Meme Coins Plunge as Bitcoin’s Outlook Worsens

The cryptocurrency market has witnessed a significant downturn in meme coins, with many retail traders selling in panic as the outlook in crypto worsens. The market cap of all meme coins has dropped by 12% to $113 billion as of December 13.

Smaller Tokens Hit Hardest

While most meme coins have plunged, the sell-off has been more pronounced among smaller tokens. For instance, Brett, the largest meme coin in the Base Blockchain, fell by 11.2% on Thursday and by 23% in the last seven days. Similarly, Peanut the Squirrel, a Solana meme coin that recently gained popularity, has plummeted by 40% in the last seven days.

Other worst-performing cryptocurrencies include Popcat, Turbo, and Mog Coin. The market cap of all Solana meme coins has dropped by 15% to $15.5 billion.

Bitcoin’s Performance Affects Meme Coins

The ongoing performance of Bitcoin has contributed to the decline in meme coins. After reaching a record high of $108,200, Bitcoin fell below $100,000, sparking a wave of profit-taking and jitters surrounding the hawkish Federal Reserve.

The Federal Reserve’s warning that it will deliver just two cuts in 2024 due to concerns about inflation has also impacted the market. As a result, Bitcoin has dropped, causing meme coins to crash in its wake.

Why Meme Coins Crash When Bitcoin Slips

Meme coins often drop when Bitcoin slips because they are predominantly held by retail investors riding the bullish wave. Unlike Bitcoin, which has huge institutional investors like MicroStrategy, Marathon Digital, and Tesla, meme coins lack the same level of institutional support.

According to Nansen, on-chain metrics show that the number of smart money investors in Peanut the Squirrel has dropped to just 35 from last month’s high of almost 100. A similar trend is observed in Brett, where the number of smart money holders and their balances have decreased in the past few weeks.

Will Meme Coins Rebound?

There is a likelihood that Bitcoin and meme coins will bounce back for three reasons:

  • Bitcoin is still in an uptrend, with this retreat being a breather. Technicals suggest that Bitcoin’s price will peak at around $122,000 in this bullish cycle.
  • Historical data shows that Bitcoin and altcoins tend to perform well during the first quarter of the year. Data by CoinGlass reveals that the average Bitcoin return in the first quarter is 56%.
  • Financial assets often overreact when there is a major event and then moderate as traders adjust to the new normal. A good example of this was in March 2020, when stocks and crypto rebounded after an initial decline.

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

Post Views: 0