The crypto market's biggest meme token, Dogecoin (DOGE), has recently started to attract short bets amid a general decline in the meme sector. This shift in sentiment indicates a bearish mood in the market, which may spell worry for the meme sector. Here are the key points and trends that highlight the decline in trading activity and the shift towards short positions:
Dogecoin Funding Rates Turn Negative
Funding rates for Dogecoin have turned negative, indicating a bearish mood in the market. Funding rates are periodic payments made by traders based on the difference between prices in the futures and spot markets. The rates have been declining continuously, reaching levels previously seen in October 2023. This indicates that traders are now taking short positions on the token, expecting its value to decrease further.
Open Interest Decreases
Open interest, or the number of unsettled futures contracts, has decreased significantly. From nearly $800 million on Monday to $611 million as of Thursday, this decline indicates a drop in demand for the tokens. This decrease in open interest further supports the notion that traders are taking short positions on Dogecoin.
Meme Coin Sector Loses Value
Tokens across the meme coin sector have recorded losses of as much as 40% over a seven-day period. This decline in value is attributed to traders cautioning a move away from riskier tokens to bitcoin and stablecoins. The meme coin frenzy, which had been driving the market, appears to be easing.
Bitcoin's Influence
The decline in meme coins can also be attributed to the recent performance of bitcoin (BTC). Bitcoin prices have suffered in the past few weeks amid $2 billion in sales from large holders, net outflows from U.S.-listed exchange-traded funds (ETFs), and dollar strength. This decline in bitcoin's value has led to a broader sell-off in the crypto market, including meme coins.
Market Trends
The meme coin frenzy, which had been driving the market, appears to be losing steam. Market trends suggest that the days of meme coins mania may be over. Particularly, Dogecoin, Shiba Inu, and PEPE have all experienced a week-long downturn, with declines of 13.1%, 14.1%, and 7.9%, respectively.
Shift to Fundamentals
The focus has now shifted from gambling to fundamentals. Ki Young Ju, the founder and CEO of CryptoQuant, explained that the focus has shifted from speculative trading to focusing on the fundamentals of the tokens. This shift indicates that investors are becoming more cautious and are looking for more stable investments.
Conclusion
The decline in trading activity and the shift towards short positions on Dogecoin indicate a bearish mood in the market. The meme coin frenzy, which had been driving the market, appears to be easing. The recent performance of bitcoin and the broader crypto market has led to a sell-off in meme coins. As the market trends suggest, the days of meme coins mania may be over, and investors are now focusing on the fundamentals of the tokens.
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