Every carnival has its end, as Los Hermanos sang. In the cryptocurrency business, that end has not yet come. Last week another phenomenon happened. The cryptocurrency called Shiba Inu had an impressive appreciation, accumulating more than 700% in 30 days.
Shiba Inu is part of the “memecoin” segment, a fusion between digital currencies and internet memes. So much so that its name and symbol refer to a nice Japanese dog breed very popular on the internet.
The coin was created in August 2020 by an anonymous person calling himself Ryoshi. The creator’s goal was to compete with another memecoin called Dogecoin, which also uses the same mascot dog.
One of the characteristics of memecoins is that they have virtually no practical application beyond financial speculation, capable of enriching overnight those who believed in them at the right time. And get rich on it.
For example, an investor purchased $8,000 from Shiba Inu in August 2020. As of October 27, 2021, that amount was $5.7 billion. And that’s not all. The total market value of cryptocurrency last week surpassed the value of companies such as General Mills, 7-Eleven, Delta Airlines, Kellogs and the value of the Nasdaq exchange itself.
The influx of cash to the Shiba Inu was so considerable that on the day of its greatest ascent most of the other cryptocurrencies lost value. More than that, the currency now ranks ninth among the largest cryptocurrencies on the planet.
The case sparked a frenzy over other memecoins such as Floki Inu (which also uses a dog of the same breed as a mascot), created by members of the memecoin “community”.
There are some observations that can be made about all of this. The first is that it is worth remembering every day the phrase by the writer Doc Searls that “markets are conversations”. More than ever, there is an approximation between the unpredictable flow of information on the internet and market orientation.
The Gamestop case was a showcase for that. The case of memecoins is being another. The phrase “follow the money” will soon need to be replaced with “follow the meme”, which is what’s happening today.
Another issue is regulatory. Will there be any kind of intervention in these market movements? Will this regulation be effective?
The best known case of drastic regulation comes, again, from China. The country has simply banned any type of use or activity related to cryptocurrencies, with the exception of its own, the e-Renminbi.
The country’s claim is that financial markets need to be connected to the real economy. The fear is that with declining rates of return on investment, investors would start to shift their resources to cryptocurrencies, which in fact have recently outpaced returns on other assets.
The fact is, we are living in times of irrationality. Is it all another tulip crisis? Or the harbinger that a deeper, more chaotic change is underway?
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I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.