BONK, PEPE and SHIB are threats to crypto.
In the year In 2013, the dog-themed crypto token started as a personal joke between two software developers as harmless fun. The fact that Dogecoin (DOGE) has since accumulated a market capitalization of more than $13 billion (as of December 13) is more than most investors realize, but it appears to be here to stay. However, the sector that Doge inspired is becoming a threat to an industry that needs improvement.
Memecoins are dangerous. They are dangerous because most of those who put their money into them never see it again; They are dangerous in the way that they undermine the integrity of the entire cryptocurrency industry, they are dangerous in the way that ownership is so concentrated, and they are dangerous in that they are becoming more prevalent.
In the year As of December 13th, there are 1,300 memecoins in circulation with a combined market value of approximately $22 billion. However, take a closer look at CoinMarketCap's memecoin sector, and you'll notice that nine of those listing pages contain coins that are worthless.
This is because most memecoins are shameless scams. These tokens, typically created in the bedrooms of jinxes, are designed to connect crypto to social networks in order to quickly steal people's money. Whether it's the Squid Games token — which saw a $3.38 million slide — or the coins launched on the deaths of former Berkshire Hathaway Vice Chairman Charlie Munger and former Secretary of State Henry Kissinger, these coins now fetch millions of dollars over the weekend. They.
Related: History tells us we're in a strong bull market.
Projects like SHIBA, PEPE, and BONK don't seem like obvious scams. BONK comes at a time when the Solana (SOL) ecosystem is in dire need of excitement and is getting pumped up. However, investors in these coins still lost money – PEPE, in one ugly week in May, shed an eye-watering 62% and never recovered.
Then there was the spectacular rise and fall of Bald (BALD) in August: a meme coin built on Coinbase's new layer-2 blockchain, Base. Launched on Sunday morning, BALD recorded a market capitalization of $85 million by evening. On Monday, the lead developer pulled its liquidity, causing the token's price to fall by around 90%.
Besides being – at best – a form of financial hunger games, memecoins also have no utility: they bear no resemblance to real cryptocurrencies such as Bitcoin (BTC) or Ether (ETH) in structure or implementation. But that doesn't stop the mainstream press from running endless headlines on every outburst that delights in declaring digital assets to be nothing more than fake jokes.
While cryptocurrencies in general have problems with whales, memecoins in particular suffer from strong concentration. Because memos are always so cheap — often a fraction of a penny — large investors can hold more wallets and move the market in a single trade. Ethereum creator Vitalik Buterin's decision to burn $6.7 billion in SHIB has released its halved distribution offering. It has raised serious questions about market manipulation by disrupting market activity.
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Memecoins, in short, is becoming less and less ridiculous. While we can all laugh at the latest coin dedicated to Elon Musk's dog, these accidents are occurring on a large scale and are taking a heavy toll. But does that mean we should ban them? No. There is a place for memecoins in crypto.
Just like we can in the real world, all users in crypto should be free to play with their money if they choose. As much as regulators love to bash the financial industry, they have no problem letting anyone play their house on the horses. It's a free world if you want to spend your money that way.
However, make no mistake: memecoins are gambling, plain and simple. They are not investments, valuable or useful. They attract negative attention from the press that makes us all look bad. And for every lucky person who makes a million on a meme, nine lose. Maybe one day we'll all fly to the moon in a DOGE, but probably in an Elon rocket ship.
Lucas Kiely is the Chief Investment Officer of the Product Application, where he oversees investment portfolio allocation and leads the expansion of the diversified investment product range. He was previously Chief Investment Officer at Diginex Asset Management, and was Senior Trader and Managing Director, QIS and managed the structured derivatives business at Credit Suisse in Hong Kong. He was Head of Special Derivatives at UBS in Australia.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
