Memecoin Deepdive: PEPE

Despite being founded in April 2023, in the midst of a vicious cryptocurrency bear market, PEPE is, in many respects, a ‘classic’ memecoin. Built around an OG internet meme, PEPE promises no utility, no meaningful roadmap, and any and all trading volume is based on speculation alone.

But what’s going on under the hood? And will PEPE ever breakout to the lofty heights achieved by other popular meme tokens such as DOGE and SHIB?

PEPE’s First Big Break

PEPE first captured the imagination of the cryptocurrency community in April/May 2023, shortly after it was founded.

Less than a month after its launch, PEPE had climbed to reach a staggering market capitalization of around $1.3-1.4 billion - a feat that, admittedly, it is yet to achieve again at time of writing. That’s impressive for any token in the industry, but for a new token with no intrinsic value, and at a time when BTC was still under $30,000, it was practically unheard of.

Since then, however, the market cap of PEPE has dropped to as low as $250 million, only to bring speculators new hope in recent days, having climbed some 84% in the past week alone.

PEPE’s Tokenomics

Straightforward Stuff

Unlike many of the VC-funded cryptocurrency projects, desperate to assign as much utility to their native assets as possible, PEPE’s tokenomics are simple.

In true memecoin-style, the PEPE token itself has a maximum supply of 420.69 trillion. When PEPE first launched, nearly all of the asset’s supply was used to seed its DEX liquidity pools (around 93%), with the remaining tokens left in a multi-sig wallet, controlled by the team, for a variety of potential future use cases.

Holders and Distribution

With the help of Etherscan, we can see that PEPE has around 144,000 unique holders. This number doesn’t sound like much, but it puts it well above even some of the most reputable tokens in the market, such as Lido Finance’s LDO, which has only around 41,000.

That said, it does remain well below other major memecoins such as Shiba Inu’s SHIB which boasts a staggering 1.34 million individual holders.

When it comes to the token’s distribution, and perhaps as a result of PEPE’s ‘fair launch’, PEPE’s top holders are almost exclusively centralized and decentralized exchanges, with more than 25% of PEPE’s supply seated in a Binance address. 

Unlike some memecoins, which feature a concerning number of whales, PEPE itself appears fairly well distributed and this is perhaps part of the reason that it has performed so compellingly to date. 

You may also notice that PEPE’s fourth largest holder is actually a burn address, which contains nearly 7 trillion PEPE tokens. More on this later...

PEPE’s Story So Far…

A Total Disaster… Right?

Following a descent from the lofty heights of a $1+ billion market cap, down to one as low as $250 million, PEPE broke back into headlines in late August, when disaster struck.

According to the post, suspicious transactions regarding the movement of PEPE tokens from the de facto treasury wallet were the result of “bad actors” within the memecoin’s team. Said three team members had, in effect, stolen some 16 trillion PEPE tokens (~$15 million at the time) from the project multi-sig. This equated to approximately 60% of the entire treasury token allocation.

Though the author sought to reassure PEPE’s community that the team was now free of these nefarious thieves and that remaining funds had been transferred to a safe multi-sig, PEPE itself had shed nearly $100 million in value on the news.

To make matters worse, on September 9, PEPE’s Telegram channel was compromised.

… Right??

Following the aforementioned saga, PEPE’s reputation had been tarnished in the public eye and many were concerned about the project’s tenability. PEPE was, however, just that - in the public eye. 

The @pepecoineth account was posting more regularly, its impressions were up, and so too was the regularity of PEPE’s memorable logo popping up on X/Twitter-user timelines. Ledger even manufactured a custom PEPE version of its crypto hardware wallet, pictured below.

This increased attention meant that, in late October 2023, when things got really crazy, the crypto world was watching.

PEPE’s Latest Surge

On October 24, the @pepecoineth account announced that, not only had it onboarded a new cohort of advisors to “guide pepe forward”, but it had also burnt some 6.9 trillion PEPE tokens (~$6 million at the time) from the remaining treasury funds. 

The burn left 3.79 trillion PEPE remaining which will allegedly be allocated for “strategic partnerships and marketing opportunities”, and the post ended by teasing the possibility of more token burns in the future.

Whether PEPE’s team was waiting for the right moment or it happened by chance, we’ll likely never know, but the above announcement arrived on just the day that Bitcoin itself reached the $35,000 for the first time since FTX collapsed. 

The exciting announcement, combined with wider market resurgence, added a staggering $246 million to PEPE’s market cap, translating to a nearly 80% increase for PEPE in just two days.

Only time will tell if PEPE can reclaim a $1+ billion valuation, or if the frog-themed memecoin will fade from public interest…

Why Has PEPE Performed So Well?

Whilst the precise reasons behind PEPE’s fascinating price movement can never truly be pinned down, there are some factors that commenters may attribute to the memecoin’s prevalence today.

Luck

Though perhaps reductive, the fickle nature of public sentiment means that any successful memecoin is, in no small part, reliant on luck. Be it Elon Musk’s decision to publicize Dogecoin, or announcements that happen to line up with Bitcoin’s resurgence, memecoin markets are practically impossible to predict with any accuracy.

PEPE has been fortunate in choosing a meme to which the Web3 world has shown a particular affinity, and this fortune further manifested in the timing of @pepecoineth’s decision to burn some 6.9 trillion PEPE token - which coincided with Bitcoin breaking the $35,000 mark.

Though there may be more factors at play, pundits cannot help but consider good fortune a significant part of PEPE’s journey.

No Vest

Unlike any venture capital-funded projects, which are obliged to give significant allocations to investors and, as a consequence, increase the supply of their token over time (often at alarming rates), PEPE was born with nearly all of its total supply already in the market.

As discussed, only a fraction of PEPE’s supply was left in the core team’s multi-sig address, with the remainder going straight into PEPE-specific liquidity pools.

As a result, investors may not have waited until after release cliffs to FOMO in, as we are seeing with many new L1/L2 blockchain projects. This may be one of the factors behind the speed of PEPE rise, and fall, and rise again.

Bear Market Hopium

How did a new memecoin contender pump to a $1+ billion market capitalization during a bear market?

With healthy returns notoriously difficult to achieve in cryptocurrency bear markets, traders have shown a willingness to jump at any token, memecoin or otherwise, that has outperformed in the spot markets. This meant that, even a little bullish sentiment around PEPE was amplified to mass hype and FOMO, potentially causing investors to jump into the token, in the hope of some profitability - a rare phenomenon in recent months.

The same can be said regarding Bitcoin’s recent $35,000 pump - Perhaps the biggest winners from these moves have been memecoins, with the likes of FLOKI, PEPE, and others, experiencing what feels like outsized returns in recent days.

Takeaway

In some respects, PEPE is a typical memecoin. It chose an OG meme to center its branding around, it promises no value or meaningful roadmap, and its maximum supply is even 420.69 trillion tokens.

However, in other ways, PEPE is very much atypical. It achieved its all time highs in the first half of 2023 - unlike many other meme tokens which rose to prominence in 2021’s bull market conditions. Furthermore, it has continued to surge even after concerning news about the theft of millions of dollars worth of PEPE by the project’s own team.

Nothing is ever certain in the world of memecoins, and investors should do their own research and ensure they fully understand the potential risks, before getting involved in the volatile sector. 

Only time will tell what the future holds for PEPE and its community…