Meme coins are imploding in a high-volume environment as the closely watched crypto fear and greed index slips to the fear zone.
The total market cap of all cryptocurrencies slipped by 25% in the past 24 hours to $29.8 billion. At their peak earlier this year, these tokens had a market valuation of over $63 billion, meaning that investors have lost $33.8 billion.
Dogecoin, Shiba Inu, Pepe and other meme coins are slumping
Dogecoin (DOGE), Shiba Inu (SHIB), Pepe (PEPE), Dogwifhat (WIF), and Bonk (BONK) crashed by over 23% on Monday. Other popular tokens like Floki (FLOKI) fell by more than 30%.
The meme coin sell-off happened in a high-volume environment, as many traders liquidated their positions. Data shows that the 24-hour volume rose by 170% to over $9.72 billion.
At the same time, their open interest in the futures market continued falling. Pepe’s open interest stood at over $93.61 million, down from last month’s high of $146 million. Dogecoin’s open interest also fell to $536 million after peaking at over $757 million in July.
The futures open interest of other meme coins like WIF, Bonk, and Shiba Inu also continued falling.
In most cases, meme coins are more volatile than Bitcoin since they are usually held by retail traders seeking quick returns. These traders pump them higher when Bitcoin is rising and then dump them when it is in a steep downward trend.
They also underperform the broader market when the fear and greed index is in the fear zone. This index retreated from over 90 earlier this year to the fear level of 35 as sentiment in the crypto industry continued to sour.
Still, there are a few positives to remember. First, this is not a crypto-specific sell-off; the stock market is also retreating. Nvidia, one of the largest companies in the world by market cap, dropped by over 14% on Monday while Apple, one of the most recognized brands in the world, was down more than 5%.
Therefore, since stocks always rise in the long term, there are chances that cryptocurrencies will rebound when this happens. Second, meme coins could benefit if the Fed starts to cut rates as inflation odds rise.
Meme coins have become oversold
Additionally, meme coins have become severely oversold, which could lead to a rebound in the coming weeks. Pepe’s Relative Strength Index has moved to the oversold level of 25 while the Percentage Price Oscillator has remained in the red area for the past six consecutive days.
Similarly, Dogecoin’s RSI has moved to 24 while the MACD and the PPO have moved to oversold levels. The same is true among other tokens like WIF and Popcat.
When an asset is oversold, it has two implications: the sell-off could continue due to the momentum, or it could bounce back as investors buy the dip.