Memecoins such as Dogecoin (DOGE), Shiba Inu (SHIB), and Pepe (PEPE) underperformed the market on June 18, indicating a departure from the momentum that propelled the sector higher last week.
Data from CoinMarketCap reveals that the total market capitalization of memecoins has declined by 11% to $45.31 billion in the past 24 hours. The daily trading volume has increased by 79% to $6.25 billion, highlighting the intensity of the sell-side pressure.
Dogwifhat (WIF) witnessed the most substantial decline among the top-cap memecoins, losing 14.55% of its market value over the past 24 hours. Book of Meme (BOME) followed with a 14.3% loss, and Brett (BRETT) ranked third with a 13% decline during the same period.
Key memecoins DOGE and SHIB experienced losses of 11.4% and 11.5% on the daily chart, respectively, while PEPE fell by 10%.
Several factors may have contributed to the downturn in memecoins:
Weakening Market Structure:
Historically, the bull market has been primarily driven by retail investors, with funds flowing from large-cap cryptocurrencies like Bitcoin (BTC) and Ether (ETH) into altcoins. However, the current correction in memecoin prices has coincided with a pullback in TOTAL3 - the total market cap of all cryptocurrencies excluding BTC and ETH - after it peaked at $720 billion on June 5.
Since then, TOTAL3 has declined by 19% to $582.88 billion at the time of writing. This pullback has given rise to a descending parallel channel on the daily chart.
Traders took profits after the daily relative strength index (RSI) reversed direction, moving away from the overbought region just before it reached 70 following a rally in Ethereum-based memecoins that saw PEPE hit new all-time highs.
An RSI reading close to 70 indicates that altcoins were becoming overvalued, triggering a trend reversal or corrective pullback.
Technically, altcoins continue to be trapped in an extended downtrend, evident from TOTAL3's downward movement within the descending parallel channel. The RSI value has dropped from 62 to 30 in the past two weeks, suggesting that bears dominate the market.
Should TOTAL3 fail to recover and rise above $600 billion, which represents the channel's middle boundary, altcoins, including major memecoins, could continue to decline over the coming days.
Declining Memecoin Trading Volume:
Memecoin's weekly trading volume has been on a downward trend since early March, as previously reported by Cointelegraph.
Data from Dune Analytics indicates that memecoin transactions across blockchains, including Ethereum and Solana, have collectively declined by 97% from their March peak of $996.7 million to $30.35 million during the week ending June 14. This suggests a waning interest or confidence among traders in the sector.
Analyzing individual memecoins, CoinMarketCap data reveals that DOGE's trading volume dropped by approximately 41% between April 17 and June 17. Similarly, SHIB's and PEPE's trading volumes have fallen by 68% and 34%, respectively, during the same period.
Massive Crypto Liquidations Accompany Memecoin Crash:
Data from Coinglass reveals that the ongoing crypto market selloff has resulted in over $434 million in liquidated leveraged positions in the past 24 hours, with DOGE longs accounting for $60.22 million and SHIB longs amounting to $22.6 million, contributing significantly to the memecoin liquidations.
Over $4.4 million in PEPE longs and $2.3 million in WIF longs were also liquidated during the same period.
More than 160,826 traders were liquidated over the last 24 hours, with the most significant single liquidation occurring on Binance and involving an ETH/USDC trade valued at $6.44 million.
Crypto prices, including those of memecoins, are negatively impacted when long derivative positions are liquidated without the support of buying pressure from trading volume.
Please note that this article does not constitute investment advice or recommendations. Investing and trading involve inherent risks, and individuals should conduct their own research before making investment decisions.