Normally, an effective trading approach involves entering positions at lower prices to maximize profits when the market rebounds, rather than trying to time the market peak.
With Bitcoin-induced volatility and downturns in high-cap tokens, there seems to be a trend where traders could be transitioning towards memecoins, taking advantage of price dips driven by fear.
Majority of Memecoins Showing Positive Performance
Over the last week, Bitcoin encountered instability as bulls found it challenging to uphold the $62K support level, eventually falling close to $60K.
Currently priced at $60,820, the $61K level is now being closely watched as the next possible support, but maintaining it may pose difficulties.
Conversely, roughly 70% of the top 10 memecoins based on market capitalization concluded the period in the green, with NEIRO leading the way with a notable surge of approximately 100%.
This uptrend indicates that memecoins might be enabling traders to optimize profits in a risk-tolerant setting, as evidenced by the provided chart.
PEPE, the third-largest meme token by market cap, has witnessed a flow back into holder wallets, suggesting a potential market bottom.
Typically, substantial acquisitions of PEPE have coincided with its price hitting a bottom, often resulting in a surge on the subsequent day. If this pattern persists, PEPE could be poised for a correction.
This trend isn’t limited to PEPE alone; it extends to other meme tokens too. Traders tend to purchase low-cap assets during uncertain market sentiments, enabling them to offload when tokens with high potential start to recover.
Therefore, in the event that BTC manages to uphold its support without bearish pressure, these memecoins might witness a surge in profit-taking. Conversely, an increasing dominance of memecoins could suggest that Bitcoin is not on the brink of a breakout just yet.
Investors Potentially Seeking Short-Term Opportunities
While specific memecoins are gaining autonomy from Bitcoin’s volatility, their initial momentum typically surges during BTC’s bullish runs.
Throughout each bull cycle, memecoins tend to mirror Bitcoin’s dominance, achieving similar daily gains. However, as the cycle advances, memecoins often see their daily gains surpassing those of BTC, mainly due to BTC’s heightened volatility.
As worries about a reversal heighten, traders frequently transfer their funds from Bitcoin to memecoins for enhanced returns.
Thus, last week, as BTC retested the $63K threshold, numerous traders exited their positions, apprehensive of a pullback. Meanwhile, memecoins saw substantial increases, highlighting short-term opportunities for traders.
According to CryptoCrypto, memecoins also impact BTC’s price movements, especially towards the cycle’s end. Consequently, the upcoming “memecoin cycle” may coincide with BTC encountering a crucial resistance level around $66K.
Until then, investors are expected to partake in speculative trading to secure short-term profits.