Meme-Coins Explode As Bitcoin Stumbles

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Seasoned cryptocurrency traders may be no strangers to the excessive volatility that comes with the territory. But the events of Cryptoland sometimes seem to be pushing their limits. For example, in January, a lesser-known crypto coin known as Dogecoin rose more than 800% in the space of a month after Tesla Inc. (NASDAQ: TSLA) CEO Elon Musk, through a series of cryptic tweets, encouraged his followers to “hodl” DOGE.

And now cryptoland is getting back to it.

A week ago, the native digital token Terra of Singapore-based Terraform Labs soared 50% in the space of a week after 100 million Terra tokens were burned, removing them forever from the world. parts supply, as Hayden Hughes, CEO of Alpha Impact, told Bloomberg.

“This reduction in supply combined with the popularity of Luna staking (where staking participants get new tokens) created a supply shock that drove up value.”

Terra has gained over 10,000% year-to-date and now has a market cap of $ 60.4 billion, up from less than $ 200 million in the same period a year ago, which in fact the tenth largest crypto, according to data from CoinMarketCap. Terra remains very volatile, up nearly 13% in intraday trading on Wednesday to change hands at $ 70.67 per token.

Memes-based cryptocurrencies

Terraform’s dispute with the United States Securities and Exchange Commission (SEC) over its platform potentially selling unregistered securities hasn’t stopped it from becoming “the last shiny thing in the crypto space, in the footsteps of it. other blockchains like Solana and Avalanche, all of which have seen explosive gains over the past year, ”Nexo co-founder Antoni Trenchev told Bloomberg.

It doesn’t matter that Terra’s protocol deploys algorithmic coins, which essentially means that “Luna’s price dynamics are primarily a function of the demand for UST and, by extension, the demand for the use of UST in various applications and blockchains, ”as head of Terraform’s Communications Labs Brian Curran told Bloomberg earlier.

Stablecoins are a class of cryptocurrencies that attempt to provide price stability and are backed by a reserve asset. For example, Tether (USDTUSD) and TrueUSD (TUSDUSD) are popular stablecoins that are equivalent in value to a single US dollar and are backed by dollar deposits. You don’t expect either coin to move 800% in 30 days.

Terra is not alone here: remember that towards the end of October, Ethereum faced a similar reduction in its token supply, causing its price to increase.

If you’re wondering what’s going on here, look no further than the newly created class of “Memes Actions,” with GameStop Inc. (NYSE: GME) and AMC Entertainment (NYSE: AMC) being the top contenders.

In January, longtime subreddit channel r / WallStBets launched a wave of heavily short-shorted GME stock purchases, creating massive squeeze and sending unfathomable stocks 1,500% higher within weeks. The group then focused on AMC with the same dramatic results before quickly selecting other targets. The buying pressure was so great that the popular Robinhood trading app banned trading in even stocks such as Koss Corp. (NASDAQ: KOSS), Sundial Growers Inc. (NASDAQ: SNDL), Trivago Inc. (NASDAQ: TRVG) and Naked Brand Group.

Even stocks are often low-priced, hot-selling stocks that investors believe are unfairly targeted by hedge funds to drive their prices down. Indeed, the New York Stock Exchange has warned that the mechanisms for pricing memes stocks could be flawed as much of their trading is executed outside the conventional public exchanges where stock price formation occurs.

For now, the SEC and the markets seem helpless to a marauding group of investors who can pump a stock just because they can, meaning the stock market frenzy could be here to stay. Retail investors can often find themselves with the bag after the frenzy ends, as memes’ stocks differ from regular investments as their price movements are heavily dependent on viral buzz or community interest, rather than fundamentals. of the company.

The same has happened in cryptoland, with alt coins based on memes rallying as more tokens are withdrawn from ETH circulation.

Specifically, Shiba Inu burned 770.12 ETH around the same time Terra rallied, becoming the third largest ETH burner; Uniswap V2 destroyed 2,729.22 ETH and Tether burned 1,248.72 ETH around the same time. CoinDesk notes that ETH may continue to exceed BTC as the ether-bitcoin implied volatility spread increases.

Additionally, SafeMoon – created on the Binance Smart Chain blockchain – is another alternative coin that has seen wild price action recently.

By Michael Kern via Safehaven.com

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