May 16 (Reuters) – Overtaking Dogecoin?
“Memecoins” — a highly speculative, highly volatile and somewhat exotic class of cryptocurrency — are back in the spotlight after the latest digital token hit the market with high gains.
Pepe, a coin inspired by an anthropomorphic frog popular in internet memes, jumped nearly 7,000% in the 17 days after its launch on April 16, reaching a market capitalization of $1.8 billion by May 5, according to data tracker CoinGecko.
Pepe’s rise sparked renewed investor interest in memecoins as a whole, with total trading volumes jumping to $2.6 billion in the first week of May from $408,000 in the previous week, according to data from Dune Analytics.
“Memecoins sometimes break out, and historically it has when the market has been a bit choppy or sideways,” said Todd Groth, Head of Index Research at CoinDesk Indices. “It’s almost like, if the market doesn’t move fast enough, traders find these little tokens to trade with.”
In fact, the latest memcoin craze comes as bitcoin rally halts 2023. The #1 cryptocurrency is down 6% since mid-April to $27,416.
Pepe’s stock, which trades in fractions of a cent, is down 60% from its May 5 peak on Monday, though it still boasts a market capitalization of about $740 million. This makes it the third largest memecoin after dogecoin and shiba inu, both of which were born as internet jokes referring to the Japanese dog breed, which command more than $10 billion and $5 billion market respectively.
Reuters was not immediately able to identify Pepe’s creators, and its Twitter account did not respond to a request for comment.
Memecoins first exploded into mainstream view during the “Wall Street Bets” movement of 2021, fueled by retailers. They lack practical use beyond guesswork, which sets them apart from more “popular” currencies like bitcoin and ether whose backers say they have potential as a means of payment or a store of value.
Market players have warned that traders and investors can get very frustrated with memecoins.
“Humans love to speculate,” said Martin Leinweber, product strategist at MarketVector Indexes. “I would still be very careful to buy it. It is gambling in its purest form.”
Pepe’s website says it was launched “for the people” with no “official team or roadmap” and is “completely useless and for entertainment purposes only”.
Data firm Mesari said the coin is the fastest growing cryptocurrency hosted on Ethereum, the second largest blockchain.
Chase Defense, an analyst at Messari, said Bibi’s surge in popularity was amplified by its rapid listings on major centralized exchanges, including top-tier Binance.
Binance says on its website that Pepe has “no interest” or “value support mechanism”. It warns users of Pepe’s volatility and says the platform “will not be liable for your trading losses.” Binance did not immediately respond to a request for comment on Pepe’s jump.
Centralized listings also opened the door to derivatives trading for Pepe, Defense said, with exposure to leverage and volatility driving higher Ethereum transaction fees.
As with other cryptocurrencies, memecoins fortunes are rooted in retail and often fueled by online sentiment.
Dogecoin and shiba inu, which are the eighth largest and fifteenth largest cryptocurrency respectively, often experience sharp price swings.
Dogecoin was launched in 2013 and soared more than 12,000% to an all-time high in May 2021, before dropping nearly 90% since then. Similarly, Shiba inu is down 90% from its peak in October 2021. Read More
Newcomer Pepe has over 100,000 owners according to CoinGecko data.
Edmund Goh, Head of Trading at B2C2 crypto liquidity provider, said that the memecoin boom is an “intriguing phenomenon.”
“The recent cryptocurrency explosion shows that there is still capital sitting on the sidelines waiting to be deployed.”
Additional reporting by Medha Singh and Lisa Pauline Matakal in Bengaluru; Editing by Tom Wilson and Praveen Char
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