The week started with cryptocurrency market in the green, led by Bitcoin ($BTC) in its run up to $35,000. While $BTC is now down from this price level, it continued to sustain the bullish momentum, along with a majority of the other coins.
This seemed to also have triggered memecoin traders who often play with a risk-on sentiment, betting on tokens with a strong social interest rather than the technology that goes behind it.
Memecoins are built on top of layer-one blockchains, with a majority of them being on Ethereum utilising the ERC-20 smart contract standard.
Some of the popular ones like pepecoin ($PEPE) has jumped by more than 30% in the last 24 hours, according to CoinMarketCap. Similar on-chain trading frenzy was also noted for others like HarryPotterObamaSonic10Inu (which trades with a BITCOIN ticker) and SPX6900 ($SPX), where both rose by over 40% in the last day.
These memecoins are known for their jest in the crypto market. Their tickers mimic both Bitcoin and the US stock index S&P500 but have a combined market capitalisation of over $120m.
As a result of this renewed frenzy, a spike in Ethereum gas fees was noted. Ethereum gas is what users pay to process transactions or use smart contracts on the network. This fee ensures that transactions are included in the earliest block by network validators.
Since validators are usually incentivised to include transactions that pay the highest fees instead of a first-come-first-serve basis, the fees on popular tokens can often run to thousands of dollars.
Ethereum gas fee is denominated in gwei and can only be paid in Ethereum’s native token $ETH. Gwei is a denomination of Ether, mostly used on the Ethereum network to buy and sell goods and services. It is one-billionth of one $ETH.
On the back of the ongoing memecoin frenzy, the fees increased from 9 gwei to over 45 gwei, indicating a strong block demand.
However, memecoins are known to be heavily driven by the community. They do not have any intrinsic business or economic use case. Therefore, the prices of these coins are heavily affected by online sentiments and social media, which often results in hype spikes. On the flip side, it may also lead to financial risk and FOMO.
As observed in the past, the mania that accompanies these non-serious, made-for-joke cryptocurrencies has often acted as a warning or sign for major market tops or bearish reversals in Bitcoin.
The top coin currently sits just above $34,000, on the back of a 12.8% daily price rise. This seemed to have been a result of some recent positive developments in the cryptocurrency market, as the industry continues to hold high hopes for a potential spot Bitcoin exchange-traded fund (ETF) approval.
