Crypto Giggle
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On December 10th, the memecoins market suffered a major crash. Popular tokens such as Dogecoin(DOGE), Shiba Inu(SHIB), Dogwifhat(WIF), all experienced sharp drops. The declines were greater than the overall crypto-market selloff and erased much of the recent gains linked to the former U.S. president Donald Trump.
The market cap drops to a three-week low
Total market capitalization for the memecoin industry fell to $119.6 Billion, its lowest level since November 27 when it briefly reached $118 Billion. In just one day, the market capitalization of memecoins fell by 21%. The daily trading volume for memecoins almost doubled at the same time. This reflects increased selling pressure from investors looking to reduce their losses.
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Memecoin daily trading volume and market capitalization. Source: CoinMarketCap
Dogecoin is the main cause of decline
Dogecoin has lost 5.6% in the last 24 hours. It is the biggest memecoin based on market capital. Shiba Inu fared even worse and lost 10.4% in the same time period. PEPE, an Ethereum-based memecoin, was the lone major coin to defy the trend and gain 1.7%
Top memecoins’ Today’s Viral Level= Indigo performance. Source: CoinMarketCap
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Memecoin Crash preceded the decline in open interest
Open interest, which measures the total number of unresolved derivative contracts, dropped significantly across all major tokens prior to Dec. 10. The open interest (which measures the number of derivatives that are not settled) dropped sharply as traders reduced their positions in response to a growing bearish mood. PNUT was the first to retreat, with a drop of 30% in OI in the last 24 hours. This indicates a waning level of confidence in this token. Dogecoin’s (DOGE) OI dropped over 20%, to $3.1 Billion. This was still nearly six times more than Dogwifhat’s (WIF), whose OI fell 27%, to $519 MILLION. Ethereum-based PEPE experienced a moderate drop in OI, which fell 11% to $3002.4 million.
Memecoin chart of OI CoinGlass is the source for this chart.
As traders sold their memecoin positions, the decline in open interests reflected a reduced level of market confidence and activity.
Markets shaken by Liquidation Event
Recently, the broader crypto-market experienced an unprecedented wave of liquidations. Over $1.7 billion disappeared within 24 hours. According to CoinGlass, $1.3 billion in liquidation occurred within 12 hours. This is the biggest event of this kind since 2021.
Source CoinGlass Memecoins were among the worst affected, with significant disruptions. Dogecoin was particularly affected, as long positions worth $72.6 millions were wiped out. Shiba inu wasn’t spared, either. Long positions worth $22,35 million were liquidated. PEPE and WIF positions totaling $3.6 million, $7.9 millions in losses. The massive liquidation is similar to the situation that occurred during the December 5 flash crash, when 816 million dollars in long positions disappeared from the market. This recent volatility seems to echo the turbulence of that period and highlights the volatile nature the crypto landscape.
The Bearish Feeling Grows
Open interest in memecoin derivatives has dropped, indicating a negative outlook. Traders have closed their leveraged positions to prepare for further drops.
The sell-off is reminiscent of the beginning of the bear market in 2021 and underlines the volatile nature of memecoins. Bitcoin’s Where to Buy dropped by 11% during the crash on December 10, triggering an altcoin sale. Memecoins lost alone $1 billion of market capitalization. While market participants try to navigate through this turmoil, memecoins are a reminder of how high the risk is with speculative crypto assets.
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