Is the meme game over?

Memes have been the heartbeat of this cycle. The dog in the hat and the frog have had a great time together, and they continue to break records and create new highs. However, with DeFi and other fundamental narratives retaking the lead, is it game over for memes? Well, let’s look at some indicators to find out.

Meme Dominance

The memecoin’s dominance in the major altcoin market has been declining. In fact, as shown in the chart below, it has recently seen a sharp decline. Some analysts in the industry believe that similar to previous cycles, the “gambling” narrative will soon fade.

Ki Young Ju of CryptoQuant said,

"Guys, pack up, it's all over."

Source: Twitter

Can Meme still grow?

DonAlt, a pseudonymous analyst who has accurately predicted market bottoms and tops in the past by going against the trend, is not a fan of memes by nature. Despite his extremely contrary stance, he still holds the same view. Regarding WIF, he recently said,

"It looks bad. No matter how biased you are, call me biased, a decline is a decline."

Source: Twitter

He did enjoy his share of short-selling profits when the token’s value began to fall. However, he has since exited the market, claiming that he did not want to “kill” the token.

Despite DonAlt’s extremely pessimistic stance, he did not rule out the possibility of another rally for memecoins. If Bitcoin eventually reverses its trend, memecoins will follow suit.

However, if the bear starts howling again, meme holders will have to buckle up. In the words of DonAlt,

“I’m not disagreeing with that, if BTC breaks out of this range to the upside your [meme] token is going to do well, but the tail end is brutal.”

Spotlight on Solana

Most of the memes put into use during this cycle are based on Solana . In fact, the amount of coins minted on this chain has exceeded the amount minted on other chains such as BNB, Ethereum, and Polygon.

If one wants to draw an analogy, then it would not be wrong to say that Ethereum NFT dominance in the last cycle was replaced by Solana meme coin dominance in this cycle. In fact, this has become the preferred chain for retail users and meme coin traders in this cycle.

A recent report from Pantera Capital states:

“Solana extracts 85% of all new tokens appearing on DEXs by May 2024, up from 50% a year ago. The growth of Solana-based tokens reflects its strength in retail usage, driven by memecoin activity.”

Source: Pantera Capital

As the meme hype slowly cools, will Solana bear the brunt? To a considerable extent, yes. However, Solana does have fundamentals to fall back on.

Several consumer-facing applications, DePin projects, content distribution applications, CLOB-based DEXs, and gaming applications are being built on the blockchain. Therefore, even if the Meme fever fades, Solana will not be left out.

Solana’s future is arguably protected. According to Pantera Capital:

“Solana is now a major contender for the future of blockchain development. Solana’s overall architecture has a product roadmap focused on optimizing each component of its own blockchain, similar to Apple’s approach to vertically integrating the hardware and software stack in macOS.”

Politi-Fi meme coins will rise again

The Politi-Fi meme coin is expected to be in the spotlight again at the end of this month. The debate between US President Joe Biden and presidential candidate Donald Trump will take place on June 27.

The coin toss has determined the podium placement and the order of closing remarks. As debate day approaches, a volatile influx of Politi-Fi meme coins, including Jeo Boden [BODEN], Doland Tremp [TREMP], Super Trump [STRUMP], MAGA [TRUMP], etc., can be expected.

Bitfinex analysts said that discussions around capital gains tax in general and cryptocurrency tax policy in particular could have an impact on the market. They said:

“‘Politi-Fi’ tokens could see significant movement during and after the debates depending on how they perform, as these tokens themselves have become speculative assets with respect to the election outcome.”

So, the Meme season is not over yet, and volatility is expected at various stages until November.

Meme Liquidity

Despite losing its dominance, it is interesting that the liquidity of Meme coins is currently at its peak. According to Kaiko data, the combined 1% market depth of DOGE, SHIB, PEPE, WIF, BONK, GROK, BABYDOGE, FLOKI, MEME, HarryPotterObamaSonic10Inu, and HarryPotterObamaSonic has recently created a record high of $128 million.

Source: Kaiko

As a rule of thumb, the higher the liquidity, the healthier it is, as large trades can be executed without worrying about the price being affected. In retrospect, this tightened the bid-ask spread. However, Meme took a different path.

The cost of trading emojis remains high. On most exchanges, the bid-ask spread is above 2 basis points, supporting the above statement. Kaiko’s report emphasizes that this is a double-edged sword.

“While more market makers are venturing into providing liquidity for these tokens, they are still considered risky due to their high volatility.”

Source: Kaiko

Market participants haven’t completely stopped trading Meme. They’re just being cautious. Despite the drop in dominance, liquidity is still pouring in, suggesting the token hasn’t been abandoned.

The rule is to never get too obsessed with your meme and always keep in mind how intensely they might sell off eventually. Play with fire like a trader, but make sure to walk out with profits and not burn your fingers.