Jan 17 (Reuters) – Bitcoin is charging into 2023, pulling the crypto market off the floor and electrifying bonk, the new meme coin.
The No. 1 cryptocurrency is up 26% in January, jumping 22% in the past week alone, clawing its way back above the $20,000 mark and on track for its best month since October 2021, just before the Great Crypto Crash.
Ether is also up 29% this year, pushing the total global cryptocurrency market value above $1 trillion, according to CoinGecko.
“After a difficult year for crypto last year, we’re seeing a form of mean reversion,” said Bespoke Investment Group analyst Jake Gordon, referring to the theory of long-term mean reversion in asset prices.
Investors’ bets on a higher macroeconomic picture are driving a rise in riskier assets, researchers say.
Few crypto tokens have benefited more than bonk, which launched in late December on the Solana blockchain and surged 5,000% in early January. It has since fallen back, although it remains up 910% year-to-date.
It’s the latest entrant into the hyper-antastic world of meme coins, cryptocurrencies inspired by online memes and jokes, and modeled after the same grinning Shiba Inu dog as dogecoin, which itself rose to fame on Elon Musk’s tweets.
Bonk is a puppy though.
Even at its peak, it was only worth $0.000004873759 with a market capitalization of $205 million.
Other meme tokens have also risen, with dogecoin and Shiba Inu up 19% and 27% respectively in 2023.
But buyers beware.
“Investors should be especially careful when it comes to coins like doge, Shiba Inu and bonk,” said Les Borsay, co-founder of digital asset services firm Wave Financial.
“They fall as hard as they rise.”
However, some market players pointed out the relative cheapness of these tokens; a dog 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, digital asset product specialist at MarketVector Indexes. “It only takes a few lines of code to create a meme, and if you have a community for it, people love it.”
SOL’S DEATH SOLUTIONS inflated
Bonk is a meme coin with a mission. It was created, in part, to support the Solana blockchain, which has seen an outflow of funds and users since crypto exchange FTX filed for bankruptcy in November and its native Solana token fell more than 37%.
The Solana sign has really risen now as bonk has gained traction. It has risen 131% in 2023, the biggest gain among major cryptocurrencies.
“The news of Solana’s death appears to be overblown,” said Tom Dunleavy, senior research analyst at data firm Messari. “Despite recent price appreciation, which appears to be driven by speculation, the underlying ecosystem remains quite strong.”
TOO EARLY TO CALL A CRYPTO FIGHT
Some researchers chalked up the crypto gains to optimism that inflation has peaked, reducing the need for tighter central bank policy.
“Bitcoin and crypto tend to be at the forefront of everything, which is why we’ve seen notable relative strength in this asset class recently,” said Wave Financial’s Borsai.
There is certainly an increase in activity.
According to data from Blockchain.com, the dollar value of Bitcoin trading volume on major exchanges rose to $151 million over a seven-day period, the highest in nearly two months.
Total bitcoin flows, which represent all uses including trading and payments, have increased by an average of 13,130 bitcoins over the past 7 days, the largest increase over the past 64 days, Chainalysis data showed.
However, market watchers cautioned against celebrating too soon, noting that trading volumes remain low and the macroeconomic environment remains uncertain.
“It’s too early to declare a definitive reversal for the crypto market despite the recent strength we’ve seen recently,” said Aaron Kaplan, co-founder of Prometheum, a digital asset securities trading platform.
“If rate hikes are lower than the market expects, then risk assets will benefit and crypto prices will likely continue the uptrend, but there’s just too much uncertainty right now.”
Reporting by Medha Singh and Lisa Matakal in Bengaluru; Editing by Pravin Char
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