Author: MARCEL PECHMAN, COINTELEGRAPH; Translation: Song Xue, LianGuai
The recent cryptocurrency crash has dealt a heavy blow to memecoins, with a total market value drop of 9% from August 14th to August 21st. During the same period, Pepecoin, Shiba Inu, and ApeCoin dropped by 25%. The biggest question is whether this trend will affect the broader market, signaling a wider bear market, or if it simply reflects the lagging performance of memecoins.
Cryptocurrency total market value (blue) vs PEPE/USDT (green), SHIB/USDT (red), APE/USDT (orange), August 2023. Source: TradingView
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Driven by memecoins and community enthusiasm, memecoins like Dogecoin suddenly emerged. However, due to various factors, their appeal has gradually diminished. These cryptocurrencies rely on media hype and online communities to gain attention, but they lack value beyond their memecoin origins. Their speculative nature leads to rapid price changes and volatility.
In addition, the memecoin market has become saturated with imitators, diverting attention and resources to more traditional cryptocurrencies.
As investors shift their focus to new trends, capital is being reshuffled.
For traders, the mid-August cryptocurrency market crash serves as a stark reminder of the volatility of memecoins. Many of these cryptocurrencies have emerged in the past six months, such as PEPE and Milady Meme Coin (LADYS). This may drive away newcomers and generate negative sentiment, potentially expanding the bear market to a broader cryptocurrency field.
However, this poor performance is typical for memecoins, as seen in the past, such as from June 5th to June 15th, when APE, SHIB, and PEPE lagged behind the entire crypto market by 18%.
Cryptocurrency total market value (blue) vs PEPE/USDT (green), SHIB/USDT (red), APE/USDT (orange), June 2023. Source: TradingView
These two examples do not necessarily mean that memecoins always perform worse than the overall crypto market. They reflect a higher beta coefficient in the industry, and memecoins tend to exaggerate market trends. Nevertheless, it is currently uncertain whether the excessive price decline is a lagging phenomenon or a signal of market regression.
Contrary to expectations, memecoins may also lag behind during bull markets. For example, from March 13th to 30th, memecoins declined while the total cryptocurrency market value rose by 17.5%.
Total market cap of cryptocurrencies (blue) compared to FLOKI/USDT (green), SHIB/USDT (red), APE/USDT (orange) in March 2023. Source: TradingView
After studying the poor performance of recent memecoins, it is crucial to explore the consequences. This requires determining whether the price decline implies that the market may have hit bottom or simply indicates that investors are shifting their attention to other cryptocurrencies.
Total market cap of cryptocurrencies in USD. Source: TradingView
Despite bullish evidence, external factors affect the price trend of memecoins
Following the poor performance of memecoins in mid-June and late March, the overall market cap of cryptocurrencies either remained stable or experienced significant growth in the following weeks. During this period, many factors could influence investor sentiment. For example, this sentiment may be influenced by BlackRock’s application for a Bitcoin exchange-traded fund (ETF) on June 15th.
Similarly, on March 31st, $4.2 billion worth of Bitcoin options expired. This event was seen as a potential catalyst for Bitcoin to strengthen its $28,000 support level. This is due to a significant imbalance between bullish (buy) options and bearish (sell) instruments, with bullish options exceeding bearish options by $1.2 billion. This could favor Bitcoin bulls and potentially lead them to utilize the expiration profits to support Bitcoin prices.
However, since the recent significant adjustments of memecoins were not replaced by a broader cryptocurrency market decline, the possibility of Bitcoin finding support around $26,000 still exists. Nevertheless, it is apparent from the ETF and options expiration events that market trends and memecoin price movements are mainly influenced by news and events.
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