Why is Solana Dogwiff’s (WIF) memecoin crashing?
Dogwifhat (WIF), the fourth largest memecoin by market capitalization, is on the verge of reversing its recovery after the August 5 crypto market crash. WIF is down roughly 30% from its Aug. 9 local high of around $1.95, bringing its price down to $1.36 since Aug. 17.
WIF will crash with other memecoins
The decline in WIF price comes with similar lows in other top memecoins, namely Dogecoin (DOGE), Shiba Inu (SHIB) and Pepe (PEPE). For example, DOGE, the largest memecoin by market capitalization, is down roughly 10% over the past nine days.
Among the major memecoins, WIF experienced the most significant losses on weekly and monthly timeframes. For example, WIF's 30-day returns are around -42%, much higher than DOGE (-15%) and SHIB (-23.5%).
YFF has had an exceptional year-to-date performance, with returns reaching approximately 708%, second only to PopCat, another Solana-based token, which is up around 4,570%. Such high profits have attracted profit-taking from early investors, adding to the selling pressure.
Long skirts are better than shorts.
Dogwiff's 30% correction from the Aug. 9 local high in terms of short-term liquidity coincides with significant liquidity in the WIF futures market.
Over the past nine days, there have been long liquidations totaling $6.932 million and short liquidations of $3.16 million, according to Koenigles data.
It shows that many traders were overly bullish on WIF, perhaps expecting the price to rise after the August 9 peak. They open long positions in the futures market, betting on further price increases.
As WIF prices began to decline, it triggered profit calls for these overused long positions. If traders cannot meet these margin calls by adding additional collateral, the exchange will liquidate their positions to cover the loss.
This forced selling increases the pressure on the price, contributing to the 30% correction.
Dogwifhat is falling in value?
WIF downside remains intact as it resembles a classic Head and Shoulders (H&S) pattern.
The H&S pattern is characterized by the formation of three consecutive peaks – the middle peak, called the head, is higher than the other two, called the shoulders – at a common support level called the neckline.
Related: Memecoin ‘Retail Mania' May Go the Way of ICOs and NFTs, Experts Say
As a rule, the H&S pattern resolves when the price breaks below the neckline along with increasing trading volume. It then falls with the maximum distance between the top of the head and the neckline.
Since August 17, WIF has attempted to break below the H&S neckline level to $1.46. If successful, the price could drop to a lower target of $0.725 in September, a roughly 48% drop from current price levels.
Conversely, taking the neckline as support, a close above the WIF stock area – the $1.48-1.69 range highlighted by the red bar – could completely invalidate the H&S setup. If this happens, WIF's immediate upside targets are the 50-day (red wave) and 200-day (blue wave) exponential moving averages.
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.
