Why meme coins are up today

Meme coins had quite a moment on Friday, supported by market-moving news of the past few days that inspired a rally. While even a robust price increase won’t convince many investors that such cryptocurrencies have value, the latest price increases are certainly turning believers out of former skeptics.

For the most part, meme coins had a good Friday, with many prices improving by double-digit rates. The best dog in the pack, Dogecoin (DOGE 5.10%)was enjoying a nearly 6% increase in trading at the end of the afternoon. The other dog-themed crypts Shiba Inu (SHIB 8.00%) and Bonk (BONK 11.92%) outperformed their leader with respective increases of 8% and sub-17%. Outside the animal kingdom, Floki (FLOKI 10.37%) advanced nearly 13% on the day.

Here comes China

For the key drivers behind the rally, we need to look across the Pacific Ocean to China. On Tuesday, the country’s massive government unveiled its latest package of economic stimulus measures. Among many other initiatives, part of this package may soon include injecting financial liquidity into the nation’s banking system. In another major move, its central bank followed that move with an interest rate cut on Friday.

A sudden influx of cash, whether inspired by an outright cash injection or a rate cut, means an intense investment hunt. It should also result in a higher risk appetite, so the higher the potential returns of an asset class, the better. Meme coins fit in such situations as they are a rather risky segment of the already risky cryptoverse. We can say that there is a broad movement in the direction of meme coins due to the relative uniformity of recent price gains.

Thanks in large part to Dogecoin, meme coins have proliferated, with a number of cryptos branded with cute dog logos (also known by some as “Doggone Doggerel” tokens. An interesting strategy used by their developers is to beat these coins in large numbers, allowing for the price to settle in tiny amounts, even with the recent surge, one Dogecoin will set an investor back just over $0.12 each, a single dollar can buy nearly 50,000 Shiba Inus.

Rate cut race?

Meanwhile, we certainly haven’t seen the last of the interest rate meltdown. Not long before China’s slice, the global pace-setting central bank, the US Federal Reserve (Fed), adopted a relatively aggressive 50 basis point rate cut last week. Such a move not only increases the appetite for risky assets, but also inspires other central banks to taper if they have room to do so; after all, they need to keep investment in their countries attractive.

As a class, meme coins are too volatile to recommend as a solid long-term play for any investor. However, for those who can stomach the often skyrocketing levels of risk, it may be worth considering whenever this current rally takes place and prices deflate.