Memecoins Surge in Popularity amid High Speculation
The year 2021 seems to be favouring the memecoins as online discussions surrounding these high-risk tokens have skyrocketed, registering a year-to-date high. This surge of interest is a clear departure from earlier in the year when memecoins failed to attract much attention. The analytics company Santiment has recorded this growing fascination for these tokens, indicating a significant shift in trader behaviour.
From Bitcoin to Memecoins
Two weeks ago, talks around Bitcoin and layer-1 protocols were at their peak. This was triggered by the market volatility caused by the blanket tariffs introduced by the Trump administration. However, conversation trends have since pivoted towards high market cap memecoins. The Santiment marketing director, Brian Quinlivan, discussed this transition in his blog post dated May 1. According to Quinlivan, traders are now more inclined towards adopting a betting mentality in lieu of a calculated investment approach. This trend underscores the fact that traders are increasingly participating in investments based on speculations and chances for short-term gains rather than long-term investment strategies.
Are Memecoins overshadowing Bitcoin?
Quinlivan stated that although the overall cryptocurrency market experienced a growth of 10% in the past eight days, Bitcoin experienced a smaller gain of 7%. This divergence points towards the possibility of speculative assets preoccupying investor interest. He added, “When Bitcoin initiates a rally and subsequently moves sideways, investors generally start assuming bigger risks in hopes of reaping even higher returns through more speculative and risky purchases.”
Dogecoin Clings to Positive Attention
Dogecoin, one of the better-known memecoins, has recently seen a significant rise in favourable crowd sentiment following a major decline in crowd interest in April. Applications for Dogecoin exchange-traded funds processed in the US have driven this trend. However, the decision on these applications by the Securities and Exchange Commission (SEC) has been postponed until mid-June. Quinlivan notes, traders appear to be cautiously awaiting these developments to unfold.
Surge in Memecoin Activity after Trump’s Memecoin Launch
Major activity around memecoins began after the launch of a memecoin linked to US President Donald Trump, which coincided with an increase in trading volume on Pump.Fun, a memecoin launch platform. However, there has been a cooling off period as the novelty of memecoins began to fade. Bobby Ong, the founder of CoinGecko, stated in a report that memecoin investor interest had waned following several unsuccessful token launches. Therefore, the volatile and fickle nature of the memecoin market continues to make these tokens a risky investment for traders.
Conclusion
To sum up, the surge in memecoins can lead to increased volatility and risk in the crypto market. The shift from a calculated investment strategy to a gambling mindset is a notable trend, with memecoin activity often corresponding to online discussions and crowd sentiment. While some argue this signals an increase in speculative trade, others suggest it reveals the true nature of the crypto market.
Please note: Investing in cryptocurrency, particularly memecoins, involves risks. As with any investment, it is essential to do thorough research and consult with a financial advisor before making any decisions.
