Why is BONK going up? Be careful of doggy tokens, we have seen this movie before
Bonk is a meme coin launched on Solana on Christmas Day
It has surged close to 2,500%
Solana, meanwhile, has collapsed following associations with Bankman-Fried and top projects fleeing the blockchain
Our Analyst writes that this is not the climate for memecoin hysteria
Woah, this is a throwback. Twitter is alive this week with talk of Bonk, a doggy token on the Solana blockchain. There is something a little nostalgic in talking about a good old-fashioned meme token. All we need is a COVID mask and some Elon Musk tweets, and we would be squarely back in 2020.
The Shiba-Inu themed token was issued on Christmas Day, and has risen close to 2,500% since. The price rise in the last hour as I write this is 150%.
Of course, the intriguing thing here is that the token has been launched on Solana, which has been struggling mightily over the last few months. I wrote a deep dive only yesterday analysing the demise of Solana, with multiple top projects fleeing the blockchain, repeated outages causing massive problems, and its ominous association with Sam Bankman-Fried pulling down the price.
But while it is still down hugely, Solana has bounced back a little in conjunction with this surge for Bonk. It jumped back above $13 Tuesday having dipped as low as $8 last week. Looking at Coinglass data, there has been close to $7 million of short positions liquidated, the largest amount since FTX collapsed in November.
The Layer 1 seems to be benefiting from the surge in interest for Bonk, which announced a large airdrop of 50% of its supply to drive up hype around the coin. It has worked – Bonk now has a market cap of $120 million and is following the meme coin playbook perfectly.
Why is Bonk rising?
Like any meme coin, it is difficult to ascertain how exactly bonk has pulled this off. It really comes down to marketing and luck. A number of Solana projects have even integrated Bonk as payment tokens, while $BONK has been trending incessantly on Twitter.
It all amounts to the same hysteria we saw over the last couple of years. As everybody knows by now, meme coins are nothing but a gamble. But what makes this so unusual is that the rise is occurring not only at a bearish juncture for Solana, but for the market as a whole.
The past year has seen interest rates hiked and liquidity pulled from the market, with risk assets collapsing. There is nothing further out on the risk spectrum than meme coins, and they have hence cratered as a result.
What next for Bonk?
All I will say to any investor (gambler) is that Bonk is a very dangerous game, like any meme coin. There is zero utility here and that means that in the long run, the coin is likely to drop to zero.
Of course, everybody knows that anyway, and these are memes we are talking about. But in the current tight monetary policy environment, the hysteria of the pandemic, where stimulus-cheque-wielding retail investors were pumping everything within sight, is long gone. This is not the climate for gambles like meme coins, and that is without even mentioning the carnage with Solana.
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