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Theres Pepe the soccer player, Pepe the guitarist, and Pepe the racing driver. And now theres Pepe the new frog-themed cryptocurrency.

The coin, based on an internet meme, has taken token markets by storm in the month since its launch. Trading has been frenzied, lifting Pepes market value to nearly $2 billion at one point, though that has since slid by more than half.

Only in the world of crypto could a currency that pays homage to a cartoon frog capture the attention of market participantsand possibly even Elon Musk. Its emblematic of the hype that continues to underpin crypto markets, fueled by the actions of a few dominant players and influenced by the price of Bitcoin.

The new memecoina subcategory of altcoin, which refers to tokens other than Bitcoin and Ether is the latest to capture the attention of the crypto crowd. It joins the more familiar Dogecoin, around since 2013, which refers to the doge meme involving a Shiba Inu dog. Dogecoin is now the eighth-largest digital asset by market capitalization and has inspired countless spinoffs, including Shiba Inu, which is the 15th-largest crypto.

Pepe is growing faster than its older peers. It took the frog coin only 22 days for the number of holders recorded on the blockchain to surpass 100,000, according to the crypto research group Messari. The same growth took 90 days for Shiba Inu.

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Like the dog-themed coins, Pepe appears to have caught the attention of Tesla s (ticker: TSLA) Musk, who has said he owns Dogecoin and has toyed with it for years in references on Twitter and television. Pepe prices spiked some 50% in one volatile spurt that came immediately after Musk tweeted the Pepe the Frog meme, though he didnt explicitly mention the token.

Pepes meteoric rise is unlike anything weve witnessed in crypto history, Chase Devens, an analyst at Messari, wrote in a note earlier in May. Here is a look at the coins brief past, how it is traded, and what could happen to the price.

Pepe was launched in mid-April by a team of anonymous developers. The groups website is littered with internet in-jokes, including the phrase make memecoins great again, and details about how the supply of tokens is 420,690,000,000,000.

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Pepe is a meme coin with no intrinsic value or expectation of financial return, the developers say. There is no formal team or roadmap. The coin is completely useless and for entertainment purposes only.

The token references the Pepe the Frog internet meme, which itself is based on a character from a 2005 comic by cartoonist Matt Furie. As a meme, Pepe can appear in a variety of waysthe frog often has different facial expressions and is edited into different contextsbut in its most basic form, it seems to represent smugness.

The Pepe meme has been picked up by internet-based radical groups, earning it a checkered cultural reputation. The Anti-Defamation League has named the meme a hate symbol, while noting that the character didnt initially have racist connotations and that many uses continue to be non-bigoted.

Pepe is now available on a number of major crypto exchanges. That includes Binance, the worlds largest venue for digital-asset trading, as well as platforms including OKX, Kraken, KuCoin, and the decentralized exchange UniSwap.

The U.S.-based broker

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Investors should note that digital asset trading and most crypto exchanges remain unregulated in the U.S.

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The price of Pepe rose as much as 6,300% between April 18 and its zenith on May 5, after being listed on a number of major exchanges.

Before it was listed on OKX, Pepe had a market cap of around $275 million, according to crypto data provider CoinGecko. In a spike after it was listed on Binance, its market cap peaked at $1.7 billion, with its trading volumes in the first week of May routinely dwarfing those of Dogecoin or Shiba Inu. The market capitalization of Pepe was hovering near $650 million as of Wednesday.

For those outside crypto, Pepe may represent yet another example of why digital assets are worthless: It has no intrinsic value and exhibits dangerous levels of volatility.

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For those inside the industry, though, there is a logic to the Pepe trade. The key is getting ahead of the hype and fear of missing out that new coins can generate as interest grows. That dynamic, alongside signs that influential market participants known as crypto whales are wading in, suggests the frenzy around Pepe may be far from over.

Arguably the most significant driver of Pepes growth is the fact that crypto participants are now familiar with how quickly memecoins can grow, said Devens, of Messari. It pays to be early, and this self-reinforcing force pulls in more buyers as the meme grows in popularity.

That popularity only grows as tokens like Pepe get listed on crypto exchanges. The first major factor lifting prices of the frog crypto was its listing on OKX on May 1, which was soon mirrored by Binance on May 5. While exchanges dont endorse coinsBinance has kept Pepe in its Innovation Zone for smaller and often more volatile coinslistings can act as implicit endorsements and funnel billions of dollars of liquidity to tokens.

The wider dynamics of crypto markets play a role in determining memecoin prices. Trends in Bitcoin, the largest coin, tend to lead prices for all cryptocurrencies, which has worked out well for Pepe.

Bitcoin has rallied by some two-third so far this year, helped by rising expectations that the Federal Reserve has finished raising interest rates to battle inflation. Memecoins have taken off as well in a surge that could signal either a strengthening bull market or froth before a correction.

When meme coins pump it often tells us where we are in the crypto cycle, Antoni Trenchev, co-founder and managing partner at crypto lender Nexo, said in a research note shortly after Pepe began to surge higher.

Trenchev pointed to gains seen by the token Squidreferencing the popular Netflix series Squid Gamein late 2021, when the token rose by more than 200,000%. In hindsight, that was a sign that crypto markets had topped out.

Time will tell if the emergence of Pepe-the-Frog heralds the beginning of a new crypto summer or something a lot bleaker, Trenchev wrote.

Write to Jack Denton at jack.denton@barrons.com

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Memecoin Pepe Is the New Crypto Craze. Move Over, Dogecoin. - Barron's