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Cryptoverse: Bitcoin is back with a bonk

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Jan 17 (Reuters) – Bitcoin is in charge in 2023, taking the crypto market off its feet and electrifying bonk, a new meme currency.

The #1 cryptocurrency posted a 26% gain in January, jumping 22% just last week, breaking above the $20,000 level and entering its best month since October 2021 – just before the Big Crypto Crash.

Ether is also up 29% this year, helping to propel the global cryptocurrency market cap above $1 trillion, according to CoinGecko.

“After a tough year for crypto last year, we are seeing a form of mean reversion,” said Jake Gordon, an analyst at Bespoke Investment Group, referring to the theory of asset prices returning to long-term averages.

The researchers said that investors’ bets on a more upbeat macroeconomic picture are driving a jump in riskier assets across all sectors.

Few crypto tokens have benefited more than bonk, which launched in late December on the Solana blockchain and surged 5,000% in early January. It has since dropped, though it remains up 910% since the start of the year.

It’s the latest entrant into the hypervolatile world of meme currencies, meme-inspired cryptocurrencies and online jokes, and is modeled after the same smiling Shiba Inu dog as dogecoin – which was catapulted to fame by Elon Musk’s tweets.

But Bonk is a puppy.

Even at its peak, it was worth just $0.000004873759, with a market capitalization of around $205 million.

Other meme tokens are also on the rise, with dogecoin and Shiba Inu up 19% and 27% respectively in 2023.

But buyers beware.

“Investors need to be especially cautious when it comes to currencies like doge, Shiba Inu and bonk,” said Les Borsai, co-founder of digital asset services firm Wave Financial.

“They fall as hard as they come.”

However, some market participants pointed to the relative low cost of these tokens – the doge is worth around eight cents – as a reason why speculators were willing to bet on them.

“Meme coins belong in cryptocurrency, they’re part of the culture,” said Martin Leinweber, digital asset product specialist at MarketVector Indexes. “It only takes a few lines of code to create a meme token, and if you have a community for it, people love it.”

RUMORS OF SOL’S DEATH EXAGGERATED

Bonk is a meme currency with a mission. It was created, in part, to support the Solana blockchain, which has seen an exodus of funds and users since crypto exchange FTX filed for bankruptcy in November, and its native Solana token has dropped more than 37%.

The Solana token has now really bounced as bonk gained traction: it is up 131% in 2023, the biggest gain among major cryptocurrencies.

“Rumors of Solana’s death appear to have been greatly exaggerated,” said Tom Dunleavy, senior research analyst at data firm Messari. “Although the recent price appreciation appears to be driven by speculation, the underlying ecosystem remains quite strong.”

Reuters charts

TOO EARLY TO CALL A CRYPTO REVERSAL

Some researchers attributed the cryptocurrency gains to optimism that inflation had peaked, reducing the need for tighter central bank policy.

“Bitcoin and crypto tend to lead everything, which is why we’ve seen remarkable relative strength in this asset class lately,” said Borsai of Wave Financial.

There has certainly been an increase in activity.

The dollar value of bitcoin trading volumes on major exchanges over a 7-day period jumped to $151 million, the highest in nearly two months, according to data from Blockchain.com.

Total bitcoin flows — representing all uses, including trading and payments — increased by an average of 13,130 bitcoins over the past 7 days, the biggest increase in 64 days, Chainalysis data showed.

However, market watchers cautioned against celebrating too soon, noting that trading volumes remained low and the macroeconomic environment uncertain.

“It’s too early to declare a definitive reversal for the crypto market, despite the recent strength we’ve seen lately,” said Aaron Kaplan, co-founder of Prometheum, a digital asset trading platform.

“If interest rate hikes are below what the market expects, risky assets will benefit and cryptocurrency prices will likely continue to rise, but there is a lot of uncertainty at the moment.”

Medha Singh and Lisa Mattackal in Bengaluru; reporting by Medha Singh; Editing by Pravin Char

Our Standards: Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, in accordance with the Trust Principles, is committed to integrity, independence and freedom from bias.

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