Does the speculative mania of Meme coins herald a short-term “peak” for Bitcoin?

Bitcoin fell below $27,500 on Monday as trading volume for Meme tokens based on the Bitcoin BRC-20 standard soared to a two-year high, and on-chain data showed that speculation in meme coins historically The frenzy heralds a short-term “top” or bearish reversal for Bitcoin.​

Meme popularity "sucks blood"

Meme coin trading volume in the crypto market last week was $2.3 billion, a six-fold increase from $387 million the previous week and reaching the highest level since May 2021, according to a tracker by blockchain observer James Tolan based on Dune Analytics.

The speculative frenzy was led by pepecoin (PEPE), a sad frog meme-themed token launched in mid-April with a maximum supply of 420 trillion. On Friday, PEPE’s market capitalization surpassed $1 billion, eventually peaking at $1.82 billion, an astonishing achievement for a cryptocurrency that was launched less than a month ago. Bitui terminal data shows that as of press time, PEPE’s market capitalization is US$931 million.

The PEPE craze has also fueled speculation in other low-cap tokens such as DINO, WSB, CHAD and 4TOKEN, which have gained hundreds of percent in the past two weeks. Tolan believes that historically, altcoin speculative mania with no real use cases has heralded a bearish reversal for Bitcoin.

At press time, Bitcoin was trading below $27,500, down 5% on a 24-hour basis, with the U.S. Dollar Index (DXY) rebounding slightly. The U.S. Dollar Index, which measures the greenback against major currencies including the euro, and Bitcoin typically moves inversely to the U.S. Dollar Index, was currently hovering around 101.37 after briefly rebounding to 101.75 on Friday following the release of unexpectedly strong U.S. jobs data.

BRC-20 Token Fees Hits Multi-Year High

As the hype surrounding the memecoin grows, the Bitcoin network continues to see an increase in transaction volume. BRC-20’s daily minting fee hit an all-time high of 247 BTC on May 7, according to crypto data analytics platform Dune Analytics, a value that suggests the fee has reached its highest level in two years.

The BRC-20 token standard is an experimental token standard on the Bitcoin blockchain, modeled after Ethereum’s ERC-20. Created in March by an anonymous on-chain analyst named Domo (@domdata on Twitter), the BRC-20 token standard allows programmers to create and send fungible tokens through the Ordinals protocol.

Unlike ERC-20 tokens, BRC-20 tokens do not use smart contracts and require a Bitcoin wallet to mint and trade these tokens.

The BRC-20 token standard has exploded in recent months, especially with the emergence of memecoins like Pepe (PEPE) and Memetic (MEME). On May 3, cumulative fees paid on the Bitcoin network exceeded $3.5 million, a 400% surge from the end of April. The total fee for BTC Ordinals is 641 BTC, and YCharts data shows that the average Bitcoin transaction fee on May 7 reached $19.21.

The number of BRC-20 tokens on the Bitcoin network has exceeded 14,000, many of which are meme coins. The coins have a combined market capitalization of over $952 million, with a 24-hour trading volume of over $10 million.

Pre-CPI sell-off

Turning to macroeconomic factors, traders this week are focused on the release of the U.S. Consumer Price Index (CPI) for April on May 10, which tracks the price of a wide range of goods and services, to gauge the Fed's progress in reducing inflation. Changes, other key data include initial jobless claims and producer price index. When the Federal Reserve aggressively raises interest rates to curb inflation, investors often sell "risk assets."

CPI is known as the volatility catalyst for the entire cryptocurrency. Anonymous trader Aqua analyzed in a tweet that the market may experience "tactical selling" and BTC/USD enters a wider correction range. "If the CPI data is good, we may have another shot higher, but this is looking more and more like a correction and we will definitely see a market correction in the coming weeks," he wrote.

Global asset management firm BlackRock issued a report on May 8 saying that central banks' battle with inflation is far from over and riskier assets are likely to continue to take a beating this year. The company expects central banks around the world to further tighten monetary policy in the coming months, pushing the global economy into recession.

Joe DiPasquale, CEO of crypto fund management company BitBull Capital, analyzed that since the rebound around mid-March, neither BTC nor ETH has tested recent support. DiPasquale said that BTC may test the support level between $25,000 and $27,000 before rebounding again, and buying BTC and ETH on dips is a "reasonable strategy."