- Weakening market structure for altcoins, with Total3 (total market cap excluding BTC and ETH) declining 19% since June 5th after rallying to $720 billion
- Declining memecoin trading volume, with a 97% drop from the March peak across all blockchains
- Massive crypto liquidations accompanying the memecoin crash, with over $434 million in leveraged positions wiped out in the last 24 hours
The crypto market is undergoing a broad correction, causing memecoins like Dogecoin (DOGE) and Shiba Inu (SHIB) to crash. Let’s examine why memecoins are flashing red right now.
Weakening Market Structure For Altcoins
The recent bull market has been driven by retail investors rotating capital from large-caps like Bitcoin (BTC) and Ether (ETH) into altcoins. However, the total crypto market cap excluding BTC and ETH has pulled back 19% since early June. This suggests traders are booking profits as altcoins become overvalued.
Technically, altcoins remain locked in a downtrend. The declining relative strength index (RSI) shows bears now control the memecoin market. If the total altcoin market cap fails to rise above $600 billion soon, further dumps could occur.
Declining Memecoin Trading Volumes
Memecoin trading volumes have plunged since March across all blockchains. Looking at individual memecoins, DOGE’s volume has dropped 41% since mid-April. SHIB and PEPE have seen their volumes tumble 68% and 34% respectively over the same period.
Falling trading activity indicates fading confidence in memecoins as traders shift focus elsewhere. This lack of buying pressure makes it easier for prices to slide.
Massive Crypto Liquidations
The ongoing crypto correction has liquidated over $434 million in leveraged futures positions in the past day. DOGE and SHIB longs accounted for most of these liquidations.
When long positions are forcefully closed, it negatively impacts prices as no actual buy orders offset the selling. Thus, the memecoin crash has been exacerbated by cascading liquidations across derivatives exchanges.
Conclusion
Memecoin prices are flashing red as altcoin momentum stalls and leveraged trades unwind. For memecoin prices to bounce, the overall crypto market structure needs to improve and trading volumes need to return. Until then, the path of least resistance seems to be lower for DOGE, SHIB and similar altcoins.
