Most meme coins fell this week as many retail traders continued to sell in panic as the outlook in crypto worsened.
The market cap of all meme coins tracked by CoinGecko was down 12% to $113 billion on December 13th.
While most meme coins were falling, the sale was more pronounced among smaller tokens. Brett (BRETT), the meme coin fell the most in the Base Blockchain, with 11.2% on Thursday and 23% in the last seven days.
Squirrel Peanut (PNUT), the base of a recently viral Solana meme, has dropped 40% in the past seven days. Similarly, Popcat (POPCAT), Turbo, and Mog Coin among the worst cryptocurrencies. Solana meme coin market cap fell 15% to $15.5 billion.
Bitcoin's continued performance has seen meme coins drop. After rising to a record high of $108,200, Bitcoin fell below $100,000, as we expected earlier this week.
Bitcoin has fallen due to profit taking and the speculators around the hawkish Federal Reserve. At its last meeting of the year, the bank warned that it will only give two cuts in 2024 and expressed concerns about inflation.
Meme Coins Dropped After Bitcoin Crash
Meme coins always drop when Bitcoin slides. Their retreat is usually harder because most of them are held by retail investors who are riding the bullish wave. This is unlike Bitcoin, which has large institutional investors like MicroStrategy, Marathon Digital, and Tesla. Bitcoin ETFs also have over $115 billion in assets. Historically, institutional investors have a longer investment horizon than retail traders.
A good example of this is sales in chain metrics. According to Nansen, the number of smart money investors in Peanut the Squirrel has dropped to just 35 from last month's level of almost 100.
The same trend is happening in Brett, where the number of smart money holders and their balances have fallen in the last few weeks. Brett has about 40 smart money holders, whose balances have fallen to their lowest level in months.
Will a meme bring back coins
Bitcoins and these meme coins are likely to reverse for three reasons. First of all, Bitcoin is still in a rise, with this descent in its breath. Technicals suggest that the price of Bitcoin today stands at 122 000 $ in this bullish cycle.
It is not unusual for Bitcoin to pull back after hitting major resistance. For example, it went through a long consolidation when it rose to an all-time high in March.
Second, historically Bitcoin – and altcoins – do well in the first quarter of the year. Data with CoinGlass shows that the average return of Bitcoin in the first quarter was 56%. This makes it the second best quarter after the fourth quarter, meaning they are likely to bounce back in Q1.
Third, financial assets often overshoot when there is a major event and then moderate as traders adjust to the new normal. A good example of this was in March 2020, when stocks and crypto fell after COVID was declared an emergency. They then bounced back and reached an all-time high.
