Memecoins lose three months in a row as retailers flee Dogecoin counterfeit projects
Memecoins are very popular this year and come from the “hot trend” Dogecoin (DOGE) on the subject of Shiba Inu. However, the recent turmoil in this market suggests retail investors are abandoning their positions as the sell-off has scared many new entrants.
However, analysts and traders are debating whether retail interest in memecoins will return anytime soon.
Top Memecoins perform below average in June compared to May | Source: CoinMarketCap
Memecoins exploded earlier this year, inspired by DOGE, which was powered by Tesla CEO Elon Musk and managed a 4-month winning streak. In April alone, the DOGE price on the Hong Kong-based FTX rose 528.4%, according to TradingView.
After the Dogecoin phenomenon, many memecoins were launched, including Shiba Inu’s DOGE token, as a new obsession with meme culture sparked a wave of interest in these tokens around the world. The GameStop stock trading craze earlier this year drove more people crazy.
“The meme market is saturated with meaningless memecoins,” said Vetle Lunde, an analyst with Arcane Research.
While there are tons of other dog-themed coins such as Dogelon Mars (ELON) and DOGGY, the field isn’t limited to DOGE spinoffs. There is also CUMROCKET (CUMMIES), a token that powers the NFT market for the adult entertainment industry, and Loser Coin (LOWB), a token that represents the self-deprecating culture in China.
Denis Vinokurov, Head of Research at Synergia Capital, said:
“I think it underscores the strong nature of the risk currents that prevailed during that time. Fundamentals don’t matter or are particularly less important, and it ends up being crowd-driven trading. “
However, this dynamic seems to have evaporated. The aggregated data shows that DOGE was in the red through May, while smaller meme tokens made a small profit. A month later, almost all 10 meme tokens failed miserably, and then DOGE also posted negative gains in June.
According to Coingecko, DOGE’s price has fallen 35.3% so far in July, which shows that the largest meme token by market cap is likely to close the month at a loss.
DOGE price table | Source: TradingView
The meme market is oversaturated
Lunde said the sector has faced unprecedented selling pressures since the market-wide sell-off in May, partly due to “the reduced presence of new retail investors”.
In Asia, where the crypto market is dominated by retail investors, China’s recent crackdown on crypto trading and bitcoin mining has hurt memecoins as well.
China’s crackdown “is making people reluctant to invest new money in the market, and rumors of additional regulation on centralized exchanges are a cause for concern about further investment.” Many Memecoin traders in Asia are miners too, so they are busy trying to resolve the crackdown and recoup their losses, ”said Rachel Lin, CEO of the decentralized futures exchange SynFutures.
According to Annabelle Huang, partner of the Hong Kong-based Amber Group, the meme token craze is “over”. “Now all that’s left is the mining ban and the ‘great exodus’ in China, as I predicted.”
What do speculative traders look for next?
It is clear to some analysts that speculative traders who love high returns from Memecoins have moved on to the next “hot” venture, as the growth of Axie Infinity over the past few weeks shows.
“This summer so far has been the summer of the crypto game projects,” Lunde said, warning that the gaming sector is likely to face excessive exuberance as well, much like meme tokens.
At the time of writing, the AXS token has a total market cap of over $ 1.11 billion and is in the process of overtaking French video game company Ubisoft with a valuation of around $ 7 billion.
“I think it’s safe to say that the Bulls are a little too optimistic at the moment,” said Lunde.
AXS is currently trading at around $ 18.1, up 18% in 24 hours but 37% less than its all-time high of $ 29.13 on July 15.
AXS price chart | Source: TradingView
Citing a dwindling number of arbitrage trades and a month-long Bitcoin futures contract, Synergia Capital’s Vinokurov says there is more cash on the sidelines than is being introduced into the crypto space.
Cash and carry trading involves selling a futures contract short and buying a long position in the same asset to benefit from the reduction in the difference between the futures price and the spot price. This strategy has lost its appeal for traders as the spread between futures and spot prices in the annual timeframe has decreased significantly recently.
Bitcoin futures rotate annually on a 1-month basis | Source: Skew
He said the crypto market needs a much stronger “risk-on” mentality before meme tokens can make a comeback.
There is still hope
But not all are as pessimistic as to where the memecoins are going. OKEx Exchange CEO Jay Hao said:
“Speculation aside, these memecoins are really gaining traction in the crypto ecosystem, especially when used as tips for social media content. It’s exciting to see millennials participate. “
Hao said that if the meme token creators and communities can help build better infrastructure, they have the potential to evolve into a “powerful utility token” that goes beyond the jokes or culture we use currently represented.
Despite the disappointing price, the DOGE community, for example, is still active: A new fee structure for Dogecoin was proposed by core developers at the end of May in order to reduce transaction costs overall. Last week, eToro, an exchange primarily aimed at “social” or novice traders, reported that DOGE was the fifth most popular cryptocurrency on the exchange in less than a week after trading for less than a week.
And self-proclaimed “DOGE creator” Elon Musk posted several tweets about the token meme this month, even though his influence isn’t as strong as it used to be.
Limited access to crypto investing poses a huge challenge for newbies to keep investing in the market after first becoming attracted to memecoins, Hao noted:
“The first step becomes easier if you use traditional channels such as exchange-traded funds or banks act as custodians. Then we have private investors … who continue to invest in altcoins and growing decentralized finances – with the perception that profits can no longer be made overnight.
At home at home
According to Coindesk