The defi boom is bringing meme tokens such as hotdog and pizza to the screen, but the price crash of these tokens raises questions about the seriousness of many defi projects.
On Wednesday, September 2, 2020, the DeFi -Coin Hotdog Token lost 99.9 percent of its value in just five minutes. The crash from 4,000 US dollars to less than one US dollar illustrates the downside of the defi hype. Because everyone can publish their project on the decentralized Uniswap exchange. Whether it is a serious project or a hoax can often only be determined after closer investigation.
They call themselves hot dogs, sushi, kimchi, and pizza
A wave of meme tokens has hit the crypto market over the past few weeks. These were named after food and promised horrific income. Incidents like the Crash Hotdogs show that these are not always sustainable.
The token fell in value just hours after its launch. But Hotdog wasn’t the only token that suffered this fate. The same pattern was evident with Pizza and Onlyup: Liquidity providers drive prices up immediately after listing. This leads to high income, which liquidity providers can be paid out quickly. Bad luck is for those who react too slowly – and that is often the majority due to the short duration of the crash.
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The defibrillator hype cannot be overlooked. Recently , the decentralized exchange Uniswap even outperformed Coinbase in daily trading volume. Miners are enjoying the boom that is taking place on the back of Ethereum. The activity on the blockchain leads to high transaction fees and thus high income from mining.
The meme token madness started with a clone of the successful Defi project YFI (Yearn Finance). Said clone was published under the name YAM (Yam Finance) and lured people with the fact that all tokens belong to the community. The YAM course reacted very positively to this non-existent founding share. The incident resulted in a large wave of copycats offering their own meme tokens on Uniswap.
The crash of some of these meme tokens has now caused a sensation on social media. Statements from bigger Twitter personalities compare the young Defi projects with pump and dumps, pyramid schemes and the crypto scam Bitconnect.
Because illiquid defi tokens such as Hotdog are particularly suitable for price manipulation: By providing ETH for the liquidity of a project through a smart contract, you are paid out in the form of its token. In this way, liquidity providers gain control over a large part of the available tokens. This control now enables simple and worthwhile manipulation of the courses.