By Lisa Pauline Mattackal and Medha Singh
(Reuters) – Moving Dogecoin?
“Memecoins” — a hyper-speculative, ultra-volatile, and somewhat peculiar class of cryptocurrencies — are back in the spotlight after the latest digital token hit the market with stratospheric gains.
Pepe, a coin inspired by an anthropomorphic frog popularized in internet memes, rose nearly 7,000% in the 17 days after its April 16 launch, reaching a market value of $1.8 billion on May 5, according to data tracker CoinGecko.
Pepe’s emergence has led to renewed investor interest in memecoins as a whole, with total trading volumes rising from $408,000 in the first week of May to $2.6 billion the previous week, data from Dune Analytics shows.
“Memecoins just flare up once in a while, and it has historically happened when the market is 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 up fast enough, traders will find these smaller tokens to trade with.”
Indeed, the latest memecoin frenzy comes as bitcoin’s 2023 rally stalls. The No. 1 cryptocurrency is down 6% since mid-April to $27,416.
Pepe, which trades for fractions of a cent, is down 60% from its May 5 peak on Monday, but still has a market cap of nearly $740 million. This makes it the third largest memecoin after dogecoin and shiba inu, both born as internet jokes referring to a Japanese dog breed, commanding over $10 billion and $5 billion of the market respectively.
Reuters was unable to immediately identify Pepe’s creators and his Twitter account did not respond to a request for comment.
Memecoins first exploded into mainstream view during the 2021 “Wall Street Bets” movement fueled by retailers. They lack practicality beyond speculation, setting them apart from more “mainstream” coins like bitcoin and ethereum that lenders say have potential as a means of payment or a store of value.
Market players warned that traders and investors could get badly burned by memecoins.
“People like to speculate,” said Martin Leinweber, product strategist at MarketVector Indexes. “I would be very careful about buying them anyway. It’s gambling in its purest form.”
‘COMPLETELY USELESS’
Pepe’s website says it launched “for the people” with no “formal team or roadmap” and is “completely useless and for entertainment purposes only.”
The coin is the fastest-growing cryptocurrency hosted on Ethereum, the second-largest blockchain, data company Messari said.
Pepe’s surge in popularity was amplified by rapid listings on major centralized exchanges, including top platform Binance, said Chase Devens, an analyst at Messari.
Binance says on its website that pepe has “no utility” or “value support mechanism”. It warns users about pepe’s volatility and says the platform “will not be responsible for your trading losses”. Binance did not immediately respond to a request for comment on Pepe’s jump.
The centralized listings also opened the door to derivatives trading for pepe, with leveraged exposures and volatility driving higher transaction costs for Ethereum, Devens said.
As with other crypto tokens, memecoins’ fortunes are rooted in retail and often fueled by online sentiment.
Dogecoin and shiba inu, the eighth and fifteenth largest cryptocurrencies respectively, often experience wild price swings.
Dogecoin was launched in 2013 and surged by more than 12,000% to an all-time high in May 2021 before dropping nearly 90% since then. Shiba inu is also down 90% from its October 2021 peak.
Newcomer pepe has more than 100,000 holders, according to CoinGecko data.
The memecoin surge is “an intriguing phenomenon,” said Edmond Goh, head of trading at crypto liquidity provider B2C2.
“The latest coin explosion illustrates that capital is still sitting on the sidelines waiting to be deployed.”
(Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; editing by Tom Wilson and Pravin Char)
