Memecoins underperforming as investors focus on bitcoin and ether: analysts

Market Updates • February 22, 2024, 8:48AM EST
Published 1 minute earlier on
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Quick Take

  • Analysts suggest that memecoins are underperforming because investors are focusing on market leaders bitcoin and ether.

The memecoin market cap has declined in the past 24 hours, underperforming the rest of the cryptocurrency market, which posted gains during the same period.

According to CoinGecko data, the market cap of memecoins currently stands at $22.6 billion — reflecting a decrease of 1.8%. Conversely, the global cryptocurrency market cap is now at $2.08 trillion after posting a 2.1% increase in the past 24 hours.

"Memecoin underperformance likely stems from the current strength of core cryptocurrencies, such as ether, attracting investor attention and capital away from them. Their reliance on social media trends and limited fundamentals further compounds this effect," Nansen analysts told The Block.
 
In the past week, major memecoins such as Bonk, Pepe and Shiba Inu fell 14%, 5% and 2%, respectively. In the same period, core cryptocurrencies — such as ether — increased by over 7%, according to The Block's Prices Page. Bitcoin's dominance of the entire crypto market now stands at 48.8%, and ether's dominance is at 17.3%, according to Coingecko data.

Investors focusing on spot ETFs

Most investor interest is focused on bitcoin and ether due to institutional inflows via approved and potential spot ETFs, another analyst explains. "Bitcoin ETFs and the possible approval of ether ETFs are stimulating capital inflow mostly into these two coins," YouHodler Chief of Markets Ruslan Lienkha told The Block.

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Lienkha sees memecoins as currently being "highly illiquid and volatile." He added that a large part of the crypto market is still struggling with poor liquidity.

"The recent bull run is structurally different from the crypto market hype in 2021. The market is segmented by smarter capital distribution, where memecoins are currently highly illiquid and volatile assets," Lienkha said.

The structurally different nature of the current market can be observed through the lower share of participants coming from the retail sector compared to past bull runs on Coinbase's centralized exchange. Quarterly retail trading volume on Coinbase is significantly lower than the levels experienced during the late 2021 bull run — when bitcoin reached its all-time high of over $68,000.

Coinbase retail trading volumes by quarter. Image: Coinbase.


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© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Brian McGleenon is a UK-based markets reporter for The Block. He has worked as a financial journalist and producer for multiple news outlets over the years, such as Fuji Television, The Independent, Yahoo Finance, The Evening Standard, and The Daily Express. Brian is also a screenwriter and producer with one feature film produced and one in development with Northern Ireland Screen. Apart from web3 and cryptocurrency developments, he is also interested in geopolitics, environmental issues, artificial intelligence, and longevity research. Get in touch via email [email protected].

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