Memecoin frenzy reaches crescendo on back of Bitcoin rally
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Some of the most speculative cryptocurrencies introduced in the past few years are trading at record highs.
PHOTO: UNSPLASH
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NEW YORK - It is memecoin season in the crypto market, once again.
Some of the most speculative cryptocurrencies introduced in the past few years are trading at record highs. And old favourites such as Dogecoin are outperforming Bitcoin, while the original digital asset approaches its peak price reached during the pandemic-fuelled rally more than two years ago.
Pepe, a frog-themed coin, and Dogwifhat (Wif) – yes, a dog pictured wearing a hat – have been racking up fresh highs almost daily, according to data tracker CoinGecko. With most memecoins trading around a dollar or less, traders are piling into futures on 1,000 tokens per contract to help magnify price moves.
Bitcoin meanwhile traded at US$68,220 as at 12.09pm in Singapore on March 5, in touching distance of its record peak of US$68,991.85 in 2021.
“Retail is hearing about the large crypto run-up from the Bitcoin ETFs (exchange-traded funds), and has re-entered the market buying all the cheap coins,” said Mr Jordi Alexander, founder of digital-asset trading firm Selini Capital.
“Pepe and Wif are some of the new entrants of this cycle compared with the last, as well as Bonk.
“Doge and Shib are getting a bit of a comeback also. The key question is: Do dogs keep the lead, or is there a faster animal?”
Memecoins have long been a phenomenon among retail crypto investors and promoters, who see the microscopic prices as an opportunity to quickly post huge returns despite the lack of traditional fundamentals. The token Shiba Inu was considered the most popular in the last bull market, while Dogecoin is viewed as the original memecoin by many in the industry.
Traders are positioning Pepe, Wif and other newcomers as the next big opportunity. It feels like “the usual bull market sentiment is back where people are eager to trade”, said Ms Annabelle Huang, managing partner at digital-asset investment firm Amber Group.
While prior memecoin rallies tended to indicate the top of the market, some advocates say this time is different, in part because of a change in the Bitcoin code known as halving.
“It’s just the beginning,” said Ms Ayesha Kiani, chief operating officer at crypto hedge fund MNNC Group. We “still have to go through halving, and that’s normally the peak”.
Halving refers to a planned reduction in the rewards Bitcoin miners receive, and it happens once every four years or so. Some analysts argue that the halvings benefit Bitcoin’s price.
Optimism certainly abounds. For instance, MicroStrategy, the largest corporate holder of Bitcoin, proposed increasing its cache of the token through the sale of US$600 million (S$807 million) in convertible senior notes.
“Previous cycles saw projects pushing blockchain as a cure-all for many societal and technological challenges,” said crypto exchange Woo X’s vice-president Ben Yorke.
“Now investors are ignoring those and focusing on what’s really important – the community-driven narrative, which is a hallmark of memecoins and decentralisation in general.” BLOOMBERG
