Dogecoin (DOGE), Dogwifhat (WIF), and Pepe (PEPE) are currently performing poorly in the cryptocurrency market, signaling a decline in the earlier excitement that surrounded the sector.
The drop in value of these top meme-based cryptocurrencies can be attributed to a pre-halving sell-off in the overall crypto market. Bitcoin (BTC) and Ether (ETH), the top digital assets, have also experienced a pullback from their yearly highs as traders secure profits ahead of the Bitcoin Halving in 2024. This has led to similar strategies being adopted in the memecoin sector.
This behavior mirrors what happened to memecoins prior to Bitcoin’s previous halving in May 2020, where DOGE’s price dropped by over 22.5%.
There is a strong positive correlation between Bitcoin and top memecoins, with BTC’s daily correlation coefficient versus DOGE at 0.82. This suggests that DOGE’s price trends may mirror BTC’s in the coming days.
Steno Research projects that Bitcoin may follow a pattern similar to its 2016 halving, which saw a continuation of selling pressure for up to four months after the event. This “sell-the-news” sentiment is further contributing to the depreciation of memecoin valuations.
Furthermore, the memecoin sector is experiencing a decline in weekly trading volumes. Data from Dune Analytics shows that memecoin transaction flows across all blockchains, including Ethereum and Solana, have collectively dropped by 88% from their recent peak of around $1 billion. This indicates a decrease in traders’ interest and confidence in the sector.
The decline in trading volumes has been exacerbated by reports of a Solana outage. Roughly 75% of all transactions on the network failed during March and early April, mostly involving activity related to the memecoin mania.
Solana, which has become the primary blockchain for retail users and memecoin traders, saw a more than 300% increase in trading volumes on its decentralized exchanges in Q1 2024 compared to the previous quarter. However, recent trends show a decline in DEX volumes.
This decrease in DEX activity has resulted in a decline in the prices of most top Solana-based memecoins.
The de-risking sentiment in the crypto market, driven by strong U.S. labor data and persistent inflation, has also contributed to the selling sentiment in memecoins. Investors are increasingly betting on the delay in interest rate cuts from the U.S. Federal Reserve, which makes assets like U.S. Treasuries more appealing compared to non-yielding assets like cryptocurrencies. This shift diminishes the attractiveness of riskier investments, including memecoins.
Please note that this article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment decisions.