Pepecoin: what the 7,000% appreciation of the Pepe cryptocurrency says about ‘meme coins’

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Experts heard by g1 explain why this category of crypto asset is attractive despite not being substantiated, having more fragile technology and being based on speculation. Pepecoin: what the 7,000% appreciation of the Pepe cryptocurrency says about ‘meme coins’ CoinMarketCap. The numbers, analyzed by g1, point to a peak of US$ 1.5 billion in market value (total value attributed to the asset) on May 5th. The expressive result raised the theme to the most commented subjects on the internet and drew attention (once again) to the market of “meme coins”, types of cryptocurrencies that use viral images from the internet to become popular — also known as memecoins. In the case of the cryptocurrency Pepe, or Pepecoin, after the peak of appreciation there was a drop in market value to less than US$ 625 million, on May 23 (see the curve in the chart below). Unlike cryptocurrencies considered traditional (such as Bitcoin), meme coins tend to be developed in a much simpler way and have fragile technology – which makes them less secure. In addition, they are not substantiated (that is, they do not have a specific purpose, such as being a means of payment, a business model or having some technical utility, for example) and, in general, are considered simple “jokes”, according to specialists heard by g1. It turns out that (yes!) these jokes in the form of cryptocurrencies reached billionaire values, such as the case of Pepe and Dogecoin, created in 2013 and considered the first meme-currency. But, before explaining why and how coin-shaped jokes can reach real values ​​of this magnitude, it is important to understand the concepts within this market that we are dealing with. A spoiler of what you will read in this article: What are crypto-assets, blockchain, cryptocurrencies and meme-coins What justifies the huge adherence to memecoins How meme-coins reach exorbitant values ​​Who invests in memecoins and who gains from speculation The differences between traditional cryptocurrencies and meme currencies What are cryptoassets, blockchain, cryptocurrencies and meme currencies The concepts are complex and often intermingle. In this case, it is worth starting with the first term. Cryptoassets – These are blockchain-based digital assets (see what blockchain technology is below). They are inserted in the digital environment and have a series of codes responsible for the protection of these assets. Cryptocurrencies and meme coins are considered cryptoactive, as well as NFTs, a kind of “digital collection”. Remember here what non-fungible tokens are. Blockchain – It is the technology that houses the transactions of cryptoassets. Experts translate this digital space as a large ledger, which ensures that negotiations are recorded reliably and transparently. As its name suggests, it is a chain of interconnected blocks of information, which contain data on who sent, who received and how much was received, for example. Cryptocurrencies – These are digital currencies created from a series of protocols that enable secure transactions. They are considered a kind of decentralized money, which was born without intermediaries (such as banks). Cryptocurrencies are embedded in blockchain technology. The main ones are Bitcoin and Ethereum — which have their own blockchain networks. Meme coins or memecoins – These are cryptocurrencies created based on images or jokes that went viral on the internet. They don’t have advanced technology or an ecosystem of their own, and they exist without a specific purpose. Its values ​​are based solely on speculation — supply and demand for the crypto asset. What justifies the huge adoption of Pepecoin memecoins: what the 7,000% appreciation of the Pepe cryptocurrency says about ‘meme coins’. Reproduction We already understand that memecoins are jokes that went viral on the internet and gained the form of cryptocurrencies, inserted in a blockchain environment. But what explains such appreciation? For Isac Honorato, CEO of Cointimes, two single points justify the rise of Pepecoin and meme-cryptocurrencies in general. They are: belonging to the community and FOMO. FOMO is the abbreviation of “fear of missing out” which, in free translation, means “fear of being left out”. The term sums up that feeling of missing a great opportunity or being left out of a movement with a lot of support. It is, therefore, this scenario within the cryptocurrency environment. “FOMO ends up happening very quickly. It and the feeling of belonging are the only pillars of projects that characterize memecoins. They are projects that have no clear purpose, do not have advanced technology”, he says. According to the expert, “anyone consulting a tutorial on the internet, with a five to ten minute video, can launch a cryptocurrency”. There are also examples such as the memecoin Turbo, created by artificial intelligence, with the help of ChatGPT — and which drew attention on networks for also having a strong valuation. In this context, Isac warns that this facility opens doors for malicious people. “They create these types of projects and leverage this ‘fear of missing out’ environment, with the promise of generating a lot of money,” he explains. “In other cases, it could be purely a joke, as is the case with the Pepe cryptocurrency.” It should be remembered that the Pepe meme, inspired by the online cartoon “Pepe the Frog”, was born as another joke on the internet, but was soon appropriated by the extreme right in the United States and became associated with hate speech and white supremacists . Initial plugin text Professor Raul Ikeda, coordinator of the Computer Engineering course at Insper, reinforces the thesis that Pepecoin, like memecoins in general, does not have a foundation. According to the professor, this type of currency does not have a specific use or purpose, and is very different from cryptocurrencies or cryptoassets used for transactions, for example. He cites the difference between Bitcoin and Ethereum, which have their own network (blockchain). “Bitcoin was created with the idea of ​​decentralizing [o mercado de pagamentos]. Ethereum, with the purpose of, in addition to carrying out transactions, running scripts [códigos de programação para execução de tarefas], while other coins emerged to try to add some technical aspect”, he explains, reinforcing that, therefore, there are projects behind these systems. How meme coins reach exorbitant values ​​Experts point out that meme cryptocurrencies are extremely susceptible to speculation — and gain value solely from it. Let’s use the example of Dogecoin, the first of the category to be created. To grow, it had a “little push” from billionaire Elon Musk. Launched in 2013, Dogecoin — which bears the face of the dog Kabosu, of the Shiba Inu breed, widely shared on the internet – gained new prominence in 2021 after Musk’s posts on Twitter. It was the billionaire’s enthusiasm that made Dogecoin rise 1,100% in one month, between April 7 and May 7 of that year Musk said that he bought the currency, believed in his project and, days after the peak of appreciation, even said that he started working with developers to improve it. Initial plugin text “Working with Doge developers to improve the currency transaction system efficiency. Potentially promising “, he wrote. Currently, this memecoin is still among the top 10 cryptocurrencies in market value, according to the CoinMarketCap platform – despite having no foundation (specific purpose) or advanced technology, highlights Isac Honorato, from Cointimes. He believes that one of the points responsible for keeping Dogecoin still on the rise is the fact that it was the first memecoin created, which generated an appeal around the community. Isac also uses the example of this cryptocurrency-meme to explain that even not having a clear purpose and not being grounded, there is a community around it responsible for adding value. “Why does someone say that a CS skin [um recurso visual que pode ser comprado dentro do game], for example, is it worth a million reais? Because someone on the other side, a community, has a perception of value about it”, he exemplifies. It is basically what happens with a memecoin. “In a very simple way, I would translate this whole movement as a collective madness. Why a meme-based cryptocurrency reaches a market cap of 1.5 billion [de dólares]? Because many people bought it, and it reached that price”, says Isac. Dogecoin is among the ten largest cryptocurrencies in market value, according to the CoinMarketCap platform. Ruvic data/Illustration/Reuters Professor Raul Ikeda, from Insper, reinforces that no there is a specific rationale that justifies the memecoin soaring other than the dynamics of supply and demand. “A lot of people start looking and, with that, accept paying higher prices. This creates what we call the ‘herd effect’, in which people enter because they think it has a possibility of appreciation. They try, therefore, to profit, basically buying cheap and selling high”, he says. For Ikeda, although Dogecoin is considered a meme-currency, it is better developed and differs from other memecoins. Who invests in memecoin and who earns with it speculations Isac Honorato, from Cointimes, sees memecoin investors as someone with a high-risk profile — that is, someone who decides to take on greater risks in exchange for possible better returns. These investors, says the specialist, can be separated into blocks, ranging from the first (that is, the first group to buy cryptocurrencies) to those who enter in the following waves. The first group to enter, he explains, is that of traders ( negotiators) who are already used to operating in this market and have more knowledge. “They end up seeing this type of opportunity. We saw a lot of data inside the blockchain that shows that big traders who had already made money in the market ended up allocating investments to Pepecoin”, he says. Within this logic, whoever invests and withdraws investments at the right time wins. : Those who invested before Pepe’s 7,000% surge in market value and withdrew funds at the top won. Those who entered the peak and saw the price of the memecoin plummet lost. It happens that when traders considered to be more specialists in the market make that initial move — from withdrawing resources from fundamental currencies such as Bitcoin and Ethereum — they attract the next wave of migration within the market, explains the expert. Initial plugin text Differences between traditional cryptocurrencies and meme currencies In the breadth of this market, there are around 10,000 cryptocurrencies listed on the specialized website CoinMarketCap. According to the platform, 706 are memecoins. In addition to Pepe and Dogecoin, the Shiba Inu and Floki Inu (which represent the same breed of dog) are among the highlights that inspired Dogecoin). Also on the list is Dogelon Mars, another pet-inspired meme-currency. The burst of the frog Pepe in the cryptocurrency market also led to a series of provocations against currencies based on dogs. In some publications, Pepecoin’s official Twitter page stated, for example, that “the dog days are over”, in reference to its appreciation. Along with other meme-coins, Pepecoin is currently listed on the main exchanges (platforms on which it is possible to buy, sell, exchange and store cryptocurrencies) in Brazil and the world. Finally, specialist Isac Honorato highlights some points that differentiate traditional cryptocurrencies from memecoins. According to him, the main distinctions lie in the fact that meme coins: Have no use; They don’t have technology; They have no level of security; They have no value proposition (they don’t have a business model, a project or a product behind them). He also lists the risks, the first of which is losing money. Because it is a baseless and illogical project, there is a much greater risk of market manipulation, which occurs from the concentration of these assets in a few portfolios (few owners of the resources). “This gives margin for these small portfolios to make big sales and, consequently, earn a lot of money with it”, concludes Isac.

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