BONK's Market-Beating Price Surge at Risk as Binance Lists Perpetual Futures Tied to the Token

Historically, the exchange's decision to list perpetual contracts tied to smaller tokens has marked major price tops for the those cryptocurrencies.

AccessTimeIconNov 23, 2023 at 8:37 a.m. UTC
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  • 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 market capitalization of bonk (BONK), a Solana token that came into existence as a meme coin in January, has surged over 1,800% in the past four weeks, outshining Solana's SOL token and industry leader bitcoin (BTC) by a significant margin.

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.

PEPE's market cap (May-June 2023) (Coingecko)
PEPE's market cap (May-June 2023) (Coingecko) (Coingecko)

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.

Edited by Sheldon Reback.


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.

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