- On Wednesday, Binance listed perpetual futures tied to the meme token BONK, which has rallied 1,800% in four weeks.
- The listing of perpetuals tied to smaller tokens has historically pricked bull runs in the respective cryptocurrencies.
The good times, however, might be over. On Wednesday, Binance listed perpetual contracts tied to the token with 50x leverage. Historically, a decision by the exchange to list perpetual contracts tied to smaller tokens has marked major price tops for the relevant cryptocurrencies.
Perpetuals are futures contracts with no expiry date, allowing investors to speculate on the price of an underlying asset while bypassing the physical settlement of goods involved in standard futures contracts. They also offer greater leverage than standard contracts.
Here's an example: The market capitalization of Pepe memecoin's (PEPE) surged from nearly zero to $1.5 billion in the weeks leading up to the May 5 listing of PEPE perpetual futures on the exchange. The market value peaked that day, falling to as low as $380 million in the subsequent four weeks, Coingecko shows.
A similar pattern played out in the decentralized lending and borrowing platform Hifi's HIFI token, which more than tripled in the first half of the month and crashed after Binance listed HIFI perpetuals on Sept. 16.
Perhaps the arrival of perpetual futures saw skeptics and bears express their bearish views on the rallying cryptocurrency, pricking the price bubble. Perpetuals allow traders to short or take bearish bets on the cryptocurrency more easily than in the spot market.
BONK may be following a similar course. The token's market cap has already pulled back from $327 million to $257 million in the past 24 hours, Coingecko data show.
"Now, it isn’t guaranteed to work (nothing is), but if history were our guide, the likelihood of this transpiring is quite high. That said, only time will tell!," Priyansh Patel, analyst at Delphi, wrote to clients Wednesday, noting the phenomenon.
Patel added that SOL's rally has been halted after it recently reached $68 and that could be another reason to worry for BONK bulls.
"Seeing how BONK has pretty much mirrored SOL’s price action, it wouldn’t be unreasonable to assume that this continues and BONK produces some sideways price action if not corrective," Patel said.
On Wednesday, Binance also listed perpetuals for Pyth Network's PYTH token, which has rallied 64% this week.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.