Who let the dogs out? Meme coins make runaway gains

Just as it looked like the entire cryptocurrency market was being devoured by bears, a breakout rally by the beloved crypto doggies appeared to save the day. Shiba Inu (SHIB) and Dogecoin (DOGE) closed last week with impressive seven-day returns as Bitcoin (BTC), Ether (ETH) and other top cryptocurrencies managed to stabilise over the weekend.

Global financial markets did manage to pull off an overall rally, largely due to interest rate increases from the US Federal Reserve not being as harsh as some analysts had forecast. The Fed, which controls the world's reserve currency, stated that it remained unconditionally committed to curbing inflation but also that it expected economic growth to pick up in the second half of 2022.

It may come as a surprise that the cryptos which managed more than a modest rally were the famous canine-themed meme coins. SHIB gained over 40% in value, hitting $0.000011 on Sunday, 26 June, over last week's $0.000008 low point. DOGE price rose by over 30% by the end of the week, spiking to $0.077 from $0.05. When weekday trading opened again on Monday, 27 June, some of this momentum was erased by profit-taking, with SHIB falling by 6% and DOGE losing 7.4%. Nonetheless, both coins, which started as comedic references to internet culture, managed to outperform Bitcoin's relatively poor seven-day gain of just over 2%. So, what's actually behind their momentum?

Speculation or development?

Both Shiba Inu and Doge have enjoyed massive price surges in the past, but jokey references and celebrity endorsements can only take a crypto project so far. The companies behind each token have also made efforts to reinvent themselves and present use cases for their cryptocurrencies and blockchains to follow up on their initial hype.

Shiba Inu is courting investment via its upcoming Shibarium protocol, a layer-2 upgrade to its blockchain that will introduce faster and cheaper transaction processing. Shibarium will also support a stablecoin (SHI), facilitate the creation of dApps and NFTs and improve the existing system's governance token (BONE). Shiba Inu is scaling up to pitch itself as an essential token for use in metaverse game ecosystems, one of the crypto-related tech sectors that retains an optimistic outlook as tech giants like Meta and Apple gear up to become major players in the future of the Internet.

As for Dogecoin, the stimulus for its rally can predictably be traced to celebrity billionaire Elon Musk tweeting in support of the coin at the beginning of last week. While the support of such an influential individual can certainly sustain the meme coin in the short term, the future use of DOGE remains unclear. At one point, it was floated as a verification tool on a Musk-owned Twitter, but the Tesla CEO's attempt to purchase the social media platform has since floundered.

These developments aside, the canine coins' recent gains could simply be speculators making bets on the meme coins' upsides without much weight to sustain them. However, that could be taken as a good sign for the crypto market in general, which gains as a whole when investors become less risk-averse.

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