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Crypto Memecoin Mania Begins to Cool Shortly After Latest Renaissance - BLOOMBERG

MAY 04, 2023

(Bloomberg) -- A rally in some of the most speculative cryptocurrencies appears to running out of stream just as quickly as fresh memecoins such as Pepe reignited visions of instant riches among the online faithful. 

The token, associated with a internet meme of a green anthropomorphic frog that has been around since the early 2000s, was down by about 12% on Wednesday, according to data site CoinGecko. It has surged more than 1,800% since being introduced in April, though it still trades at a fraction of one cent.

As is often the case, large traders are seen benefitting from the recent frenzy among retail investors, who are usually left holding the proverbial bag when prices collapse. Blockchain data from Etherscan shows there are about 80,000 digital wallets holding Pepe tokens, and excluding wallets belonging to exchanges, several dozen individual wallets holding at least $1 million of the tokens.

“There are a lot of large holders who got in early and the token price has gone up a lot since then,” said Xi Yin Lim, research analyst at blockchain data firm Nansen. “So when they take profits, it tends to move the price and market capitalization significantly as people tend to follow the movement of these ‘whales,”’ a industry nickname for investors who hold a large amount of a specific cryptocurrency.  

Older virtual coins made popular by online hype, including Dogecoin and Shiba Inu, have been caught up in the latest boom and bust cycle. Major cryptocurrencies such as Bitcoin and Ether were mostly little changed on Wednesday.

Some retail traders already appear to be taking losses. As Bloomberg reported previously, a crypto trading bot operator registered more than $1 million in profits by deploying a strategy referred to as “sandwich attacks” on investors who were buying large amount of the tokens. Meanwhile, Nansen’s data also shows that in the past day, several “whales” have dumped more than $1 million in Pepe tokens.

Most of the trading volume is on the OKX and MEXC Global exchanges, as well as the decentralized exchange Uniswap, according to data from CoinGecko. BitMex started supporting perpetual swap contracts for Pepe coins on its trading platform. Perpetual swaps are a type of futures contracts that doesn’t expire, and in this case, offers leverage of as much as 50 times the value of the underlying asset. 

“Retail participation and increasing trading volume are favorable for exchanges,” said Ben Yorke, vice president of ecosystems at crypto trading platform WOO Network, who also warned that memecoin frenzies are often a signal of market froth.  

(Company corrects the name of the analyst cited in the fourth paragraph. The story was initially published May 3.)


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