Memecoins Experience Decline as Dogecoin Takes the Lead in Risk
The index tracking memecoins witnessed increased fluctuations, showing a significant decrease, especially following a minor drop in Bitcoin [BTC]. While Bitcoin saw some minor ups and downs, it generally maintained a steady upward trajectory.
Unlike Bitcoin, which had relatively stable percentage changes, memecoins displayed more significant swings, both positive and negative. This volatility highlighted the higher risk associated with memecoins compared to Bitcoin.
Despite Bitcoin bouncing back from its small decline, the memecoin index did not follow suit, resulting in a sharp plummet of -16.8% in the last 24 hours as of the time of this writing.
These observations suggest that while memecoins are influenced by Bitcoin’s market movements, their recovery may lag behind or be less pronounced, impacting investor sentiment and future investment decisions in the memecoin sector.
This trend indicates the potential for increased instability in the meme market, particularly if Bitcoin continues to experience fluctuations.
Memetic Assets Under Pressure to Sell
A comparison between the cumulative volume changes in Bitcoin and the normalized price index for memecoins revealed a significant divergence. The memecoin index saw a sharp increase followed by a decline that corresponded with the volume changes.
The volume adjustments for memecoins indicated substantial selling pressure, totaling -$98 million on Binance in the USDT pair.
This surge in selling pressure could intensify price volatility in the memecoin sector, potentially leading to further declines if selling activity persists.
DOGE Sees Rise in Risk and Trading Volume
An evaluation of the Sharpe ratios of various memecoins alongside a standard price index indicated that Dogecoin [DOGE] exhibited the highest risk-adjusted returns among its peers.
As of the current moment, DOGE’s Sharpe ratio consistently remained below that of other top memecoins by market capitalization, indicating higher risk due to recent heightened volatility.
This situation suggests that while DOGE might promise significant profits, it also carries increased risk for investors seeking entry points. The varying Sharpe ratios among memecoins showcase the diverse risk profiles present in the sector.
This dynamic could affect the meme sector by potentially discouraging risk-averse investors from entering the market at present levels, while attracting individuals with higher risk appetites looking for substantial returns.
Furthermore, the trading activity and dominance of cryptocurrencies in the meme category throughout 2024 revealed that FLOKI initially led in trading volume but was eventually surpassed by SHIB, BONK, and DOGE this week.
This shift underscored DOGE’s resurgence in trading activity, particularly evident in the notable increase in its trade volume towards the year’s end.
If market conditions stabilize following recent turbulence, DOGE’s prominent position and growing trading volumes could propel its price to new highs, solidifying its position as the leading memecoin.