Crypto Chaos

Despite the second-largest bank failure in US history, the Federal Reserve continued its interest rate hike strategy last week. This caused markets to react by pricing in continued monetary tightening, pushing back their expectations of rate decreases to 2024.

Some have perceived this move as necessary to combat inflation, even if it comes at the cost of breaking the banking sector. Unfortunately, this sober outlook suggests that the rest of the year may be marked by more sideways action in the markets rather than a steady recovery.

Meanwhile, in the crypto world, frustration over waiting for the markets to rebound boiled into a frenzy of hype around memecoins and Lamborghinis. The sudden rise of PEPE and the incredible gains made by investors fueled a wave of FOMO, or Fear of Missing Out, that spread quickly and widely.

Although FOMO may seem like a modern phenomenon, it has been around for centuries. Comparing ourselves to others and to want what we don’t have is human nature. However, the constant barrage of information from social media has made it more difficult to escape these feelings.

As the price of PEPE kept rising, investors were caught in the jaws of conflicting emotions. Should they ape in and ride the wave or wait and see if the top was already in? Each time the price went up, emotions became more powerful.

This situation was different because it was driven by people experienced in the crypto market. The liquidity wasn’t coming from new people entering crypto but from people who know that PEPE has no use case and is purely speculative.

At the same time, Bitcoin was flooded with transactions of BRC-20 tokens as people started to create memecoins on that network instead of Ethereum. This caused a sudden spike in congestion and fees.

While PEPE pushed ETH gas fees over $100, the BRC-20 tokens pushed Bitcoin transaction fees to $20. Although this is far less than ETH gas fees, it’s higher than Bitcoin users are used to. The congestion even caused Binance to pause BTC withdrawals.

These events created a huge wave of volatility and uncertainty still rippling through the crypto market. Since the liquidity wasn’t coming from new investors into the space, it meant people were cashing in other tokens, causing prices across the board to drop.

The liquidity drain from other parts of the market coincided with the Fear, Uncertainty, and Doubt (FUD) of when the inevitable collapse would come. People rehashed stories about Bitcoin being broken and Ethereum being too expensive as the market dropped.

Although investing in memecoins is part of many people’s journey in crypto, the downside is that it can raise expectations of getting rich quickly and allows bad actors to exploit people’s greed. There will undoubtedly be several stories in the mainstream media focusing on people getting rekt in the coming weeks.

The irony is that while some people will lose money on memecoins it’s a small amount compared to the losses of investors in the banking sector last week. In fact, it could be argued that those investing in memecoins are more aware of the risks than those investing in bank stocks.

Instead of getting caught up in the highs and lows, it’s better to try and steady emotions and focus on the technology. We’re doing just that as we move closer to relaunching the Paribus DApp.

While everyone loves to make money and increase their portfolio, it’s good to take a step back and gain some perspective. The wild ride of meme coins can be fun as long as your time horizon is short. For a long-term strategy, it’s always best to focus on the real-world benefits Web3 technology can deliver.

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