Pre-Halving Market Correction Hits Memecoins: Trading Volumes Tumble Amid US Fed Reconsiderations
Summary:
Memecoins, including Dogecoin (DOGE), Dogwifhat (WIF), and Pepe (PEPE), are witnessing a significant downturn, mirroring a wider pre-halving market correction. Major digital assets such as Bitcoin (BTC) and Ether (ETH) are also experiencing similar drops. This trend is presumably a result of traders securing profits ahead of the Bitcoin Halving 2024. The memecoin market's downturn coincides with substantial weekly trading volume declines and increasing expectations for a delay in interest rate cuts from the U.S. Federal Reserve. The lackluster performance of Memecoins is further exacerbated by strong U.S. labor data and persistent inflation, making high-risk assets less appealing.
Cryptocurrencies including Dogecoin (DOGE), Dogwifhat (WIF), and Pepe (PEPE), broadly known as Memecoins, are seeing a decline today, emphasizing a significant decrease in the enthusiasm that previously fuelled the segment. Memecoin trends reflect hourly, daily, and weekly price falls, according to data from CoinMarketCap.
This downturn among leading joke cryptocurrencies seems to be a part of a wider market dip ahead of the crypto halving process. Major digital currencies such as Bitcoin (BTC) and Ether (ETH) have also retreated from their annual peaks as investors cash in their profits in anticipation of the 2024 Bitcoin Halving, causing a ripple effect in the Memecoin industry.
Notably, this scenario is similar to the market behavior observed around Bitcoin's last halving in 2020 when DOGE saw a price decrease of more than 22.5%. Research shows a considerable positive correlation between Bitcoin and leading Memecoins. For instance, the daily correlation coefficient between BTC and DOGE valued at 0.82 indicates a high likelihood of DOGE mirroring Bitcoin's future price trajectory.
Steno Research predicts that Bitcoin could follow a pattern reminiscent of the 2016 halving, which suggests potential sustained selling pressure for up to four months post-halving. This "sell-the-news" sentiment is further depreciating the Memecoin market's value.
Moreover, the Memecoin market's correction corresponds to serious declines in its weekly trading volumes, as revealed by data from Dune Analytics. Reportedly, flowing Memecoin transactions across all blockchains, including Ethereum and Solana, have collectively dropped by 88% from its recent high of roughly $1 billion. This signifies decreasing trader interest or confidence in the market.
The recent service disruption of Solana, where roughly 75% of all transactions failed during the late March to early April period has exacerbated the fall in trading volumes. Solana, the main blockchain platform for retail users and Memecoin traders noted an over 300% increase in Q1 2024 trading volumes on its decentralized exchanges compared to the preceding quarter, according to research by Peter Horten of data analytics platform Messari. However, this trend has now reversed.
Simultaneously, growing expectations of the U.S. Federal Reserve postponing interest rate cuts following strong U.S. workforce data and sustained inflation have further intensified the selling pressure in the crypto market, impacting Memecoins, a top-performing asset class in 2024, heavily.
Interest rate futures traders have notably shifted their outlooks, with about 81% now expecting the Federal Reserve to maintain interest rates within the 500-525 basis points range in June, up from about 60% earlier in the month. Higher-yielding assets like U.S. Treasuries become increasingly favored over non-yielding assets like cryptocurrencies in high-interest-rate environments, consequently reducing the allure of high-risk assets, including Memecoins.
Readers are encouraged to conduct their own research when making investment decisions as every investment and trading move entails risk, and this article does not provide investment advice or recommendations.
Published At
4/10/2024 7:46:06 PM
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