The frenzy surrounding memecoins has captured the attention of the crypto community during this bullish season. Pepe and WIF have quickly climbed the ranks to become top 20 cryptocurrencies based on market capitalization, achieving this feat within just one year of their public launch.
These memecoins have garnered significant popularity in the crypto leverage market, where traders have the option to either go long or short on their prices. Surprisingly, four out of the top 10 cryptocurrencies by open interest (OI) are memecoins. Leading the charge is Pepe (PEPE) with a staggering $812.6 million in OI, accounting for nearly half of Solana’s (SOL) $1.7 billion in OI.
In addition to Pepe, Dogecoin (DOGE), Bonk (BONK), and Dogwifhat (WIF) have also secured spots in the top 10. However, it’s worth noting that Bitcoin (BTC) dominates the chart with an impressive $11.1 billion in OI, followed closely by Ethereum (ETH) with $9.15 billion.
A glance at the open interest chart reveals a significant difference in OI between the top and bottom positions. While Bitcoin boasts an OI of $11 billion, the tenth-placed Near Protocol (NEAR) only manages to accumulate $230 million in OI, highlighting the contrasting levels of trader interest.
The recent surge in OI for memecoins can be attributed to their bullish momentum over the past few weeks. Pepe reached a new all-time high, while WIF soared to a multi-week high above $3.30.
Open Interest refers to the total value of outstanding derivative contracts that are yet to be settled. In the case of futures contracts, a buyer is required to settle the contract for every seller. A contract is considered “open” from the moment it is initiated by either party until it is closed. OI increases when new contracts are added and decreases when contracts are settled. Unlike trading volume, OI provides continuous data.
A growing OI indicates a bullish market sentiment as leverage traders open more contracts in anticipation of price momentum.
Despite the surge in memecoin prices and the rise in OI, funding rates for these memecoins remain negative across various crypto exchanges. Funding rates represent the cost of holding a position in a perpetual swap or futures contract relative to the spot price of the asset. Positive funding rates indicate a bullish sentiment, while negative funding rates indicate a bearish sentiment.
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