3 reasons why DOGE, PEPE and other memecoins are flashing red
2024.06.18 16:47
Memecoins such as Dogecoin (DOGE), Shiba Inu (SHIB) and Pepe (PEPE) are among the cryptocurrencies underperforming the market on June 18, highlighting a diversion from the momentum that drove the sector higher last week.
Data from CoinMarketCap shows that the total market capitalization of memecoins has dropped 11% to $45.31 billion in the last 24 hours. The daily trading volume has increased 79% to $6.25 billion, indicating the intensity of the sell-side pressure.
Dogwifhat (WIF) declined the most among the top-cap memecoins, losing 14.55% of its market value over the last 24 hours. Book of Meme (BOME) followed with a 14.3% loss, and Brett (BRETT) came in third after declining 13% over the same period.
Performance of top-cap memecoins. Source: CoinMarketCap
Leading memecoins DOGE and SHIB fell 11.4% and 11.5%, respectively, on the daily chart, while PEPE tanked 10%.
Let’s look at some of the reasons why memecoins are crashing today.
Weakening market structure
From a historical perspective, the bull market is usually driven by retail investors, with capital rotating from large-cap cryptocurrencies like Bitcoin (BTC) and Ether (ETH) into altcoins. However, given the current correction of memecoin prices, Total3 — the total market cap of all cryptocurrencies excluding BTC and ETH — pulled back after rallying to $720 billion on June 5.
The chart below shows that Total3 has decreased by 19% since then to $582.88 billion at the time of publication. This pull-back has led to the appearance of a descending parallel channel on the daily chart, as shown below.
Traders booked profits as the daily relative strength index (RSI) turned away from the overbought region just before crossing 70 following a rally in Ethereum-based memecoins that saw PEPE hit new all-time highs.
An RSI reading close to 70 means the altcoins were becoming overvalued, so they embarked on a trend reversal or corrective pullback.
Total crypto market cap excluding BTC and ETH. Source: TradingView
From a technical perspective, altcoins are still sealed in an extended downtrend, confirmed by Total3’s downward movement inside a descending parallel channel. The RSI’s value has moved from 62 to 30 over the last two weeks, suggesting that the bears control the market.
If Total3 fails to rise above the middle boundary of the declining channel at $600 billion, altcoins, including major memecoins, could continue dumping over the next few days.
Declining memecoin trading volume
Memecoin weekly trading volume has been declining since early March, as previously reported by Cointelegraph.
Data from Dune Analytics reveals that memecoin transactions across all blockchains, including Ethereum and Solana, have dropped collectively by 97% from their March peak of roughly $996.7 million to $30.35 million the week ending June 14. This suggests that traders’ interest or confidence in the sector has continued to decrease.
Memecoins total trading volumes. Source: Dune
Looking at individual memecoins, historical data from CoinMarketCap shows that DOGE’s trading volume dropped by approximately 41% between April 17 and June 17. Similarly, SHIB’s and PEPE’s trading volumes have plummeted by 68% and 34%, respectively, over the same period.
Massive crypto liquidations accompany memecoin crash
Futures market data from CoinGlass shows that the ongoing crypto market drawdown has wiped out more than $434 million in leveraged positions within the past 24 hours, with over $60.22 million in DOGE longs and more than $22.6 million in SHIB longs accounting for the majority of liquidations across memecoins.
Similarly, more than $4.4 million PEPE longs and $2.3 million WIF longs were liquidated over the same period.
Total crypto liquidations. Source: CoinGlass
More than 160,826 traders were liquidated over the last 24 hours, with the largest single liquidation occurring on Binance involving an ETH/USDC trade worth $6.44 million.
Crypto prices, including those of memecoins, are negatively affected when long derivative positions are liquidated without buying pressure from trading volume.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
