Bitcoin’s Flash Crash Drags Down Meme Coins, Can They Recover?

Bitcoin’s recent flash crash, which saw the cryptocurrency drop nearly 10% below its all-time high of $104,088 to a low of $94,150, has had a ripple effect on the market, dragging down altcoins and meme coins like Dogecoin, Shiba Inu, Pepe, Dogwifhat, and Bonk.

Bitcoin Correction and Meme Coin Price Trend

As of Tuesday, Bitcoin trades nearly 6% below its all-time high, marking the end of the altcoin season. The blockchain center altcoin season index reads 65 on a scale from 0 to 100, indicating that the alt season has indeed ended. Technical indicators show mixed signals on where the BTC price is headed, with the relative strength index reading 59 and sloping upwards, while the moving average convergence divergence shows underlying negative momentum in the Bitcoin price trend.

Further correction in Bitcoin does not bode well for meme coins, as a decline in the largest cryptocurrency ushers in mass liquidation in meme coins and altcoins across derivatives exchanges. The meme category erased nearly 15% in market capitalization in the past 24 hours, down to $128.26 billion.

Meme Coins and Santa Rally

While meme coins led gains this altcoin season, it remains to be seen whether the “seasonal” gains will push prices higher. Typically, during the Christmas holidays, altcoins tend to rally, resulting from less activity across crypto exchanges and a relatively lower volume of trades. Both factors make it easier for the market to move and prices to fluctuate against lower liquidity.

Historical data shows that meme coin price charts have rallied ahead of Christmas in previous instances. If history repeats, meme tokens led by Dogecoin could recover lost ground and make a comeback before the end of 2024. Dogecoin has rallied nearly 350% year-to-date, while Shiba Inu, Pepe, Dogwifhat, and Bonk gained 160%, 1,860%, 145%, and 180%, respectively.

Trump Correlation and Bullish Drivers

The incoming U.S. President Donald Trump and his Department of Government Efficiency D.O.G.E, led by tech giant Elon Musk and fellow Presidential candidate Vivek Ramaswamy, have acted as key drivers of the meme coin rally this cycle. Elon Musk’s comments and D.O.G.E’s incorporation are top market movers for DOGE, while capital rotation from altcoins and altcoin season drove meme coin prices higher in the past four weeks.

Technical Analysis and Price Targets

Dogecoin is currently trading 22% below its 2024 peak of $0.48434. The target for the cycle is the May 2021 peak of $0.73995, with a key resistance at $0.60000. RSI shows DOGE is currently overvalued, and typically, this is considered a sell signal. A short-term correction could send the meme coin to the buy zone between $0.29874 and $0.35740.

Shiba Inu declined nearly 23% from its December 2 top of $0.00003343. The momentum indicator MACD shows an underlying positive momentum in the SHIB price trend. The target for the cycle is a March 2024 peak of $0.00004567, nearly 40% above the current price.

PEPE is currently within the buy zone, marked by the 61.8% and 78.6% Fibonacci retracement levels of the rally from the November 4 low of $0.00000771 and the December 9 peak of $0.00002836. The target for the cycle is 141.4% Fibonacci retracement level at $0.00003691.

Strategic Consideration

Bitcoin’s steep price decline pushed the meme coin category nearly 15% lower in market capitalization. Meme tokens typically react negatively to corrections in Bitcoin price. Traders need to watch the BTC price trend closely for drops in meme coin prices this cycle.

Altcoin season has ended, and meme coins no longer lead gains among different crypto token categories. Traders need to pick meme coins with strong community, liquidity, and relatively high market capitalization to protect against rug pull incidents and unprecedented losses.

Tips for traders:

  • Keep an eye on Bitcoin’s price trend, as corrections can impact meme coin prices.
  • Choose meme coins with strong community, liquidity, and relatively high market capitalization.
  • Be cautious of rug pull incidents and unprecedented losses.

For more cryptocurrency news and updates, visit Global Crypto News.

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