If you want proof of how drastically the mood in the cryptocurrency market changed over the last six months, look no further than the rise and fall of virtual coins inspired by billionaire entrepreneur Elon Musk.
In November, when cryptocurrencies were hitting a succession of record highs, the combined value of Musk-inspired coins such as “Dogs of Elon, “Elon Sperm,” or “AstroElon” totalled $3.7bn. Fast forward six bearish months, and musk-coins are down 80%, Capital.com’s analysis shows.
The Musk-inspired coins plunged at twice the speed of the broader cryptocurrency market. Does this bubble burst signal an end to a meme-coin era?
Looking for the next SHIB among Elon’s cryptos
“I wanted to find the next SHIB,” says Andrea Rapisarda, 29, who bought Dogeelon Mars (ELON), a cryptocurrency inspired by Musk, in November’s golden era for cryptocurrencies hoping to “get in early” on the next meme-coin. At the time, there were a total of 52 cryptocurrencies that had the words “elon”, “musk,” “tesla,” or “floki” [Musk's dog] in their name, Capital.com analysis shows.
The hunt for the next crypto hype was ripe at a time when not one but two “joke coins” inspired by a Japanese Shiba Inu dig - DOGE and SHIB - featured in the top 10 cryptocurrencies by market cap.
Meme-coins were a phenomenon of 2021, fuelled by billions of dollars of easy money flooding the markets in the wake of the pandemic.
That same year Musk became the undisputed number-one cryptocurrency influencer. Tesla’s chief executive had proven crypto-market moving powers, notably when his tweet that Tesla would accept BTC for payments sent the crypto king rallying, and the tweet Tesla would suspend BTC payments sent BTC plunging.
The South African/US billionaire also found fondness for meme-coins. Throughout the year, the self-proclaimed “doge-father” regularly tweeted cryptic dog-themed tweets and photos of dogs, and had the masses guess which of the rival dog meme-coin he was endorsing.
In June, Musk told the world that he would get himself a Shiba Inu dog and name him Floki, prompting an anonymous person to launch a cryptocurrency Floki Inu (FLOKI), titled “inspired by Elon Musk’s shiba inu.”
Floki has arrived pic.twitter.com/2MiUKb91FT
— Elon Musk (@elonmusk) September 12, 2021
When Musk introduced his puppy to the world in a Tweeted photo that said “Floki has arrived”, FLOKI surged 4,000%.
No wonder that Musk’s seeming affiliation seemed like a good investment case for cryptocurrency traders.
Floki inu-US dollar (FLOKI/USD) price chart
The world’s most considerable market-mover
When deciding on his meme-coin bet, Rapisarda used metrics like price to market capitalization, circulation supply and total supply: “The market capitalization [of ELON] was not too high and not too low,” he says as he explains that it was too late to get in on DOGE which was already in the top 10.
But he was also intrigued by the Dogeelon Mars name and connection with the eccentric entrepreneur: “It was the first cryptocurrency I saw with Elon Musk’s name in it. He’s currently the most considerable person in the world, or at least in the top three, I think he’s the top one.”
“It was the first coin with the name of someone in its name, and that someone is the most considerable man in the world, and the man who’s moving the market that we’re talking about –- that I started my consideration,” Rapisarda explains, adding that he was pretty sure that the coin didn’t have any official links with the world’s richest person.
Musk-coins bubble burst
Rapisarda eventually parted with his ELONs at loss. After buying his position at $0.0000019 in November, and sold in December at $0.0000017. Had he held until now, he would be looking at bigger losses, as the token is currently trading at $0.0000004253.
What is your sentiment on BTC/USD?
Capital.com analysed coins listed on CoinMarketCap.com, and filtered for those that have the words “elon”, “musk,” “floki,” or “tesla”.
While the market value of musk-coins plummeted during the bear market, the number of such coins actually jumped 50% in the period, showing that people in the crypto space are still trying their luck. And every now and then, they do manage to succeed to hype a Musk-inspired coin up. After news spread that Musk would buy Twitter, for example, a cryptocurrency called ‘Elon Buys Twitter’ (EBT) shot up 5,000% in a mere hour.
“Digital assets with value derived from virality, such as the “Elon” and “Floki” coins, can be compared to the likes of a lottery ticket,” says Alissa Ostrove, chief staff officer at cryptocurrency data provider CryptoCompare.
“Their utility is in their virality. Although some of these tokens tend to see positive price action for longer than the general market, this is often due to low liquidity markets which are easily manipulated by investors with large amounts of capital. This is usually followed by a sell-off and prolonged downtrend,” she warns.
Late to the free-lunch party
But the speculative memecoin market's days now look numbered, as investors are more selective where to put their money, Capital.com's analyst, Piero Cingari says.
He says: “Risk sentiment in global equity markets has improved in recent days, with S&P 500 and Nasdaq rebounding, as investors begin to believe the Fed cannot go all-in on interest rate rises or the economy would face a recession; nevertheless, the ultra-speculative crypto meme-coin market remains dead.”
“The reason is quite simple: when the tide goes out we see who has been swimming naked. Because the flow of liquidity in the markets has retreated, the bubble of memecoins and cryptocurrencies with no logical or economic foundation has burst.”
“Investors are lot more selective today than they were a year or two ago, when they were willing to buy anything just because the Fed was flooding the market with $4trn of liquidity following Covid-19.
“Whoever believes there is still a free lunch in memecoin is late to the party.”
