Meme coins oversold as the crypto fear and greed index slips
Release: 2024/08/05 22:09 Reading: 671
Meme Coins Collapse Amid Market Downturn
As the crypto fear and greed index plummets into the "fear" zone, meme coins have witnessed a precipitous decline.
The total market capitalization of all cryptocurrencies has plummeted by 25% in the past 24 hours, reaching $29.8 billion. At their peak earlier this year, these coins had a combined valuation of $63 billion, resulting in a $33.8 billion loss for investors.
Dogecoin (DOGE), Shiba Inu (SHIB), Pepe (PEPE), and other meme coins have suffered significant losses. Dogecoin, the most popular meme coin, plunged by over 23% on Monday. Other prominent tokens, such as Floki (FLOKI), experienced a drop of more than 30%.
The massive sell-off was driven by high trading volumes, with the 24-hour volume surging by 170% to over $9.72 billion. Simultaneously, open interest in futures markets continued to decline. Pepe's open interest has dropped to $93.61 million from a peak of $146 million, while Dogecoin's open interest has fallen to $536 million after reaching $757 million in July.
Meme coins are typically more volatile than Bitcoin, as they are largely held by retail traders seeking quick profits. These traders tend to boost prices when Bitcoin is rising and sell off their holdings when Bitcoin experiences downtrends.
Moreover, meme coins underperform in times of market fear, as evidenced by the current fear and greed index reading of 35.
Despite the bearish sentiment, there are some potential bright spots. The sell-off is not exclusive to cryptocurrencies, with the stock market also experiencing declines. Notably, Nvidia and Apple, two of the world's largest companies by market capitalization, both lost ground on Monday.
Historically, stocks tend to rebound over the long term, suggesting that cryptocurrencies could potentially follow suit. Additionally, meme coins may benefit from a potential future interest rate cut by the Federal Reserve as inflation fears escalate.
Furthermore, meme coins have become oversold, which could lead to a price recovery in the coming weeks. Technical indicators, such as the Relative Strength Index (RSI) and Percentage Price Oscillator (PPO), indicate oversold conditions for Pepe, Dogecoin, and other tokens.
While oversold conditions can sometimes lead to further sell-offs due to momentum, they can also signal potential buy-in opportunities for investors looking to capitalize on potential rebounds.
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