Digital image of pet rock sells for $268,000, shows crypto market being hit again by FOMO

PORTLAND, Oregon – Earlier in November, an image of a pet rock sold for the equivalent of more than US$200,000 (S$268,000) on the non-fungible token (NFT) market.

Meanwhile, the market capitalization of a cryptocurrency called Pepe – a meme coin based on a cartoon frog – doubled in a few weeks. Even the price of the FTT token, which was created by the FTX exchange and has no real utility, has tripled in the past month on the hope that the Sam Bankman-Fried exchange will return from the dead.

Everywhere you look, there are signs that the crypto market’s extravagant excesses — and the fear of missing out or FOMO — are making an unlikely comeback.

As the expectation of an imminent approval of a spot-bitcoin exchange fund pushes the oldest and largest cryptocurrency ever higher, the hype has also lifted other boats – even those considered among the least seaworthy.

This latest surge in digital junk follows a nearly two-year-long crypto winter that has seen the value of millions of dubious projects slide — some to near zero — to the delight of critics and even some industry insiders.

Aggressive actions by the United States Securities and Exchange Commission have marked some cryptocurrencies as illegal, and removed some promoters from crypto. Now it seems the cleansing was only temporary.

“As prices rise, investors on the sideline think they need to get in,” said Duke University finance professor Campbell Harvey. “Many violate rule number one of investing: Understand what you are investing in. Many will also violate rule number two by putting their money in an undiversified bet on a single token.

Social media is again full of posts hyping meme coins. One of them is simply called Memecoin, which was first created in 2023 and grew in value in November. Its short white paper, where disclaimers take up as much space as explanations, notes that the token “has no functions, no utility and no intrinsic value, no promise or expectation of any financial return, profit, interest or dividend”.

“Looking for a new topic to rake in worthless customer money – this is the topic in non-bitcoin crypto,” said Cory Klippsten, chief executive of bitcoin service provider Swan. “I guarantee there will be another hype cycle for alt coins, and more people will get hurt.”

Static images of rocks linked to the Ethereum and Bitcoin blockchains are selling for eye-watering prices again. Bitcoin Rock #75 recently sold for nearly three bitcoins, or about US$112,900. The collection, like many others, is held by a small group of people. And like most NFT collections, the rocks are not very liquid.

Meanwhile, many projects are doing NFT land sales – effectively selling NFTs of property in digital gaming territories – although many participants in previous generation projects have been burned.

“It is important to note the current climate of what could be described as a mini-bull market,” said Ms. Sara Gherghelas, an analyst at researcher DappRadar. “This environment has infused the NFT space with a new wave of enthusiasm and speculative investment, which can sometimes inflate the prices of projects that might otherwise have limited long-term value.”

TG Casino, focused on offering anonymous crypto gaming on Telegram, has raised more than US$2 million in a token pre-sale, which includes the sale of NFTs to high rollers. Over the years, people’s investments in many token sales have crashed and burned.

Amidst the frenzied rush for the latest hot token, some buyers end up being what is known as rug-pulled – or duped by scams in which the creators of the coin disappear with the liquidity. In the third quarter, rug pulls accounted for 65.1 percent of all types of crypto attacks, according to blockchain security auditor Hacken.io.

“Optimists see thawing in the winter crypto, and also green shoots,” said Mr. Aaron Brown, a crypto investor. “If this is really the first spring of crypto, the good new ideas should grab attention from the nonsense. If not, the junk should fade back into obscurity.” BLOOMBERG