Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.
Crypto investors have recently witnessed the meteoric rise of another meme coin.
Three weeks after it was launched, Pepe coin, a token in reference to the internet meme Pepe the Frog, saw its market capitalization rise to as high as $1.6 billion on May 5, though it has since fallen over 60% to around $600 million. The token has lost more than 70% of its value from its all-time high on May 5.
Also read: Why meme coins are trending again
Pepe’s rally reminded investors of the meme coin craze they witnessed in 2021, especially evidenced by the rise of dogecoin and Shiba Inu then. Pepe’s surge also inspired a buying frenzy of several other meme coins, which together contributed to the congestion of the Ethereum and Bitcoin network.
Most recently, crypto enthusiasts are eyeing the tension between the Pepe coin community and digital asset exchange Coinbase COIN,
It has since sparked outrage from the meme tokens’ supporters on Twitter. “Pepe The Frog is a lot of things, but it is definitely not an alt-right hate symbol,” Twitter user @farokh, a supporter of Pepe coin wrote. “Was the narrative taken away from Matt Furie [creator of the character] for a moment? Yes, it was. Does that mean the entire character is racist and condones hateful speech and behaviour? No, it doesn’t.”
On Thursday, Paul Grewal, chief legal officer at Coinbase, tweeted an apology to the Pepe coin community, saying that the exchange’s newsletter didn’t provide the whole picture of the history of the meme.
Find me on Twitter at @FrancesYue_ to share any thoughts on crypto, this newsletter, or your personal stories with digital assets.
Rise of Pepe coin
Chase Devens, senior research analyst at Messari, attributed Pepe’s rise to a “perfect storm of conditions.”
“I would say that in the past month or so, there hasn’t really been anything too noteworthy happening in crypto,” Devens said in a phone interview. “So when Pepe coin popped up, it was relatively easy for people to be like, this is something interesting, and to start directing their attention towards it.”
It also contributed to the crypto’s rally that the meme of Pepe the Frog was already popular on the Internet, noted Devens.
Jeff Mei, chief operating officer at BTSE, said the rise of PepeCoin was largely driven by investors’ fear of missing out, which is often referred to as a crypto slang called “FOMO.”
The support of so-called whales, or individuals or entities that hold large amounts of Pepe coin, also helped with the rally, Mei said.
“While the crypto market overall might be stuck in an elongated winter, viral dynamics follow their own logic,” Mei said.
Bitcoin has gained over 60% so far this year, but is still down over its all-time high in 2021, according to CoinDesk data.
Pepe coin’s price peaked on May 5 at around $0.000004, after Binance said it would list the token, but has since fallen more than 70% to about $0.000001 on Thursday.
It’s relatively common for meme coin prices to spike as they are listed on major exchanges, and fall afterwards, noted Devens. For example, Shiba Inu’s price peaked in October 2021 at around $0.000018, after Coinbase listed the coin in September 2021, but has then lost half of its value to about $0.0000086 on Thursday.
It’s hard to say what’s next for Pepe coin, noted Devens. Compared with Dogecoin and Shiba Inu, whose market capitalization stands at $9.8 billion and $5.1 billion, Pepe coin is still relatively small.
To be sure, cryptocurrencies, especially meme coins, are highly volatile, and remain largely unregulated.
Congestion on Ethereum and Bitcoin
The rise of Pepe coin, which is based on Ethereum, has also pushed up the gas fees, or the fees paid to validators on the blockchain, as more transactions are happening on the network.
The meme coin resurgence inspired by Pepe has also led to more tokens created on the Bitcoin network using BRC-20 token standard, which allows users to create and send fungible tokens through the Ordinals protocol.
“Since the launch of PEPE, BRC-20 meme coins have exploded in popularity and caused heavy congestion on the network,” Devens wrote in a recent note.
Read: Binance twice pauses bitcoin withdrawals due to ‘large volume’
Crypto in a snap
Bitcoin lost 6.3% in the past week and was trading below $27,000 on Thursday, according to CoinDesk data. Ether declined 4.5% in the same period to below $1,800.
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