Crypto Ecosystem

GameStop is back. Is this the beginning of a new memecoin rally?

, May 17, 2024

In this week’s crypto highlights, we explore market price movements and other notable industry news items that occurred over the last seven days. Without further ado, let’s dive into the latest market developments.

Market spotlight: GameStop outperformed Bitcoin’s yearly gains in a single day

Let’s time travel back to January 2021: expanded COVID lockdowns, masks, and GameStop’s short squeeze. The latter was a classic David vs. Goliath story, where Redditors fought against hedge funds using the Robinhood app, and the Buy button near the GME ticker. Despite obstacles created since that heady time, including blocking access to said button, GameStop still managed to surge by over 1,000% in a month.

As with any compelling story, there’s a main character. Keith Gill, also known as Roaring Kitty or DFV, is widely considered the one who sparked the 2021 rally. There’s even a movie about it. But just a few months after the initial GameStop frenzy, Gill stopped posting on social media, and the GME stock price entered a prolonged downtrend. 

On May 13, 2024, after three years of silence, Roaring Kitty made a post on X (formerly Twitter). The post didn’t make a fundamental or technical case for buying GameStop’s stock. In fact, the tweet didn’t even reference GameStop, or include words at all. Nevertheless, the GME stock more than doubled in price within a few days of this post, and its trading was stopped multiple times due to significant volatility. 

Furthermore, the wave spread to other meme stocks, even touching the crypto market in the form of memecoins: 

  • DOGE, SHIB, FLOKI, WIF, and BOME temporarily joined the leaders in terms of trading volume.
  • The PEPE price hit a new all-time high, becoming the largest weekly gainer among the top 100 digital assets.
  • The Solana-based GME memecoin surged by over 2,000% in a few days, while the token named KITTY skyrocketed by 6,000%.

Notably, when GameStop’s stock rallied in 2021, memecoins also experienced a corresponding jump. Some believe that this event laid the groundwork for memecoin mania throughout that year. And considering that short squeeze veterans prefer Robinhood as the platform of choice for performing their operations, the recent Uniswap integration of Robinhood Connect could open a new pathway for onboarding meme stock bandwagoners to the crypto market. 

However, speaking strictly in Captain Obvious terms, 2021 is not 2024. Back in January 2021, the entire GameStop phenomenon was a novelty, leaving many uncertain about the possibility of an epic short squeeze to come. And although it did happen, GameStop’s rally didn’t last long. Over the last three years, GME returned to pre-hype levels (before the recent new surge). 

Moreover, this entire 2021 arc of the story could be the convergence of (pandemic-induced) boredom, social media influence, and novelty. Is the fresh surge a one-time recurrence, or a tricky new element of financial markets? GameStop’s performance will tell.

Of course, mainstream media outlets claim the hype is already fading, as GameStop’s stock price plunged 18% after the initial jump. However, this kind of correction after a more than 100% price increase seems quite reasonable, as some may question (again) the sustainability of GameStop’s upward trajectory.

When it comes to memecoins, they don’t need a particular event to kick off a surge. Like memes, they may steal the spotlight briefly, but frequently. As a result, when this latest GameStop rally eventually cools, traders will most likely find another catalyst to buy and create new memecoins, or might just use boredom as a motivator.

Other noteworthy market events

FTX wants to distribute 118% of returned funds to creditors, but there’s a catch

Bankrupt crypto exchange FTX filed a new recovery plan, stating that 98% of its creditors will receive at least 118% of their claims back in cash. The remaining creditors will receive 100% of allowed claims. Full recovery plus interest is considered a rare outcome in U.S. bankruptcy proceedings, so some view this as a victory.

Here is a super oversimplified explanation of how this agreement was proposed:

  • When FTX collapsed in November 2022, its customers had around $8 billion in assets on the platform. Meanwhile, the company’s assets consisted mainly of tokens (with some exclusively associated with FTX), and selling them at the time wouldn’t have been enough to cover the exchange’s liabilities.
  • The company filed for bankruptcy, and this stopped users from receiving any money. Essentially, FTX claims turned into long-term loans, as bankruptcy is not typically a fast process.
  • Over the next two years, new leadership began managing the FTX portfolio, gradually assessing and/or selling different entities, including real estate, businesses, venture capital, and some crypto assets.
  • At the same time, crypto experienced a massive rally over the period: Bitcoin updated its all-time high, while Solana (which plays a notable role in the FTX portfolio) surged by over 10 times since the exchange’s bankruptcy filing.
  • FTX’s plan proposes reimbursing creditors for the value of their assets at the time of its bankruptcy — when crypto prices were near the cycle’s bottom. As a result, the company takes advantage of price appreciation, offering creditors receipt of their funds back in cash, although some prefer in-kind repayments

So in a sense, bankruptcy helped FTX HODL crypto long enough to achieve “full compensation with interest.” FTX forecasts that the total value of repayment will be between $14.5 and $16.3 billion. This plan could become effective within 60 days, after its potential approval by a Delaware bankruptcy court.

However, not all FTX creditors are happy. Sunil Kavuri, a representative of the largest FTX creditor group, recommended voting against this compensation plan, arguing that the debtors owe FTX customers up to $10 billion more in value, due to price appreciation of associated digital assets.

Notably, following the new plan announcement, FTX claims witnessed a remarkable surge, trading between 101%, and 112% of their face value. For comparison, in the immediate aftermath of the FTX bankruptcy, many creditor claims traded for as little as three cents on the dollar, because people were unsure they would ever receive any money at all. 

EigenLayer performed a controversial airdrop of its EIGEN token

On May 11, EigenLayer, a restaking platform with over $14 billion in total value locked (TVL), opened the first airdrop claims for its native EIGEN token. The project announced that over 113 million EIGEN tokens were distributed within “season one,” with 8.9 million staked/delegated in hours.

After claiming, EigenLayer users will be able to stake and delegate their tokens to an EigenDA operator. It will initially function as the only autonomous validator set (AVS), with plans for expansion to additional AVSs in the near future.

However, the initial rollout failed to meet the expectations of many users, resulting in widespread criticism.

  • According to tokenomics, 45% of the total EIGEN supply will go to the community, with a third of this amount allocated through a series of airdrops. However, the monthly unlocking rate for airdrop participants will only be 5%, causing a backlash in the community. To address this, EigenLayer added 28 million more EIGEN tokens to the airdrop pool.
  • The airdrop excluded users from 30 countries, including the U.S., Canada, and China. In addition, the project warned about potential bans for using VPN services. EigenLayer cited regulatory concerns, but some users still considered this decision unfair.
  • Unlike most airdrops, where tokens can be moved rapidly after their claim, all airdropped EIGEN tokens will remain non-transferable outside the platform until September 30, 2024.

Vitalik Buterin proposed EIPs with new gas and transaction types

On May 7, Ethereum co-founder Vitalik Buterin proposed Ethereum Improvement Proposal (EIP) 7702. It suggests a new transaction type that allows regular Ethereum accounts to turn into smart contract ones for a single transaction, with their original state restored afterward.

Fun fact: EIP-7702 serves as an alternative to EIP-3074, and Buterin came up with this new proposal in 22 minutes, just before a developer call to discuss EIP-3074. Like EIP-3074, the new proposal also features batches (combining several transactions) and fee sponsorship (letting someone else pay the transaction fee).

A week after this, Vitalik Buterin introduced another proposal — EIP-7706. It suggests a new gas category for transaction calldata. By introducing this feature, the Ethereum network would assign specific costs to the data transmitted in transactions, separate from the costs associated with executing contract code or storing data.

One sentence news

  • The European Securities and Markets Authority (ESMA) is exploring the possibility of integrating cryptocurrencies into the €12 trillion UCITS market.
  • Lightning Labs announced successful tests of Taproot Assets, moving a step closer to enabling stablecoins and other tokenized assets within the Bitcoin blockchain.
  • Optimism’s Superchain obtained the support of layer 3 (L3) networks.
  • LocalMonero, a peer-to-peer crypto exchange for the privacy-focused cryptocurrency Monero, announced winding down its operations.
  • Japanese investment firm Metaplanet adopted Bitcoin as a reserve asset.
  • BitMEX launched options trading, aiming to capture market share from Deribit.

How is Bitcoin doing? 

Over the last week, Bitcoin was predominantly registering lower highs, experiencing increased volume during price drops. However, on May 15, after the release of softer U.S. inflation data, the BTC price bounced off above $66,000. Some analysts believe that this could drive Bitcoin to all-time high levels. This thinking corresponds to the perspective that Bitcoin might have broken the falling wedge pattern, which has been in place for the last two months. The pattern’s price target is near $74,000.

At the same time, Kaiko reported that Bitcoin miners could be under pressure to increase BTC selling, as Runes hype cooled. In addition, current on-chain indicators suggest that Bitcoin is experiencing a phase of consolidation and potential correction, according to Glassnode

Other notable price performances

Tune in next week, and every week, for the latest CEX.IO crypto highlights. For more information, head over to the Exchange to check current prices, or stop by CEX.IO University to continue expanding your crypto knowledge.

Disclaimer: For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.


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