Memecoins like Dogecoin (DOGE), Dogwifhat (WIF), and Pepe (PEPE) are among the worst-performing cryptocurrencies today, highlighting a noticeable waning of the earlier enthusiasm that propelled the sector.

Pre-halving correction fractal

Prima facie, the decline across the top joke cryptocurrencies is part of a pre-halving dump across the crypto market.

Top digital assets, including Bitcoin (BTC) and Ether (ETH), have recently pulled back from their yearly highs as traders secure profits ahead of the Bitcoin Halving 2024, prompting similar strategies in the memecoin sector. 

That is akin to how memecoins reacted ahead of Bitcoin's previous halving in May 2020, with DOGE's price dropping by over 22.5%.

There exists a strong positive correlation between Bitcoin and top memecoins. For instance, BTC's daily correlation coefficient versus DOGE was 0.82, showcasing strong possibilities of DOGE's price trends mirroring BTC's in the coming days. 

Steno Research projects that Bitcoin may experience a pattern similar to its 2016 halving. It anticipates a continuation of selling pressure for up to four months following the halving. This "sell-the-news" mood is further depreciating memecoin sector valuations. 

Memecoin trading volumes are crashing

The memecoin sector's correction accompanies strong declines its weekly trading volumes, according to data resource Dune Analytics.

Notably, the memecoin transaction flows across all blockchains, including Ethereum and Solana, have dropped collectively by 88% from its recent top of roughly $1 billion. This suggests that traders' interest or confidence in the sector has waned lately.

The decline in trading volumes across the memecoin sector has accelerated further amid reports of Solana outage. Notably, roughly 75% of all transactions on the network failed during March and early April sessions, primarily involving activity brought by the recent memecoin mania.

Related: Solana devs target April 15 for failed TX fix — It’s ‘not a design flaw’

Solana has become the primary blockchain for retail users and memecoin traders, with trading volumes on its decentralized exchanges rising by more than 300% in Q1 2024 compared to the previous quarter, noted Peter Horten, a researcher at data analytics platform Messari.

But in recent weeks, Solana's DEX volume trend has shifted downward, as shown below.

This lower DEX activity has preceded a decline in most of the top Solana-based memecoins.

De-risk mood amid strong U.S. numbers

Increasing bets on the delay in interest cuts from the U.S. Federal Reserve—in the wake of robust U.S. labor data and persistent inflation—have also boosted selling sentiment in the crypto market, particularly affecting memecoins, which are among the most profitable assets worldwide so far in 2024.

According to CME data, interest rate futures traders' expectations have significantly shifted. Approximately 81% now wager that the Federal Reserve will keep interest rates steady at 500-525 basis points in June compared to around 60% earlier in April.

Assets that yield, such as U.S. Treasuries, become more appealing compared to non-yielding counterparts like cryptocurrencies during higher interest rate periods. Consequently, this shift diminishes the appeal of riskier investments, including memecoins.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.