you may be unfamiliar with our native utility token, IMX.
Let us bring you up to speed.
The IMX token lives as an ERC-20 token on the Ethereum blockchain and can be bought, sold, or traded on all main crypto exchanges.
At the time of writing, the IMX token sits near the middle of the top 100 cryptocurrencies based on market cap, as it has a total market cap of nearly $300 million with a circulating supply of around 680 million tokens.
Over the last two years, the cryptocurrency market has experienced intense volatility, with many tokens skyrocketing to all-time highs only to lose significant amounts of value in a few short months.
So what has contributed to this shift? A few factors:
The Economics of Crypto Pricing
Cryptocurrency prices, including the price of IMX, are primarily dictated by supply and demand. That is, crypto tokens are often valued based on how abundant or scarce they are, as well as how many people are actually lining up to buy them - off exchanges or otherwise.
If a specific coin is in short supply, or if its demand is particularly high, then the price will increase. Increased demand over a finite supply will drive the price even higher. Inversely, if there’s too much supply and not enough demand, then the price will decrease accordingly. That’s why many cryptocurrencies intentionally rely on a fixed or low supply to either drive prices up or set prices high in the first place.
However, these supply and demand curves can be influenced by other external factors such as broader macro sentiment, news cycles, marketing ploys, and even bad actors.
Given the unregulated nature of crypto, it’s not uncommon to see prices fluctuate, even within a 24-hour span. While cryptocurrency does follow many of the same economic cycles as traditional finance, it’s still very much a Wild West.
How Does the Broader Macro Environment Affect the IMX Price?
Major economic events and problems that affect global markets like the stock market typically influence the course of cryptocurrencies as well.
For example, the US Federal Reserve has continued to increase interest rates over the past several quarters to decrease the rate of inflation. Because of this, high-risk assets like crypto have fallen into bear market territory, with prices heavily decreasing over the last 12 months.
News of partnerships and hacks can also impact prices. While promising partnerships may lead to price spikes, hacks or implosions of exchanges and protocols that make national news can lead to a drop in market sentiment and overall fear for the safety of holders’ assets.
We’ve seen this most recently with the implosion of LUNA and FTX, which have sent shockwaves throughout the entire crypto community and broader financial ecosystem.
How Does Token Utility Affect the IMX Price?
For DeFi gaming protocols specifically, token utility plays a large role in driving demand. If the token is needed to interact with a game or dApp, then it will always be in demand for as long as people use the protocol.
In the case of IMX, the IMX price should reflect the growth of the Immutable protocol. With programs like IMX Staking and Trading Rewards, users are incentivized to hold the token and interact with the protocol for the long term.