Memecoins’ Market Performance Dips Amid Weak Altcoin Market and Falling Trading Volumes
Summary:
The market performance of memecoins such as Dogecoin, Shiba Inu, and Pepe has weakened, signalling a divergence from the positive momentum seen last week. Data indicates a fall in the total market cap of memecoins, along with a decline in individual memecoin values. The cooling of the altcoin market, a decline in memecoin trading volumes, and shifting investor sentiment towards safer yield assets are all suggested factors behind this downturn. However, every investment involves risk, and individual research is critical before decision making.
Cryptocurrencies known as memecoins like Dogecoin (DOGE), Shiba Inu (SHIB), and Pepe (PEPE) did not match the market performance on May 6, indicating a shift from the positive momentum that fueled their growth just a week ago. CoinGecko's data reveals that the overall market capitalization of these memecoins has decreased in the past day, dipping 2.7% to hit $55.48 billion. Bonk (BONK) was hit the hardest with a market decline of 6% over the past 24 hours while Floki (FLOKI) saw a decrease of 3.3% and Memecoin (MEME) experienced a 3% drop.
As the prominent meme token, Dogecoin saw its price drop by 2.1%, reducing its market capitalization to $22.74 billion. However, Dogecoin still boasts nearly 41% of the total market share in the memecoin sector. Shiba Inu, its closest competitor, also saw a decrease of 2.4%, settling its market cap at $14.29 billion and fortifying its position as the second most popular memecoin.
Let's explore the reasons behind this market downturn for memecoins.
Historically, the positiveness of a bull market is typically propelled by an increase in altcoins. Unfortunately, along with the current price reduction in memecoins, TOTAL3 - representing the collective market cap of all cryptocurrencies barring Bitcoin (BTC) and Ether (ETH) - showed a decline following its October 2023 rally.
As seen in the chart below, TOTAL3 has dipped 15% since the first week of April, totalling $661.41 billion. This downturn has formed a descending parallel channel on the weekly chart. The shift to book profits happened when the relative strength index (RSI) suddenly became overbought after crossing the 70 mark amidst the peak of the Solana-based memecoin craze. An RSI reading above 70 implies a shift towards overvalued altcoins, leading to a trend reversal or pull back.
Despite the declining trend, with TOTAL3's decline noted within the parallel channel, altcoins, including leading memecoins, may continue to adjust in the coming weeks. The RSI value moving from 89 to 62 within a span of seven weeks further cements this supposition.
Aside from market structure, memecoin trading volumes have also been continuously dipping since the start of March. Dune's data reveals a collective 81% decrease in memecoin transactions across all blockchains, including Ethereum and Solana, from the recent peak of approximately $998.55 million to $191.88 million as the week ended on May 3, indicating a diminishing faith and interest in this sector.
Individual memecoins, like Dogecoin, saw their trading volumes decrease by nearly 50% between March 7 and May 6, while Shiba Inu and Pepe experienced a similar downward trend.
The dwindling opportunity for interest rate cuts from the U.S. Federal Reserve, as indicated in the FOMC statement on May 1, 2024, may have also played a part in shifting the crypto market sentiment, particularly impacting memecoins, some of the most profitable assets of 2024.
As the U.S. economy shows signs of strengthening, investors are leaning more towards safer yield assets like the U.S. Treasurys, rather than non-yielding digital currencies. This results in decreasing the appeal of risk-involved investments such as memecoins, leading investors to shift their profits from memecoins to other crypto sectors.
It is important to note that this news does not provide investment counsel or suggestions. Every investment or trading action comes with inherent risks, and it is the readers' responsibility to conduct ample research before deciding.
Published At
5/7/2024 1:00:00 AM
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