Crypto: Memecoin Trading Spikes Briefly As Traders Cash In, Say Analysts

Memecoin trading volume briefly spiked to $5.6 billion on Monday, with analysts suggesting speculative momentum for memecoins may have now cooled.

Memecoin traders appeared to be locking in profits on Monday after a strong start to the year, according to analysts, with memecoin trading volumes spiking while memecoin marketcap fell.

Memecoin trading volume spiked to $5.62 billion on Monday, rising 106% from a day earlier, while memecoin market capitalization fell 6%, according to crypto data platform CoinMarketCap.

The volume has since dropped back down to $3.6 billion, down more than 24% for the day.

Vincent Liu, the chief investment officer at Kronos Research, told Cointelegraph a surge in memecoin trading volume alongside a falling market cap points to heavy churn rather than fresh capital entering the market and typically reflects profit-taking, short-term flipping, and capital rotation.

“In thin liquidity conditions, elevated activity can still push prices lower even as volume spikes,” he said. “The initial surge and subsequent drop in volume suggest speculative momentum has cooled.”

Memecoins saw a strong start to the year as their market capitalization surged from $38 billion on Dec. 29 to $47.7 billion by Jan. 5, before cooling in the following days.

Kadan Stadelmann, the chief technology officer of the blockchain-powered Komodo Platform, told Cointelegraph that gains in the sector are usually the result of speculation and are likely candidates for reversion rather than holding steady.

“The overall fundamentals of the memecoin market are poor and driven by speculation. This results in constant capital rotations between memecoins, causing price downturns in certain coins and appreciation in others,” he said.

Related: PEPE, BONK post double-digit gains: Are memecoins back?

Source: CoinTelegraph