Sell ​​Memecoins as Bitcoin Price Takes Spotlight — Is Meme Season Over?

Memecoin, like Dogecoin (DOGE), Shiba Inu (SHIB), and Pepe (PEPE), was among the cryptocurrencies that underperformed the market on May 6, highlighting a departure from the momentum that drove the sector higher last week.

According to data from CoinGecko, Memcoin’s overall market capitalization fell 2.7% over the past 24 hours to $55.48 billion.

BONK fell the most, losing 6% of its market value over the last 24 hours. FLOKI followed, down 3.3%, and Mimecoin (MEME) took third place, down 3% over the same period.

DOGE, the leading meme token by market capitalization, fell 2.1% in price on the day, reaching a market capitalization of $22.74 billion. Notably, DOGE still accounts for nearly 41% of the overall market share of the Memecoin sector.

Rival SHIB also fell 2.4% on the day, May 6, reducing its market capitalization to $14.29 billion, solidifying its position as the second most popular memecoin.

Let’s take a look at some of the reasons why Memecoin is down today.

Vulnerable altcoin market structure

From a historical perspective, bull markets are typically driven by rallies in altcoins. However, in line with the current memecoin price adjustment, TOTAL3, the market capitalization of all cryptocurrencies except Bitcoin (BTC) and Ethereum (ETH), has declined since the upward trend that began in October 2023.

The chart below shows that TOTAL3 has decreased 15% since the first week of April to $661.41 billion. This downtrend has resulted in a descending parallel channel appearing on the weekly chart, as shown below.

Traders took profits as the Relative Strength Index (RSI) on the weekly chart became overbought after crossing 70 at the height of the Solana-based memecoin craze.

An RSI above 70 means the altcoin is overvalued and embarking on a trend reversal or correction downward.

The altcoin is still pursuing an extended downtrend, which is confirmed by the downward movement of TOTAL3 within a descending parallel channel. The RSI value has moved from 89 to 62 over the past seven weeks, which suggests that market conditions are still bearish.

Altcoins, including major memecoins, may continue to correct in the coming weeks if TOTAL3 fails to surpass the $660 billion upper limit of the downward channel.

Memecoin trading volume continues to decline.

According to a report by Cointelegraph, Memecoin weekly trading volume has been declining since early March.

According to data from Dune, Memecoin transaction flow across all blockchains, including Ethereum and Solana, recently fell from approximately $998.55 million in March to $191.88 million in the week ending May 3, a total decline of 81%. . This suggests interest or trust on the part of the trader. The field has been in decline recently.

Looking at individual memecoins, historical data from CoinMarketCap shows that DOGE’s trading volume decreased by approximately 50% between March 7 and May 6. Similarly, SHIB and PEPE’s trading volumes decreased by 88% and 51% over the same period.

Related: BONK, POPCAT and Solana memecoins remain green even as Bitcoin price falls.

Traders shed risk after strong US macroeconomic data.

According to the FOMC statement on May 1, as the likelihood of an interest rate cut by the U.S. Federal Reserve (FRB) in 2024 has decreased, risk aversion in the cryptocurrency market has also increased, especially MEM, which is one of the most profitable assets so far in 2024. Coins were affected.

As the U.S. economy strengthens, traders are more attracted to safe-yielding assets like U.S. Treasury bonds compared to non-yielding assets like digital currencies.

As a result, these changes reduce the attractiveness of riskier investments, including memecoins. Therefore, investors can invest the profits earned from Memcoin in other sectors of the cryptocurrency ecosystem during the first quarter of 2024.