In early November, Crypto.com announced a major token consolidation plan, merging its MCO and CRO tokens into a single CRO token ecosystem. Around the same time, crypto analytics firm Coin Metrics released its Q2 2020 "State of the Network" report, which revealed that CRO had the highest inflation rate among major cryptocurrencies at a staggering 145%.
This article breaks down what happened, why the community reacted strongly, and how the token's price still managed to climb significantly despite these fundamental concerns.
Understanding the MCO to CRO Swap
Crypto.com's MCO Visa Card program has been widely popular, offering users a way to spend cryptocurrency seamlessly. On November 3rd, the company announced it would be sunsetting the MCO token to streamline its ecosystem ahead of its mainnet launch.
The mandatory token swap, where users could exchange their MCO for CRO, was set to conclude on November 2nd. After this date, MCO tokens would cease to have any utility or value. The primary reason given was to maximize the functionality of the upcoming blockchain by focusing on a single, native token: CRO.
Breaking Down the High Inflation Report
Coin Metrics' quarterly report provided a snapshot of the market's supply growth. In Q2 2020, the total net new supply added to the crypto market was $1.36 billion. The largest contributors to this new supply were:
- CRO: $392 million
- XRP: $268 million
- Ethereum (ETH): $256 million
- Bitcoin (BTC): $245 million
The report also calculated the annual inflation rate for various assets. CRO's 145% inflation rate placed it firmly at the top of the list, far exceeding other notable cryptocurrencies:
Highest Annual Inflation Rates:
- Crypto.com Coin (CRO): 145%
- Bitcoin SV (BSV): 26%
- Decred (DCR): 19%
Lowest Annual Inflation Rates:
- Bitcoin (BTC): 2.6%
- Cardano (ADA): 1.6%
- Dogecoin (DOGE): -1.9% (deflationary)
- Huobi Token (HT): -23% (deflationary)
Specifically, the circulating supply of CRO increased by 5.9 billion tokens in Q2 alone—a significant jump compared to the total growth of 2.4 billion tokens over the previous three quarters combined.
It's important to note that the report clarified that tokens moving from team-controlled addresses don't necessarily mean they were sold on the open market. These movements could be for operational expenses, strategic partnerships, investments, team member distributions, or community incentive programs.
Community Backlash and Swift Revisions
The initial announcement caused an immediate uproar within the Crypto.com user base. The core of the controversy was the new staking requirements for the popular Visa cards.
Previously, users staked MCO tokens to access different card tiers and their associated benefits. The new model required staking CRO instead. Crucially, at the time of the announcement, the dollar value required to stake for each card tier was nearly five times higher than before, dramatically increasing the cost for users to maintain their card privileges.
Facing widespread criticism and user protests on social media, Crypto.com responded quickly. Just one day after the initial announcement, the company revised its staking model, slashing the required CRO amounts and effectively reducing the dollar-cost of staking to approximately one-fifth of the originally proposed amount. This move was crucial in calming the community and making the transition more palatable for existing users.
Price Performance Contradicts Fundamentals
Despite the high inflation rate reported by Coin Metrics, which typically suggests selling pressure from new supply, CRO's market price told a different story throughout much of 2020.
According to data from CoinMarketCap, CRO’s price saw substantial growth, rallying nearly fivefold from its price at the beginning of the year. This highlights a unique and often counterintuitive aspect of the cryptocurrency market: short-term price action can sometimes diverge sharply from traditional fundamental metrics like supply inflation.
With a total maximum supply of 100 billion tokens, of which roughly 18.8 billion were in circulation at the time, the market appeared to focus more on the long-term utility and ecosystem growth promised by the mainnet launch and token consolidation, rather than the immediate inflationary data. For those looking to understand such market dynamics, it can be useful to explore real-time analytics platforms that track on-chain metrics.
Frequently Asked Questions
What was the MCO and CRO token swap?
Crypto.com initiated a plan to merge its two tokens into one. Users were required to swap their MCO tokens for CRO tokens by a specific deadline. After the swap ended, the MCO token was rendered obsolete, and the CRO token became the sole native asset for the Crypto.com chain and its services, including card staking.
Why did CRO have such a high inflation rate?
The significant increase in CRO's circulating supply in Q2 2020 was largely due to the tokenomics surrounding the mainnet launch and the ecosystem expansion. New tokens are often released from vesting schedules for teams, as rewards for staking, or to fund ecosystem development, all of which contribute to inflation.
How did the community react to the changes?
The initial reaction was extremely negative due to the dramatically increased cost of staking for Visa cards. Users protested across social media channels. Crypto.com listened to the feedback and revised the staking requirements downward within 24 hours, which helped to alleviate major concerns.
If inflation was so high, why did the price still go up?
Cryptocurrency prices are influenced by a wide array of factors beyond simple supply inflation, including market sentiment, news announcements, anticipated future utility, exchange listings, and overall bull market conditions. In this case, optimism around the mainnet launch and ecosystem growth likely outweighed inflationary concerns.
What is the total supply of CRO?
The total maximum supply of CRO is capped at 100 billion tokens. The circulating supply increases over time according to the project's emission schedule.
Where can I learn more about tokenomics and supply metrics?
Understanding tokenomics is key to evaluating any crypto project. Many platforms provide detailed on-chain data and circulation charts. You can get advanced analytical tools to perform your own research into supply metrics and other vital fundamentals.
Risk Warning: Cryptocurrency investment is highly speculative and volatile. You could lose your entire investment. Always conduct your own research and assess your risk tolerance carefully before investing.