Reddit-based tokens look set for a run as Reddit IPO looms

Two Reddit-based tokens, r/CryptoCurrency Moons (MOON) and Donut (DONUT), have seen significant increases in their price and market capitalization after months of low trading activity and stagnant prices as Reddit’s Initial Public Offering (IPO) on March 21 draws closer.

Also read: Bitcoin cleared $70,000 and Ethereum, $4,000: What’s next for crypto?

Reddit IPO FOMO triggers cryptocurrency rally

MOON, which is used to reward and tip users that contribute to the r/CryptoCurrency subreddit, rose more than 29% in the past seven days and 104% on a month-on-month basis, according to data from Coingecko. Its market capitalization has also experienced steady growth since February 23, with almost a 2x increase.

DONUT, on the other hand, a community token for rewarding contributors to the r/ethtrader subreddit, spiked more than 100% in the past 24 hours before a slight correction. It has risen more than 117% week-on-week and 215% month-on-month.

The major reason for the increase in these tokens’ prices is the rising attention around Reddit's upcoming IPO. Reddit is targeting a valuation of about $6.4 billion through the sale of 22 million shares, priced in the range of $31 and $34. As a result, investors are accumulating its underlying community tokens with the expectation of a huge bull run in the hope of a successful IPO.

Another reason MOON and DONUT have risen is because of the wider crypto bull market. Trending crypto prices and predictions have prompted more discussions in these subreddit crypto communities where they are used for rewards. Hence, giving room for more exchange of tokens among community members.

We can see proof of this in the slower price growth of r/FortNiteBR Bricks (BRICK), another community token for rewarding contributors to the Fortnite subreddit. Compared to MOON and DONUT, which are crypto-focused, BRICK is yet to catch the grove.

DONUT/USD 1-hour chart

Poor IPO may lead to a correction

Investors must exercise caution amidst the increasing prices as a poor IPO may cause a correction. This is because the IPO market recovery has recently been quite uneven.

For example, the IPOs of Arm Holdings, Instacart (CART.O), and Birkenstock (BIRK.N) in Q4 2023 were somewhat poor. In addition, Reddit has never turned a profit since its launch in 2005, and its method of content moderation may invite serious regulatory scrutiny. 

A weak IPO for Reddit could weigh on its underlying community tokens the way its success might cause a price boost.

It's almost the same scenario as with layer one blockchain networks and the underlying tokens that run on them – if they experience a decline, it's likely the tokens that run on them will catch some of the impact.

Reddit's success may prompt more Web2 Platforms to launch crypto tokens

Even with these challenges, Reddit's IPO may still turn out a success and prove beneficial to its community tokens. This may serve as a catalyst for other web2 social platforms like Telegram and X (formerly Twitter), which are considering launching their own crypto tokens.

For example, Telegram had earlier announced ad revenue sharing using Toncoin, and X’s CEO Elon Musk has reiterated his ambition on several occasions to launch a payment/reward coin on Twitter. And maybe Meta may finally achieve progress with its several efforts to launch a crypto token for its family of apps.