These days, memecoins such as Dogecoin (DOGE), DogeCannon (WIF), and Pepe (PEPE) are underperforming in the cryptocurrency market. This lackluster performance indicates a significant decrease in the excitement that once drove this sector.
Pre-halving correction fractal
At first glance, it seems that the drop in value for many top joke cryptocurrencies is simply a part of the broader pre-halving sell-off occurring throughout the crypto market.
The prices of leading cryptocurrencies like Bitcoin (BTC) and Ether (ETH) have retreated from their peak values this year due to traders taking profits before the anticipated Bitcoin Halving in 2024. This trend has resulted in similar actions among investors in memecoins as well.
Before Bitcoin’s halving in May 2020, memecoins such as DOGE displayed similar behaviors, causing their prices to decrease by more than 22.5% respectively.
In simpler terms, there is a significant relationship between Bitcoin and popular meme coins like Dogecoin. This connection is demonstrated by a high positive correlation coefficient of 0.82 between their daily prices. This suggests that Dogecoin’s price movements might closely follow Bitcoin’s trends in the near future.
According to Steno Research’s analysis, Bitcoin might follow a trend reminiscent of its 2016 halving. After this event, they expect a potential period of selling pressure lasting approximately four months. This selling sentiment, often referred to as “selling the news,” is also negatively impacting memecoin markets.
Memecoin trading volumes are crashing
According to Dune Analytics, the trading volume for memecoins in the weekly market has significantly decreased, contributing to their price corrections.
Significantly, the volume of memecoin transactions spanning various blockchains such as Ethereum and Solana has declined by approximately 88% since reaching a peak of around $1 billion. This indication points towards decreased enthusiasm or faith among traders in this market segment.
The number of trades in the memecoin market has dropped significantly faster due to rumors of Solana experiencing downtime. Around three-quarters of all transactions on its network malfunctioned during the March and early April trading periods, largely driven by the hype surrounding memecoins.
According to Peter Horten, a researcher at Messari, Solana has emerged as the go-to blockchain for individual investors and meme coin traders. The trading activity on its decentralized exchanges increased by over 300% during the first quarter of 2024 compared to the preceding quarter.
But in recent weeks, Solana’s DEX volume trend has shifted downward, as shown below.
This lower DEX activity has preceded a decline in most of the top Solana-based memecoins.
De-risk mood amid strong U.S. numbers
With strong US labor reports and ongoing inflation pushing the Federal Reserve to delay interest rate reductions, investors have been raising their wagers. This trend has heightened selling feelings towards crypto, significantly impacting memecoins – some of the most lucrative assets this year in 2024.
Based on information from the Chicago Mercantile Exchange, there’s been a notable change in the anticipations of interest rate futures traders regarding the Federal Reserve’s decision. Currently, around 81% of these traders believe that the Fed will maintain the interest rates at the range of 5.0% to 5.25% in June, as opposed to roughly 60% who held this view earlier in April.
During times when interest rates rise, investments that generate income, such as U.S. Treasuries, become more attractive than non-yielding assets like cryptocurrencies. This trend reduces the allure of riskier investments, such as memecoins.
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2024-04-10 19:49