Jan 17 (Reuters) – Bitcoin is on fire in 2023, sweeping the crypto market off the floor and electrifying bonk, the new meme coin.
The #1 cryptocurrency posted a 26% gain in January, jumping 22% in the past week alone, clawing back above the $20,000 level and heading for its best month since October 2021 – just before the Great Crypto Crash.
Ether has also grown, up 29% this year, helping push the value of the total global cryptocurrency market above $1 trillion, according to CoinGecko.
“After a tough last year for cryptocurrencies, we’re seeing a mean reversion form,” said Jake Gordon, an analyst at Bespoke Investment Group, referring to the theory of asset prices returning to long-term averages.
Investors’ bets on a rosy macroeconomic picture led to a surge in riskier assets around the world, researchers said.
Few crypto tokens have benefited more than bonk, which launched in late December on the Solana blockchain and jumped 5,000% by early January. It has since declined, although it is still up 910% year-to-date.
It’s the latest entrant in the hyper-volatile world of meme coins, cryptocurrencies inspired by online memes and jokes, and is modeled after the same smiling Shiba Inu dog as dogecoin – itself made famous by Elon Musk’s tweets.
Bonk is a puppy after all.
Even at its peak it was only worth $0.000004873759 with a market cap of around $205 million.
Other meme tokens also rose, with Dogecoin and Shiba Inu up 19% and 27% in 2023.
But buyers beware.
“Investors need to be extra careful when it comes to coins like Great Dane, Shiba Inu and Bonk,” said Les Borsai, co-founder of digital asset services firm Wave Financial.
“They fall just as hard as they jump.”
Still, some market players pointed to the relative cheapness of these tokens – a Great Dane is worth about eight cents – as a reason why speculators were willing to bet on them.
“Meme coins belong in crypto, it’s part of the culture,” said Martin Leinweber, product specialist for digital assets at MarketVector Indices. “It only takes a few lines of code to create a meme token and if you have a community for it, people love it.”
RUMORS OF SOLO’S DEATH EXAGGERATED
Bonk is a meme coin with a mission. It was built, in part, to support the Solana blockchain, which has seen an exodus of funds and users since crypto exchange FTKS filed for bankruptcy in November, and its native Solana token has plunged over 37%.
The Solana token has really soared now as the bonk has gained traction: it is up 131% in 2023, the biggest gain among major cryptocurrencies.
“The rumors of Solana’s death appear to be greatly exaggerated,” said Tom Dunleavy, senior analyst at data firm Mesari. “Despite the recent seemingly speculation-driven price appreciation, the underlying ecosystem remains quite strong.”
TOO EARLY TO CALL A CRYPTO RETURN
Some researchers have attributed the crypto gains to optimism that inflation has peaked, reducing the need for tighter central bank policy.
“Bitcoin and cryptocurrencies tend to lead the way, which is why we’ve seen significant relative strength in this asset class recently,” said Wave Financial’s Borsai.
There has certainly been an increase in activity.
The dollar value of bitcoin trading volume on major exchanges over a 7-day period jumped to $151 million, the most in nearly two months, according to data from Blockchain.com.
Total bitcoin flows – representing all uses, including trading and payments – rose by an average of 13,130 bitcoins over the past 7 days, the largest increase in 64 days, Chainalisis data showed.
However, market watchers cautioned against celebrating too soon, noting that trading volumes remained low and the macroeconomic environment uncertain.
“It’s too early to declare a definitive reversal for the crypto market despite the recent strength we’ve seen lately,” said Aaron Kaplan, co-founder of Prometheum, a digital asset securities trading platform.
“If interest rate hikes are below what the market expects, then risk assets will benefit and cryptocurrency prices are likely to continue their upward trend, but there is too much uncertainty right now.”
Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Editing by Pravin Char
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