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The month of May witnessed a hype around Bitcoin ordinal inscriptions. The soaring demand was driven by memecoins, cryptocurrencies inspired by Internet memes and viral trends, with no underlying utility.
Bitcoin ordinals, a new way of creating non fungible tokens (NFTs) were launched in January by Casey Rodarmor. Images, texts, PDFs, programs, audio files and video games can now be directly inscribed on the Bitcoin blockchain. Previously, NFTs could only be minted on blockchains such as Ethereum and Solana.
Early March, an anonymous developer working under the name “Domo” released a new experimental token standard called Bitcoin Request for Comment (BRC-20). This technology enables users to mint and transfer tokens on the Bitcoin blockchain, just as Ethereum’s similar ERC-20 token standard.
BRC-20 inscriptions reached all-time high
The number of Bitcoin ordinal inscriptions started to soar toward the end of April, data from Dune Analytics show. The hype was driven by demand for memecoins such as the newcomers with a dark-green frog visage, Pepe, the robot Capo, and the dog Ben in addition to the more established memecoin dogs Doge and Shiba Inu.
An all-time high was reached on May 7 when just over 400,000 BRC-20 inscriptions were made. Inscriptions have since mid-May been oscillating between 200,000-250,000 per day compared to a few thousands a day during the first quarter.
Sudden spike in demand led to congestion & soaring trading fees
The sudden demand for these ordinal inscription on the Bitcoin blockchain caused a spike in its transaction fees and even lead to congestion on the Bitcoin network. On May 7 and 8, Binance halted withdrawals of Bitcoin for a couple of hours due to the congestion.
Bitcoin transaction fees soared to 30.91 dollars on May 8, the highest level in two and a half years. At May 29, they had dropped by 88 percent to 3.64 dollars, still way above a level hovering around 1 dollar in January, data from Y-Charts show.
The total market capitalization of memecoins amounted to almost 17.2 billion US dollars on May 30. Doge, Shiba Inu and Pepe are the three largest memecoins being traded, data from CoinGecko show.
Will memecoins last?
Whether the memecoin hype will last is questioned by numerous market players. Unlike traditional cryptocurrencies, they do not have an intrinsic value, so depend on their popularity and how the innovation can be applied for new applications with long-term traction.
“They will fade away after even months, let’s not talk about years here,” the CEO of Jan3, Samson Mow, told Cointelegraph.
“Coins like PEPE don’t happen by accident. Big money, powerful people & careful planning goes into creating these scam. You’re just a pawn in a much bigger game,” tweeted crypto Chris Blec, the founder of DeFi Watch.
As the memecoin market grows, so does the interest of regulators. Stricter rules may be imposed, another factor dampening demand.
The constant evolution of the cryptosphere should nevertheless not be underestimated. Some memecoins are tapping on their popularity and setting up real-world items with their logo, including keyrings, T-shirts, tissue boxes, backpacks, pins, sleeping eye masks and much more. This may help maintain the demand for memecoins.