The Story Behind BONK Token's Skyrocketing Price Rise and Why Its Liquidity Fee Rate Isn't Sustainable

Labeled as the people's dog coin by its creators, the Shiba Inu-inspired BONK/USD token SHIB/USD has been making waves since it was listed on Dec. last year on a number of popular crypto exchanges.

Not only has it become the best performing cryptocurrency over the past week, seeing an almost 25x increase in price from its issue price, but it also continued to face massive investor demand from employed tokenomics.

However, with a total token supply of 100 trillion BONK and having already dumped over 50% to a number of early benefactors, this latest cryptocurrency meme looked like a another desperate attempt to bring back Solana's lost shine money.

What happened: Known for its thriving decentralized finance (DeFi) ecosystem, the Solana SOL/USD blockchain has undergone major updates since severing ties with the liquidity provider promoted by Sam Bankman-Fried, Serum.

Blockchain has turned Serum into OpenBook and has taken an increasing number of steps to reassure investors, aiming to bring DeFi volumes back to pre-FTX levels.

One ​​of these initiatives is the launch of the BONK token, created to give more control to Solana users and which strives to become the true community coin of the Solana blockchain.< /p>

Presenting the BONK token as the primary catalyst for Solana's return to DeFi supremacy, the BONK whitepaper goes into very little detail about how it aims to achieve this.

Also read: Thought the days of counterfeit Dogecoin were over? This one is up 80% today

While 50% of BONK tokens have already been airdropped to merchants, artists, collectors, OpenBook developers and a collection of 40 Solana NFT projects, an additional 20% have been awarded to 22 people who helped launch the meme token.

Of the remaining 30% of total BONK tokens, 15% was allocated to the BONK DAO which was responsible for promoting initiatives designed by the BONK community, while 5% each was set aside for marketing, providing initial cash and for future developments.

Why it matters: Yet data from the decentralized protocol Orca indicates that liquidity providers were earning a 1% hourly rate for providing liquidity through the BONK/SOL pair, totaling a astonishing amount of 8760% APR for those who stake their BONK tokens.

While it remains to be seen whether such extraordinary returns can be sustained over the longer term, the token team was likely hoping that the current hype could channel the growing demand for the token GOOD.

Indeed, in the scenario where these returns are reduced to more realistic levels, it could force BONK token holders to dump the tokens and pocket their profits.

This last scenario is counter-intuitive to BONK's motive to provide liquidity to Solana's thriving DeFi ecosystem and would justify the token's creators in resorting to other marketing tactics .

Anyway, the BONK token has its work cut out for it and will need to attract investor interest in the near future to deliver on its promise.

Read next: Meta-bets go bankrupt as NFT digital land prices plummet: Are investors wasting money?< /em>

Photo: BONK

© 2023 Benzing...