BONK Token's Meteoric Rise Grinds To A Halt: Are Investors Wagering A Losing Bet?

Making waves ever since it was listed on the penultimate day of 2022, the Shiba Inu SHIB/USD-inspired BONK BONK/USD token — promoted as the first Dog-themed memecoin on the Solana SOL/USD blockchain — had been piquing investor interest.

BONK, which appreciated by over 3,300% to a peak of $0.00000487, is currently trading down around 55% at 0.00000195, according to data from CoinGecko.

While the token’s team was probably hoping the current hype can channel increasing demand for the BONK token, a closer look at its tokenomics casts a long shadow over the premise.

What Happened: With a total token supply of 100 trillion BONK tokens, with 56 trillion of them already in circulation, the latest memecoin dwarfed peers such as Dogecoin DOGE/USD when it came to market dilution.

The fluctuation in the value of the BONK token was reminiscent of the unstable nature of other memecoins that gained popularity in the past, such as Shiba Inu, Dogecoin and FLOKI FLOKI/USD, which are based on the Ethereum ETH/USD blockchain.

These memecoins were inspired by the Shiba Inu dog, which had become a popular symbol in the cryptocurrency world due to its association with the "doge" meme.

Having already airdropped more than 50% of it to several early benefactors, the latest meme cryptocurrency seemed like a desperate attempt to bring back Solana’s lost luster.

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Interestingly, Solana blockchain severed ties with FTX co-founder Sam Bankman-Fried-promoted liquidity provider Serum and had been pursuing major updates in a bid to win back decentralized finance (DeFi) users.

The Solana token lost more than 90% of its value over the past year and was suffering from falling transaction volumes across its burgeoning DeFi ecosystem.

Why It Matters: The Solana blockchain evolved Serum into OpenBook and launched the BONK token to give Solana’s users more control over the functioning of its entire ecosystem.

Despite touting the BONK token as being the potential enabler to return Solana to DeFi supremacy, the BONK whitepaper detailed very little of how it aims to achieve this.

Furthermore, with almost all of its current circulating supply distributed amongst selected participants, demand for the BONK token would probably outstrip its supply only until the present euphoria survives.

While 50% of BONK tokens had already been airdropped to OpenBook traders, artists, collectors, developers and a collection of 40 Solana NFT projects, another 20% had been allocated to 22 individuals who contributed to launching the meme token.

Of the remaining 30% of the total BONK tokens, 15% had been allocated to the BONK DAO that had been entrusted with furthering initiatives conceived by the BONK community, while 5% each had been set aside for marketing, providing initial liquidity and for future developments.

And yet, data from decentralized protocol Orca indicated liquidity providers were earning an hourly fee rate of 1% for providing liquidity through the BONK/SOL pair trade, totaling to an astonishing 8,760% APR for those staking their BONK tokens.

While it seemed certain such extraordinary returns would only be possible in the short term, a return to normal yields would compel BONK token holders to dump the tokens and pocket their profits.

The consequences of the latter scenario would be counterintuitive to BONK’s ulterior motive of providing liquidity to Solana’s flourishing DeFi ecosystem.

This would warrant the token’s creators to resort to other marketing tactics or flood the market with more tokens, thereby exerting further downward price pressure on the BONK token.

Despite emerging as the top-performing cryptocurrency in the past week, the BONK token has its work cut out and will have to amass a lot of investor interest in the near future if it has to live up to its goals.

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Photo: SynthEx via Shutterstock