As the Bitcoin halving event – which occures every four years – approaches, the trend of some digital assets is being questioned by crypto experts. The Bitcoin halving is an occurrence where the reward for mining Bitcoin transactions is slashed in half, thus reducing the rate at which new coins are created and therefore lowering supply as well. In previous halving events, some pretty standardized repercussions occurred – most often the price of Bitcoin would grow in the six months following the halving. However, with BTC having reached an all-time high just two months before this halving (as we wrote about here), the behaviour of cryptocurrencies has, in this particular time frame, been puzzling to say the least. One type of digital asset that have been making noise in this regard are meme coins, one of the most interesting and perhaps perplexing phenomenons in the crypto sphere.
What are Memecoins
In the crypto world, memecoins are considered to be funnily named assets with very low worth that are usually connected or gained popularity through the usage of an internet meme for brand marketing purposes – with relevant examples being dogecoin and PEPE token, who are both based on very popular memes from the past decade. The two, however, have had very different life spans, both in terms of longevity and creation date. Dogecoin was the very first meme token and was created over ten years ago, in 2013. PEPE, on the other hand, had a very steep rise after its creation one year ago, as it surpassed $100 million in market cap just a week after its creation. These, of course, are not the only memecoins on the market, as others have had steep rises in popularity over the last couple years and, indeed, couple of weeks, as we’ll soon find out.
WIF and Its Ascent
One token that has had an exhilerating ride, especially in the past few days, is dogwifhat (WIF) – I did say the names were funny didn’t I? After a skyrocketing trend this weekend, dogwifhat has found itself as the 29th overall most valuable cryptocurrency on the market. In addition, its market cap has reached almost $4.3 billion, as the memecoin had an incredible surge of roughly 87% in just one week. Its market cap may even approach $5 or $6 billion if its price bounce remains intact in the next weeks.
As of March 31st, dogwifhat is the third-largest memecoin by market cap: it is therefore a meteoric rise for a relatively unknown token. It even overtook PEPE coin, who stands at a valuation of $3.4 billion, but still way below the likes of dogecoin, which has recently soared to $75.2 billion market cap. The most interesting aspect about dogwifhat’s recent ascent is to see whether, like PEPE in April 2023, the hype will be extinguished in a relatively short period of time, or whether, with the halving approaching, it could follow a potential Bitcoin trajectory upwards for the next weeks.
Memecoins and Bitcoin: Breaking the Cycle?
As we spoke about in the introductory paragraph of this piece, crypto industry analysts have been calling this halving cycle “one of the weirdest bull market crypto has ever had”, as described by Ethereum educator Anthony Sassano this weekend in a Cointelegraph article. There are a bunch of factor that have led analysts to this conclusion, all of which more or less unprecedented. The main one, evidently, is the fact that Bitcoin reached its all-time high over a month before the halving cycle. In previous cycles, the recurring theme was Bitcoin always reaching its all-time high the year after the halving event occurred. The uniqueness of this price soar has spelled a bit of uncertaintly in the market, as well as a great deal of positivity of course. But the fact reamins that this is an unprecedented occurrence in Bitcoin’s otherwise relatively short life span so far.
Another factor that is breaking from previous halving effects is where liquidity is flowing to at this moment in time. As the Cointelegraph article points out, “bull runs would see liquidity flow into Bitcoin before moving into Ethereum and other high-capitalization coins and finally moving down the chain.” However, in this particular case, the flow went directly from Bitcoin to memecoins (a rather unusual movement). In fact, the total memecoin market soared to $70 billion this weekend, booseted by the likes of dogwifhat, Bonk, dogecoin and Book of Meme, among others. But what is the actual correlation between the trend of these memecoins and Bitcoin? Let’s take a closer look.
How Bitcoin and Memecoins Coexist
Memecoins usually have a coherent, high price correlation to Bitcoin. This means that when bitcoin’s price begins to move higher, usually the memecoins follow suit. In the past two days, for example, Bitcoin suffered a 5% drop, before stabilizing itself at just over $60,000, while it began at over $65K before Easter. Alongside its narrow drop, “tokens popular among meme enthusiasts, notably PEPE, also expereinced substantial drops in value,”, as a CoinGape article indicated today. PEPE in partciular lost 12% in just one day. On the other hand, historically speaking, when Bitcoin rallies, investors also rush to buy other coins, which means the crypto has positive effects for the whole industry.
This is why Bitcoin’s behaviour as we approach this year’s halving is so important, and why some people are perplexed at its unprecedented pre-halving trend. We are in uncharted territory, but if Bitcoin returns to its levels from a couple weeks ago, the whole industry would benefit from it as yet another halving event looms over the digital asset world. Will Bitcoin reach another all-time high post-halving? Will dogwifhat continue to rise in the digital asset rank? And will memecoins ever truly be econonomically relevant? These are all questions that only time will answer.
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