Memecoins Sell Off As Bitcoin Price Takes Attention – Is Meme Season Over?
Memecoins such as Dogecoin (DOGE), Shiba Inu (SHIB) and Pepe (PEPE) were among the underperforming cryptocurrencies in the market on May 6, marking a reversal from the momentum that lifted the sector last week.
According to data from CoinGecko, the total market capitalization of memecoins fell 2.7% to $55.48 billion in the last 24 hours.
BONK is off the top, losing 6% of its market value in the last 24 hours. Floki (FLOKI) followed with a loss of 3.3%, and Memecoin (MEME) was placed in third place after falling 3% during the same period.
DOGE – the leading meme token by market capitalization – showed a 2.1% drop in price on the day, bringing its market value to $22.74 billion. Notably, DOGE still holds nearly 41% of the total market share of memecoin sectors.
Its rival SHIB also fell by 2.4% on May 6, reducing its market cap to $14.29 billion, proving to be the second most popular memecoin.
Let's look at some of the reasons why memecoins went down today.
Weak altcoin market structure
From a historical perspective, the bull market is usually led by a rally in altcoins. However, with the current memecoin price correction, TOTAL3 – the total market value of all cryptocurrencies excluding Bitcoin (BTC) and Ether (ETH) – has pulled back after the rally that started in October 2023.
As the chart below shows, TOTAL3 is down 15% to $661.41 billion since the first week of April. This pullback resulted in a descending parallel channel on the weekly chart as shown below.
After the Relative Strength Index (RSI) on the weekly chart crossed 70, overbought traders took profits at the height of the Solana-based memecoin frenzy.
An RSI reading above 70 means that altcoins have been overvalued, thus initiating a trend reversal or corrective reversal.
Altcoins are still following an extended downtrend confirmed by the descending parallel channel of TOTAL3. The RSI value has moved from 89 to 62 over the past seven weeks, indicating that market conditions are still favoring the downside.
If TOTAL3 fails to break above the upper limit of the $660 billion descending channel, altcoins, including major memecoins, may continue to correct in the next few weeks.
Memecoin's trading volume continues to decrease.
As reported by Cointelegraph, Memecoin's weekly trading volume has been declining since early March.
According to data from Dune, memecoin trading flows across all blockchains, including Ethereum and Solana, fell by 81% from $998.55 million in March to $191.88 million in the week ending May 3. This indicates the interest or confidence of traders. The sector has been on the decline lately.
Looking at individual memecoins, historical data from CoinMarketCap shows that DOGE's trading volume dropped by roughly 50% between March 7 and May 6. Similarly, SHIB and PEPE's trading volume declined by 88% and 51% over the same period.
RELATED: BONK, POPCAT, and Solana memecoins stay green despite Bitcoin price drop
After strong US macroeconomic data, traders are taking risks
In the year According to the FOMC statement released on May 1, the possibility of an interest rate cut by the US Federal Reserve has increased the risk sensitivity in the crypto market, especially affecting memecoins among the most profitable assets in 2024.
As the U.S. economy strengthens, traders gravitate to safe-yielding assets like US Treasuries compared to non-yielding assets like digital currencies.
Therefore, this change reduces the appeal of risky investments, including memecoins. As such, investors can invest profits earned on memecoins in other sectors of the crypto ecosystem during the first quarter of 2024.
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.
