The price of memecoins, such as Dogecoin and Shiba Inu, fell significantly on May 6. This decline comes as Bitcoin regains investor attention.
Data shows that the total value of all memecoins combined dropped by 2.7% within 24 hours, reaching $55.48 billion. Bonk suffered the most significant loss, dropping 6% in value. Dogecoin, the most valuable memecoin, fell 2.1%, bringing its market capitalization to $22.74 billion.
This sell-off appears to be a correction following a period of rapid growth for memecoins. Traditionally, altcoins, which include memecoins, tend to rise in value alongside Bitcoin during a bull market. However, Total3, the market value of all cryptocurrencies excluding Bitcoin and Ethereum, has also dipped recently. This suggests a broader market correction, not isolated to memecoins.
Analysts believe several factors are contributing to the decline in memecoin prices. Firstly, the market may have become overheated, with the Relative Strength Index (RSI) for altcoins exceeding 70 on the weekly chart. An RSI above 70 indicates an asset may be overvalued, triggering a sell-off.
Secondly, data shows a significant drop in memecoin trading volume since March. This suggests that traders’ interest in the sector may be waning. Finally, the recent Federal Open Market Committee statement reduced the likelihood of interest rate cuts in the US in 2024. This has led to a more risk-averse investment climate, which tends to negatively impact memecoins, known for their volatility.
With Bitcoin regaining investor interest and the broader market experiencing a correction, memecoin prices are likely to remain under pressure in the coming weeks.