Crashing Memecoins: DOGE, WIF, and More

The worst-performing cryptocurrencies today include memecoins like Dogecoin (DOGE), Dogwifhat (WIF), and Pepe (PEPE). This decline signals a decrease in the enthusiasm that was once driving the sector. The drop in these joke cryptocurrencies is likely a pre-halving dump, similar to what happened with Bitcoin (BTC) and Ether (ETH) as traders secure profits before the Bitcoin Halving 2024. There is a strong positive correlation between Bitcoin and top memecoins, suggesting that the price trends of memecoins may mirror BTC’s in the coming days. Steno Research predicts that Bitcoin may experience a pattern similar to its 2016 halving, with selling pressure lasting for up to four months after the event.

The correction in the memecoin sector is accompanied by a significant decline in weekly trading volumes. Data from Dune Analytics shows that memecoin transaction flows across all blockchains, including Ethereum and Solana, have dropped by 88% from their recent peak of $1 billion. This indicates a decrease in traders’ interest and confidence in the sector. The decline in trading volumes has been further exacerbated by reports of Solana outages, with approximately 75% of transactions on the network failing during March and early April, primarily due to memecoin activity. Solana has been the primary blockchain for retail users and memecoin traders, but its DEX volumes have been trending downward recently, leading to a decline in top Solana-based memecoins.

The crypto market is experiencing a de-risking sentiment, fueled by expectations of a delay in interest rate cuts from the U.S. Federal Reserve. Strong U.S. labor data and persistent inflation have led to increased bets that the Federal Reserve will keep interest rates steady in June. This shift in expectations has made assets that yield, like U.S. Treasuries, more appealing compared to non-yielding assets like cryptocurrencies. Consequently, the appeal of riskier investments, including memecoins, is diminishing.

Memecoins like Dogecoin, Dogwifhat, and Pepe are currently performing poorly, reflecting a decline in enthusiasm in the sector. The decrease in trading volumes and the shift in expectations about interest rates from the U.S. Federal Reserve have further contributed to the devaluation of memecoins.