Pepe, a coin inspired by an anthropomorphized frog popular in internet memes, leapt nearly 7,000% in the 17 days after its April 16 launch, hitting a market value of $1.8 billion by May 5, according to data tracker CoinGecko.
Pepe’s rise has sparked renewed investor interest in memecoins as whole, with overall trading volumes jumping to $2.6 billion in the first week of May from $408,000 the week before, data from Dune Analytics data shows.
“Memecoins just flare up on occasion, and it’d historically happened when the market’s a bit choppy or sideways,” said Todd Groth, head of index research at CoinDesk Indices. “It’s almost like, if the market is not moving up fast enough, traders find these smaller tokens to trade with.”
Indeed, the latest memecoin frenzy comes as bitcoin’s 2023 rally stalls. The No.1 cryptocurrency has slid 6% since mid-April to $27,416.
Pepe, which trades for fractions of a cent, was down 60% from its May 5 peak on Monday, though still boasts a market cap of almost $740 million. This makes it the third-largest memecoin after dogecoin and shiba inu, both born as internet jokes referencing a Japanese dog breed, which command more than $10 billion and $5 billion of the market respectively.
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Reuters couldn’t immediately identify pepe’s creators, and its Twitter account didn’t respond to a request for a comment. Memecoins first exploded into mainstream view during 2021’s “Wall Street Bets” movement, fueled by retail traders. They lack practical use beyond speculation, distinguishing them from more “mainstream” coins like bitcoin and ether whose backers say have potential as a means of payment or store of value.
Market players warned that traders and investors could get badly burned by memecoins.
“Human beings love to speculate,” said Martin Leinweber, product strategist at MarketVector Indexes. “I would still be very cautious to buy them. It’s gambling in its purest form.”
‘Completely useless’
Pepe’s website says it was launched “for the people” with “no formal team or road map” and is “completely useless and for entertainment purposes only”.
The coin is the fastest-growing cryptocurrency hosted on Ethereum, the second-largest blockchain, data firm Messari said.
The surge in pepe’s popularity was amplified by its quick listings on major centralized exchanges, including top platform Binance, said Chase Devens, 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 didn’t immediately respond to a request for comment on pepe’s leap.
The centralized listings also opened the door for derivative trading for pepe, with leveraged exposures and volatility pushing Ethereum transaction fees higher, Devens said.
As with other crypto tokens, the fortunes of memecoins are rooted in retail trading and often fueled by online sentiment.
Dogecoin and shiba inu, the eighth and 15th largest cryptocurrencies respectively, often experience wild price swings.
Dogecoin was launched in 2013 and soared over 12,000% to an all-time high in May 2021, before sinking nearly 90% since then. Shiba inu has similarly dropped 90% from its October 2021 peak.
Newcomer pepe has over 100,000 holders according to CoinGecko data.
The memecoin’s surge is “an intriguing phenomenon” said Edmond Goh, head of trading at crypto liquidity provider B2C2.
“The latest coin explosion illustrates that there is still capital sitting on the sidelines waiting to be deployed.”
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