3 reasons why DOGE, WIF and other memecoins are broken
Memecoins like Dogecoin (DOGE), Dogwifhat (WIF), and Pepe (PEPE) are among the worst performing cryptocurrencies today.
Pre-half correction fraction
The main joke is that the decline of cryptocurrencies is part of the pre-half garbage in the crypto market.
Top digital assets including Bitcoin (BTC) and Ether (ETH) recently prompted similar strategies in the memecoin sector as traders profited ahead of the Bitcoin Halving in 2024.
This is similar to how memecoins reacted to Bitcoin's previous halving, with the DoJ price dropping by more than 22.5% in May 2020.
There is a strong positive correlation between Bitcoin and top memecoins. For example, BTC's daily correlation with DOGE was 0.82, indicating a strong possibility that DOGE's price trends will mirror BTC's in the coming days.
Steno Research projects that Bitcoin may experience a pattern similar to the 2016 halving. After halving, it is estimated that sales pressure will continue for four months. This “sell-news” sentiment is further depressing memecoin sector prices.
Memecoin's trading volume is crashing.
The correction of the memecoin sector is accompanied by a sharp decline in the weekly trading volume, according to data source Dune Analytics.
Notably, memecoin trading across all blockchains, including Ethereum and Solana, has recently dropped by 88% compared to $1 billion. This shows that traders' interest or confidence in the sector has decreased recently.
The decline in trading volume in the memecoin sector has further increased amid reports of Solana's outage. In particular, about 75% of all transactions on the network failed in March and early April, mainly due to the recent memecoin mania.
RELATED: Solana targets April 15 for TX fix – ‘not a design flaw'
Solana has become the main blockchain for retail users and memecoin traders, with decentralized exchange volume growing more than 300% in Q1 2024 compared to the previous quarter, said Peter Horton, researcher at data analytics platform Messari.
But in recent weeks, Solana's DX rate trend has turned downward, as shown below.
This low DEX activity was preceded by a decline in most Solana-based memecoins.
Avoid risk sentiment amid strong US numbers
Increased bets on a delay in interest rate cuts from the US Federal Reserve – on the back of strong US labor data and continued inflation – also boosted selling sentiment in the crypto market, particularly affecting memecoins, which have been among the most profitable assets globally so far. In the year 2024
According to CME data, interest rate futures traders' expectations have changed significantly. About 81% said the Federal Reserve would keep interest rates at 500-525 basis points in June, and about 60% would do so in April.
During high interest rate periods such as US Treasuries, they become more attractive compared to non-yielding counterparts such as cryptocurrencies. Therefore, this change reduces the appeal of risky investments, including memecoins.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
