Memecoins
Why meme coins are falling despite supercycle hopes
Despite growing expectations of a meme coin supercycle, recent performance data reveals significant declines in these assets, calling bullish predictions into question.
Over the past month, popular meme coins such as Dogecoin (DOGE) and Shiba Inu (SHIB) saw declines of between 8% and 31%.
Meme Coins Fall as Interest Shifts to Bitcoin
Market analysts attribute the downward trend in meme coins to a shift in investor attention towards Bitcoin after its latest halving and the growing popularity of exchange-traded funds (ETFs). While some investors predicted a surge in all cryptocurrencies, the reality was more nuanced.
The market capitalization of meme coins AS is to $54.639 billion, recording a daily decline of 2.7%. This decline is reflected in trading volume, which amounted to $5 billion in the last 24 hours.
Despite the general recession, not all meme coins have suffered losses. PEPPER AND BONK have bucked the trend, posting gains of 15.5% and 4.3% respectively over the past month. These outliers highlight the volatile and unpredictable nature of meme coin investing.
To know more: 7 Hot Meme Coins and Altcoins That Are Trending in 2024
Meme coin prices. Source: CoinGecko
The broader narrative among investors suggests the start of a supercycle, fueled by the Bitcoin halving ETFs, could possibly benefit the meme coin industry. This optimism is based on the expectation that the reduced supply of Bitcoin after the halving could push up its price, potentially leading investors to seek higher returns in more speculative assets.
However, serious market analysts and entities such as the venture capital firm a16z have done so expressed concerns about the sustainability of meme coins, citing them as potential risks to the credibility of the cryptocurrency market. Crypto Koryo, a data scientist, also suggests that the meme coins have become high risklow reward.
“Considering that the vast majority of these new meme coins will end up at $0, a lot of diversification is needed if you want to play that game. If there is too little diversification, your portfolio could go to $0 at any time. Excessive diversification, and even a 20x on one of them, would not have a significant impact on PnL,” explains Koryo.
In light of these dynamics, the future of meme coins remains uncertain. While some predict a rebound driven by broader cryptocurrency gains and increased investment in higher-risk assets, others caution against the speculative nature of such investments.
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