Memecoin Market Crashes 12% Following Bitcoin’s Dip and Federal Reserve Caution
The memecoin market experienced a 12% decline on December 13 According to data from CoinGecko.
The sell-off was particularly severe among smaller tokens, driven by Bitcoin’s recent pullback and concerns over the Federal Reserve’s hawkish stance.
Meme Coins Take a Hit
Among the hardest-hit meme coins:
- Brett (BRETT): A top token on the Base Blockchain, Brett fell 11.2% on Thursday and is down 23% for the week.
- Peanut the Squirrel (PNUT): A viral Solana-based meme coin, Peanut the Squirrel saw its value plunge by 40% over seven days.
- Popcat, Turbo, and Mog Coin: These tokens also suffered significant losses, contributing to a 15% drop in the market cap of Solana meme coins, which now sits at $15.5 billion.
Why Are Meme Coins Crashing?
Meme coins closely mirror Bitcoin’s performance. As Bitcoin fell below $100,000—after hitting a record $108,200—the ripple effect was felt across the meme coin market.
Key factors behind this downturn:
- Profit-Taking: After Bitcoin’s historic high, many investors opted to cash out.
- Federal Reserve Caution: The Fed’s decision to limit 2024 rate cuts to just two, coupled with concerns about inflation, rattled risk-on assets.
- Retail Investor Dominance: Unlike Bitcoin, which is supported by institutional investors like Tesla and MicroStrategy, meme coins are largely held by retail investors, making them more vulnerable to rapid sell-offs.
On-Chain Metrics Reflect the Decline
Data from Nansen highlights the dwindling participation of “smart money” investors:
- Peanut the Squirrel: The number of smart money holders dropped from 100 last month to just 35 now.
- Brett: Smart money balances have reached their lowest levels in months, with just 40 holders remaining.
Can Meme Coins Rebound?
Despite the current downturn, analysts see a potential recovery for meme coins alongside Bitcoin in the coming months.
- Bitcoin’s Uptrend: Analysts predict Bitcoin could reach $122,000 during this bullish cycle. Past performance shows that minor retreats often precede new highs.
- First-Quarter Strength: Historically, Bitcoin performs well in Q1, with an average return of 56%, according to CoinGlass. This trend often spills over into altcoins and meme coins.
- Market Adjustments: Financial markets tend to overreact to major events before stabilizing. Similar rebounds were seen after the March 2020 COVID crash, with both crypto and stocks reaching all-time highs shortly after.
Conclusion
While the meme coin market has faced a turbulent week, the broader crypto outlook remains optimistic. With Bitcoin expected to regain its upward momentum in Q1, smaller tokens like Brett and Peanut the Squirrel may also find their footing.
For investors, the key lies in staying informed and cautious, as the volatility that defines meme coins can offer both risk and opportunity.
Share this content:
