Memecoins outperformed the broader crypto markets in recent days, but there may be cause for caution ahead as some warn of imminent profit-taking.
Monday saw the Elon Musk-owned social media app Twitter replace its popular blue bird logo with that of Dogecoin’s Shiba Inu mascot. Dogecoin (DOGE) prices surged almost immediately – with its futures markets setting a record – as some bet on the increased use of dogecoin within the Twitter platform.
That rise caused several other Shiba Inu-themed memecoins to jump multifold, with the sector jumping 14% on average. Large-cap tokens such as shiba inu (SHIB) rose up to 10%, while small-caps such as floki (FLOKI), kishu inu (KISHU) and baby dogecoin (BABYDOGE) surged as much as 25%.
Memecoins on newer blockchains had their moment as well. Some dog-themed tokens, such as zkDoge and zkShib on the zkSync blockchain, which went live in March, registered gains of as much as 100%.
Such rises are unlikely to hold for the long term, however, with some traders warning of such moves being non-indicative of a broader trend.
"We do not believe that it is indicative of a long-term bull run. Quite the opposite,” said Guilhem Chaumont, CEO of crypto trading firm Flowdesk, in a Telegram message. “There is a regular pattern of crypto market uptrends with first, bitcoin going through a bull run, then major altcoins pumping, and finally, tokens with small market caps.
“Since bitcoin has been experiencing a relatively stable upward trend, memecoins’ rise would indicate the third phase, the end of the cycle. But there is no need to over-interpret such momentary price changes,” Chaumont said.
It is a sentiment shared by Bonnie Cheung, head of strategy at crypto developer Sending Labs. “The sentiment for memecoins is not a new one and this means there is a high potential that the growth will fade off as usual in a few days,” Cheung said.
There could still be long-term growth for these tokens if fundamental features strengthen in the coming months.
“Shiba Inu for instance is gaining additional traction through the launch of Shibarium, its layer-2 protocol built on the Ethereum blockchain. Dogecoin’s recognition by Twitter and the payment world is also growing, and these trends can help record more sustained growth over the long term,” Cheung noted.
Meanwhile, some opine that Twitter’s move could pave the way for mainstream crypto adoption.
“Musk’s supportive tweets and the recent decision to add the Dogecoin logo to Twitter help keep both DOGE and SHIB in the public conversation,” said Kadan, CTO of blockchain network Komodo, in an email to CoinDesk.
“Regardless of whether or not one supports meme coins, it's impossible to deny that Musk is driving mainstream adoption of crypto and creating media attention that wouldn't otherwise exist. This is certainly a net positive for the crypto space as a whole,” they added.