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main conclusions
2023 started off hot in crypto markets, with meme coins printing significant gains Softer macro weather fueled Shiba Inu gains up 50%, with hype also surrounding the launch of a Layer-2 ecosystem Our analyst warns investors that not everything can be the same that looks like
It seems a little crazy to write this, but here we are anyway. 2023 is about to kick off in cryptocurrency markets, with optimism abounding that softer inflation data will lead to an easing of monetary policy sooner than the market previously anticipated. And one such “asset class” to benefit is memes. Doggy coins are printing returns straight from the first quarter of 2021, a time when Reddit was at war with Wall Street over GameStop, Elon Musk was tweeting daily about cute dogs, and, well, the money printer was firmly on. The king and queen of space, namely Dogecoin and Shiba Inu, are currently up 22% and 49% respectively this year.
Bonk the latest meme to join the party
Perhaps the curious case of Bonk best sums up this bizarre resurgence. The meme coin, inspired by Shiba Inu, was released on Christmas Day in Solana. You know, that same Solana who was firmly at war, suffering from his close ties to Sam Bankman-Fried, repeated outages shutting down the network and seeing several of his major projects flee to rival blockchains. Objectively, launching in Solana – and in the depths of the bear market – was an objectively odd decision. And yet, what is the logic in the crypto meme market? The coin is up 2,500% in ten days, exploding above a market cap of $200 million. It has since fallen back to earth a bit, but is still trading at a market cap of $50 million.
Why are memes doing so well?
But why are meme coins doing so well? Well, the first answer is that the entire cryptocurrency market is. When looking at even the biggest cryptocurrencies, they are all printing impressive returns. Memes don’t look all that dizzying in comparison. The increase is due to inflation data that came in below expectations. While the numbers are still extreme and well above the Fed’s 2% target, there are noticeable signs that it has peaked. Investors took this as a sign that the death knell for risky assets, namely high interest rates, may wear off sooner. Shiba Inu, meanwhile, is rising more than just positive macro factors. It jumped 20% following the news that it will be listed on Upbit, the most popular South Korean exchange. This comes amidst the hype surrounding the upcoming and highly anticipated Shibarium Beta release. Shibarium Beta will be a Layer 2 network built on top of Ethereum, the same way Polygon and Arbitum work.
Is this sustainable?
Personally, I can’t put too much weight on this (still mysterious) Shiba’s Layer-2 project. Memes are exactly that – memes – and they have never been a cornerstone. It would take a lot more than blind speculation about Shibarium to convince me that Shiba will never be used for anything other than trying to buy it with the hope of selling it for a higher price. But that’s what happens with memes. There was never an argument that there is any value. They have always been something of a middle finger to prudent investing, a misbehaving little brother of real investment “responsibility”. However, this is all fun and games in a climate that makes more money than any other time in history. It’s great when interest rates are zero and cheap capital is ubiquitous. And it’s amazing when a pandemic hits the world, with millions of people locked down with nothing to spend their aid. However, this is no longer the world we live in. I’ve said it before and I’ll say it again – the joke is over with the memes. They no longer present themselves as a chance to make retirement gains. They’ve always been a reckless gamble, and that’s a good thing. But now they’re not this new source of endless entertainment anymore, they’re just sitting there as the world deals with the worst economy since cryptocurrency was launched when Bitcoin was launched in 2009. Things may be more rosy than they are. one or two months. But inflation is still crushing, although it has come down a bit. Rates are still high and there are a million variables that could make this volatile economy much worse in a very short amount of time. It’s hardly jaw-dropping, but watch out for the canine tokens. When the music stops – and it always stops – it’s not a fun place to be.
