Meme coin prices have surged 4.7 percent to $109 billion, a rebound after an early week slide on Saturday. Popular meme coins like Shiba Inu, Bonk, Pepe and others stage sharp recoveries, but analyses warn the rally may be short-lived.
Shiba Inu was leading the way, surging 12.6% to reach a new intraday high of $0.00002397. The Solana ecosystem’s biggest meme coin, Bonk also came in at a 20% jump to $0.000032. At the same time, Pepe, along with less-known meme coins such as Dogwifhat and Pudgy Penguins, went up by more than 15%.
Meme Coins Rally Amid Potential Dead Cat Bounce
That came following a Bitcoin plunge earlier this week, which saw the main cryptocurrency drop from $108,200 to $97,000 and a wider crypto sell-off. Before this recent recovery, the total market capitalization of cryptocurrencies went down to $3.37 trillion from $3.7 trillion.
During the revival of the meme coins, the macroeconomic data from the United States was positive. But the Personal Consumption Expenditure (PCE) report, a favorite inflation gauging eyesore for the Federal Reserve, showed signs of slowing inflation. PCE headlines were less firm in November, down from 0.2% in October to 0.1%, and Core PCE dropped from 0.3% to 0.1%.
Friday the news was good for stock markets. Investors took the data as a sign that inflationary pressure is easing and bought into the Dow Jones (+1.18%), S&P 500 (+1.10%), and Nasdaq 100 (+0.85%).
Earlier in the week, the Federal Reserve had taken a hawkish stance. Interest rates were cut a further 0.25 percentage points to one percentage point in total for the year, the central bank said. Nevertheless, it continued to warn that inflation had yet to recede, and that two further rate cuts were coming in 2024.
Core CPI remained unchanged at 3.3 percent while the headline Consumer Price Index (CPI) increased to 2.7 percent. The Fed also said it was concerned about how President-elect Donald Trump’s tariff proposals could lead to inflationary pressures.
The memorandum coin rally has inspired a bullish wave in the market, but analysts warn that the gains could be a dead cat bounce (DCB). A DCB is a temporary rise in asset prices during a wider downturn, which precedes further falls in asset prices.
Earlier this month we saw the pattern in Shiba Inu’s price movements. Following its 15% drop on Dec. 9, the coin flirted with a 6% rally on Dec. 11 only to resume the decline to the Dec. 20 low of $0.00001855.
On the charts, meme coins like Shiba Inu and other meme coins are adding to the bearish signal with the formation of the head-and-shoulders (H&S) patterns. A reversal usually precedes the formation of this type of technical indicator, which includes a (head) peak between two smaller (shoulder) peaks and a (neckline). With Shiba Inu, the neckline is at $0.00002280, and if prices fall further below that point, further declines might follow.
Despite being in a rebound, meme coin investors are advised to do so with caution. But the broader cryptocurrency market stays in the red, alongside meme coins’ potential for more declines.
Market conditions remain macroeconomically uncertain, with indications of a reversal from technical indicators, and the upcoming weeks may warrant traders to be on alert for heightened volatility.
