Earlier this month, an image of a pet rock sold for more than US$200,000 in the non-fungible token market.
Meanwhile, the market capitalization of a cryptocurrency called Pepe — a meme coin based on a cartoon frog — doubled in just a few weeks. Even the price of the FTT token, created by the FTX Trading Ltd. exchange and currently has no real utility, has tripled in the past month in hopes that Sam Bankman-Fried’s company will return from the dead.
Everywhere you look, there are signs that the wacky excesses of the cryptocurrency market — and fear of missing out on them — are making an unlikely comeback. As expectations of an imminent approval of a spot-bitcoin exchange-traded fund push the oldest and biggest cryptocurrency ever higher, the hype has also lifted other boats, even those considered among the least seaworthy.
This latest rise of digital junk follows a nearly two-year-long cryptocurrency winter where the value of thousands of dubious projects slid — some to nearly zero — to the delight of critics and even some industry insiders. Aggressive actions by the United States Securities and Exchange Commission marked some cryptocurrency coins as illegal and chased some promoters away from the market. Now, it appears that the cleansing was only temporary.
“As prices rise, investors on the sidelines think they need to get in,” said Campbell Harvey, a finance professor at Duke University. “Many will violate the No. 1 investment rule: Understand what you invest in. Many will also violate the No. 2 rule by putting their money in an undiversified bet on a single token.”
Social media is once again full of posts hyping meme coins. One of them is called Memecoin, created earlier this year, and its value has shot up this month. Its short white paper, where disclaimers take up about as much space as explanations, notes that the token “has no functions, no utility and no intrinsic value, no promise or expectation of any financial return, profit, interest or dividend.”
“Looking for a new theme to rake in customer money for no value, that’s the theme in non-bitcoin crypto,” Cory Klippsten, chief executive of bitcoin services provider Electric Solidus Inc. (doing business as Swan), said. “I guarantee there will be another hype cycle for altcoins, and more people will get hurt.”
I guarantee there will be another hype cycle for altcoins, and more people will get hurt.
Cory Klippsten
Static images of rocks tied to the Ethereum and Bitcoin blockchains are selling for eye-popping prices again. Bitcoin Rock #75 recently sold for almost three bitcoin, or about US$112,900. Like many others, the collection is held by a small group of people. And like most NFT collections, the rocks aren’t very liquid.
Meanwhile, a slew of projects are holding NFT land sales — effectively selling NFTs of properties inside digital territories of games — even though many participants in prior-generation projects got burned.
“It’s important to note the climate of what might be described as a mini bull market,” Sara Gherghelas, an analyst at researcher DappRadar UAB, said. “This environment has infused the NFT space with a fresh wave of enthusiasm and speculative investment, which can sometimes inflate the prices of projects that might otherwise have limited long-term value.”
TG Casino, focused on offering anonymous cryptocurrency gambling on Telegram, has raised over US$2 million in a token pre-sale, including selling NFTs to high rollers. People’s investments in many token sales crashed and burned in years past.
Amid the frenetic rush into the latest hot token, some buyers end up being what’s known as rug-pulled or duped by scams in which the coin’s creators disappear along with the liquidity. In the third quarter, rug pulls accounted for 65.1 percent of all types of attacks in cryptocurrency, according to blockchain security auditor Hacken.io.
“Optimists are seeing thaws in the crypto winter and even green shoots,” said Aaron Brown, a cryptocurrency investor who writes for Bloomberg Opinion. “If this is early crypto spring, the good new ideas should suck the attention from the nonsense. If not, the junk should fade back to obscurity.”