Memes have been the heartbeat of this cycle. The dog with a hat and the frog had a glorious time together, where they kept scripting records and creating highs. However, with DeFi and other fundamental narratives back in the driving seat, is it game over for memes? Well, let’s look at a few metrics to find out.
Meme coin dominance
Right off the bat, meme coin dominance in major altcoin markets has been declining. In fact, as chalked out in the chart below, it has noted a free fall of late. Several analysts from the industry feel that the 'gambling' narrative is soon going to fade, similar to previous cycles.
CryptoQuant’s Ki Young Ju says,
“Pack it up lads, it’s over.”
What does the Duck say?
Pseudonymous analyst DonAlt, who accurately predicted market bottoms and tops in the past by going against the herd, doesn’t essentially fancy memes. Despite his extremely contrarian stance, he continues to maintain the same opinion. With respect to WIF, he recently said,
“It just looks sh*t. Call me biased however much you want, down means down.”
He did enjoy his share of shorting profits when the coin started tumbling in value. However, he has exited the market claiming he does not want to “kill” the coin.
Well, prevention is always better than cure, and there’s no harm in being warned against moon-boy targets, right?
Despite his ultra-bearish stance, DonAlt hasn’t ruled out the possibility of meme coins rising again. If Bitcoin ends up pulling off a trend reversal, meme coins will tag along.
However, if the bears start howling again, well, meme coin holders will have to fasten their seatbelts. In the words of DonAlt,
“I'm not disagreeing with that, if BTC breaks the range upwards your [meme] coins will do decent, the tail case is brutal though.”
Enter Solana
Most meme coins that were put to sea this cycle had been Solana-based. In fact, coin mints on this chain have outnumbered the mints on other chains like BNB, Ethereum, and Polygon.
If parallels were to be drawn, it wouldn’t be wrong to claim that last cycle’s Ethereum NFT dominance was replaced by Solana meme coin dominance this cycle. In fact, for both retail users and meme coin traders, this became the go-to chain this cycle.
A recent report by Pantera Capital pointed
“By May 2024, Solana accounted for 85% of all new tokens appearing on DEXs, up from 50% a year ago. This rise in Solana-based tokens reflects its strength in retail usage, driven by memecoin activity.”
With meme coin hype slowly starting to evaporate, will Solana bear the brunt? To a fair extent, yes. However, Solana does have fundamentals to lean on.
Several consumer-facing apps, DePin projects, content distribution apps, CLOB-based DEXes, and gaming applications are being built on the blockchain. So, even if memes take a break, Solana will not be left hung out to dry.
The future of Solana is arguably shielded. According to Pantera Capital,
“Solana is now a major contender for the future of blockchain development. Solana’s monolithic architecture has a product roadmap focused on optimizing every component of its own blockchain, similar to Apple’s approach with its vertically integrated hardware and software stack in macOS.”
‘Tis the 'debate' season
Politi-Fi meme coins are expected to yet again grab a share of the limelight towards the end of the month. The debate between US President Joe Biden and presidential contender Donald Trump will be aired on June 27.
A coin flip has already decided the podium placement and the order of closing statements. As we approach the debate day, a volatility influx into the Politi-Fi meme coin basket consisting of Jeo Boden [BODEN], Doland Tremp [TREMP], Super Trump [STRUMP], MAGA [TRUMP], etc. can be expected.
According to Bitfinex analysts, discussions around capital gains taxes in general and crypto taxation policies, in particular, could bear a weightage on the market impact. They said,
"There could be significant movement for 'Politi-Fi' tokens during and after the debate depending on their performance as these tokens have turned into speculative assets themselves in terms of the election results.”
So, no, the meme season is not yet over, and periods of volatility influxes can be expected in phases leading up to November.
Meme coin liquidity
Despite the shedding dominance, it is interesting to note that meme coin liquidity is at its peak at the moment. According to data from Kaiko, the aggregate 1% market depth of DOGE, SHIB, PEPE, WIF, BONK, GROK, BABYDOGE, FLOKI, MEME, HarryPotterObamaSonic10Inu, and HarryPotterObamaSonic created an all-time high of $128 million recently.
As a rule of thumb, the higher the liquidity, the healthier because large trades can be executed without worrying about the price being impacted. In retrospect, this tightens the bid-ask spread. Memecoins, however, have been treading on a different path.
The cost of trading memes continues to remain high. On most exchanges, the bid-ask spread is above 2 basis points, supporting the said narrative. Highlighting how this is a double-edged sword, Kaiko’s report pointed out,
“While more market makers are venturing into providing liquidity for these tokens, they are still considered risky due to their high volatility.”
Well, this isn’t a ‘rabbit out of the hat’ kind of situation. Market participants have not completely ceased trading meme coins. They are just being cautious. Liquidity is being poured in, despite a drop in dominance, indicating that this set of coins ain't being abandoned.
The rule is to never marry your memes and always keep in mind the intensity with which they could end up dumping. Play with fire like a trader, but make sure to walk out with profits in your hands instead of burnt fingers.
