NOIDA (CoinChapter.com) — The recent Memecoin frenzy netted users quite a few bucks, making the sector an attractive option for traders looking to make millions in minutes. However, it would be wise to exit the memecoin sector when on a high level rather than stay in the hope of more gains.
Many traders learned this the hard way when the crypto market experienced a sudden correction as it entered April. The sector likely reacted to the latest US manufacturing data for March, which showed the ISM Manufacturing PMI jumping from 47.8 to 50.3.
The spike signaled growth in the U.S. economy, leading the target rate possibility for a June rate cut below 50%, according to CME.
This forced crypto assets to pare gains since higher interest rates often discourage investors from riskier assets like Bitcoin. Overall, it’s bad news for memecoins, the riskiest of all assets, if Bitcoin keeps dropping due to macroeconomic factors.
Memecoins In The Red
Of all the altcoins, memecoins suffer the most during a market-wide dump since there is very little chance of the crypto tokens recovering. Memecoins are known to rely on hype and FOMO for their rallies.
To put things in perspective, 8 out of the top 10 memecoins (by market cap) suffered losses in the last 24 hours, according to CoinMarketCap data. The list includes Dogecoin, the favored memecoin of Elon Musk.
DOGE failed to rally despite a rise in speculations that social media giant X would accept Dogecoin as payment rose in the last week.
Other tokens, like PEPE, Dogwifhat, Floki, etc., continued their downtrend, dropping an average of 12.5% over the last seven days. The few tokens that show some life are barely a few weeks old and have the hype working in their favor.
Solana Craze Dying Out?
Moreover, Solana-based memecoins, launched in March faster than two catholic rabbits can multiply, are now coming down from their hopium-fueled rage trip (bull run), leading to the likely end of the memecoin frenzy.
One reason could be that investors are moving to other blockchain-based memecoins to seek more exposure and, possibly, better profits. Moreover, the whale transaction tracking account Whale Alert highlighted four transactions, which collectively transferred over $158 million in SOL to Coinbase.
Moving a token to exchanges is traditionally considered a bearish sign since it often results in a sell-off. Other options could be that the four transactions were a strategic move by the whales.
If a sell-off does occur, the resulting bearish pressure could irradiate the blockchain’s memecoin offerings, resulting in massive losses for users.
Another aspect of memecoin trading that most traders tend to ignore is the risk.
For instance, on-chain data provider Lookonchain noted a user who made about $550,000 while trading the Hobbes memecoin. Once the news goes viral, it would attract a flurry of traders to the Hobbes marketplace.
However, before striking it with Hobbes, the user had traded 36 other memecoins, profiting in only 10 of those trades and losing nearly $140,000. Though the user’s gains covered his losses, that may not always be the case.
As such, getting rid of the cat, dog, frog, rat, or duck-billed platypus-themed tokens from your wallet in case your dreams of millions cost you thousands.
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