As a seasoned crypto investor with a decade of experience under my belt, I must admit that the recent downturn in memecoins like Dogecoin, Shiba Inu, and Dogwifhat has left me with a familiar sense of deja vu. It’s as if we’re stuck in a never-ending rollercoaster ride, where every peak is followed by an equally dramatic drop.
On December 10th, digital currencies like Dogecoin (DOGE), Shiba Inu (SHIB) and Dogwifhat (WIF) were among those that suffered the most, erasing a substantial chunk of the gains they had accumulated during the recent surge caused by Donald Trump’s influence.
Memecoin market cap takes a hit
On December 10, the recent decrease in meme coin values led to the overall market capitalization of this sector reaching a three-week low of approximately $119.6 billion.
Recently, the cumulative value of meme coins dropped to a level lower than $120 billion on November 27, specifically standing at $118 billion. Over the past day, the total market capitalization of these cryptocurrencies has decreased by about 21%.
In the last 24 hours, the overall trading activity for meme coins has almost doubled compared to the same timeframe, suggesting a strong selling force in the market during this period.
In simpler terms, Dogecoin, which is currently the most valuable meme-based cryptocurrency, saw a decrease of about 5.6% in its value over the past day. Its main competitor, SHIB, also experienced a drop, amounting to 10.4%, while Pepe (PEPE), a cryptocurrency based on Ethereum, was the only top-tier meme coin that saw an increase, rising by 1.7%.
Memecoins OI drops sharply
On December 10, a decrease in open interest (OI) occurred first, which then led to a drop in memecoins. Notably, Pnut (PNUT) was at the forefront of this downturn, experiencing a 30% decline in OI over the past 24 hours.
The term “open interest” signifies the overall quantity of derivative deals still unresolved; these are agreements yet to be finalized. In the context of a futures contract, for each seller there must be a corresponding buyer who will fulfill the terms of the contract.
On a given day, DOGE’s Open Interest (IO) fell more than 20%, landing at around $3.1 billion. This is nearly six times greater than WIF’s Open Interest of $519 million, which experienced a decrease of 27% during the same timeframe. Meanwhile, PEPE’s Open Interest was reported at $302.4 million, representing an approximate drop of 11%.
A decrease in Open Interest (OI) for meme coins suggests a growing pessimism in the market, as traders with high-leverage positions are liquidating their contracts in expectation that the prices will continue to fall.
Massive crypto liquidations accompany memecoin crash
Over the last 24 hours, a significant drop in the cryptocurrency market has eliminated over $1.7 billion worth of leveraged trading positions. Interestingly, around $1.3 billion was erased from these positions just within the past 12 hours.
“The biggest long liquidation of this bull cycle so far,” CoinGlass said in a Dec. 10 post on X.
In an uncommon occurrence as indicated by CoinGlass’s data, the value of futures contracts tied to smaller cryptocurrencies and meme tokens dropped more significantly compared to those of Bitcoin (BTC) or Ethereum (ETH).
Approximately 72.6 million dollars worth of Dogecoin long positions and over 22.35 million dollars worth of Shiba Inu coin long positions made up the largest portion of liquidations in the meme-coin market during the last half day.
Over the same timeframe, approximately $7.9 million worth of PEPE long positions and around $3.6 million worth of WIF long positions were closed out.
This represented the most significant liquidation incident since the year 2021, coinciding with the onset of the 2022 bear market. More recently, a comparable liquidation event occurred alongside the sudden crash on Dec. 5, during which over $816 million in long positions were eliminated from the derivatives market, contrasting with approximately $280 million in short positions.
At this occasion, the price of Bitcoin tumbled by up to 11%, reaching approximately $92,000, causing a wave of selling across other cryptocurrencies, including meme-based coins. Dogecoin fell by 12% on the same day, while the market capitalization of meme-coins collectively decreased by about $1 billion.
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2024-12-10 15:13