The world of cryptocurrency has been known for its volatile nature, with capital flowing from fiat currencies to Bitcoin and other large caps before trickling down to mid and low caps.
However, the past two years have seen the emergence of non-fungible tokens (NFTs) and memecoins, which have disrupted the existing patterns in the industry.
NFTs, especially Profile Picture NFTs (PFPs), are a hybrid of an identity solution, a club, and a fungible token. The NFT market has different sizes based on market cap, with Bored Ape Yacht Club (BAYC) and Azuki leading the large-cap category.
In the mid-cap category, we have Mfer’s, Nakamigo’s, and Milady’s, while the small-caps category comprises the rest. Memecoins, on the other hand, are digital assets that have no real utility other than social media posting and entertainment.
The emergence of memecoins like $DOGE, $SHIBA, and $PEPE, which reached a $150m market cap in several days, has shown that fun and memes can now be digital asset.
Memecoins have come back in vogue after the stagnation of the Nakamigos and BAYC communities, combined with the boredom of retail crypto folks, which led to a boom in memecoin season. The Milady Maker’s PFP assets also rose as the memecoin meta kicked off.
These new digital assets are now throwing curve balls into the flow, and it’s yet to be seen where they fit in. However, it’s clear that when large caps run, they rise fast, sucking all the liquidity from mid-lower caps.
When they stop running, the capital flows back to mid-low caps, causing uncertainty even for the most seasoned traders.
This pattern can happen across all classes (NFTs, fungible tokens) and categories (PFPs, Game-FI, fungible tokens, and utility NFTs), which is causing the Web3 scene to seem very chaotic.
As these liquidity ebbs and flows continue to shape the crypto industry, it’s essential to keep an eye on new trends and patterns.
While the observations presented in this text are not intended as financial advice, they provide insights into the evolution of the industry and the emergence of new digital assets like NFTs and memecoins. It’s an exciting time for crypto enthusiasts, and we can’t wait to see what the future holds for this industry.