The meteoric rise of Pepecoin (PEPE), a meme coin themed after the popular internet character Pepe the Frog, has left many investors in a precarious position, according to new research from SingularityDAO. While early adopters enjoyed significant gains, the majority of investors have been unable to achieve meaningful profits due to limited liquidity and the concentration of tokens among a few large-scale investors.
Upon its issuance, Pepecoin quickly went from a low five-figure market capitalization to $33 million within just a week. Trading volumes surged, eventually surpassing those of other notable meme coins, such as Dogecoin (DOGE) and Shiba Inu (SHIB). By mid-May, it reached a peak market capitalization of $1.8 billion. However, since then, PEPE prices have experienced a sharp downturn, dropping 73% according to CoinGecko data. This decline in value, coupled with ongoing liquidity concerns, has raised alarm bells among analysts who worry about the influence of a few early traders and the lack of retail traders.
Rafe Tariq, Senior Quant at SingularityDAO, noted that “the limited amount of net liquidity is creating a high-stakes game of musical chairs.” While everyday investors were lured in by the promise of significant profits, the reality is that only a small percentage of them will walk away with gains, while the majority are left burned. According to the research, over 80% of potential profits were accrued during the first week of Pepecoin’s issuance, when the market capitalization exploded.
But the troubling news doesn’t stop there. SingularityDAO discovered that a handful of large investors, dubbed “whales,” hold roughly 25% of all PEPE coins, while other sizable investors control another 46% of the circulating supply. Such a high degree of influence by a minority of investors imposes increased risk on the average trader. Tariq highlights that most investors “already missed the opportunity to gain huge profits before even investing in the coin.”
As Tariq concludes, the excitement around Pepecoin offered a false hope for those seeking a quick profit, effectively leaving the average investor out in the cold. While some may have managed to cash in on this meme coin craze, it’s apparent that the majority of participants were left playing a high-stakes game with limited chances for success. This cautionary tale serves as a reminder to investors to exercise scrutiny and be careful when navigating the volatile world of cryptocurrencies.
Source: Coindesk
