Dogecoin’s Decline: What Does It Mean For The Meme Coin Market?

The tariff threats posed by US President Donald Trump had spread global panic. Cryptocurrencies took the brunt of this unpleasant announcement quite badly. While Bitcoin dropped by 10% and Ethereum by 20% over the week following the announcement, the poster child of meme coins, Dogecoin, fell by a much more significant 23%.

This decline raises a question: Do meme coins decline more significantly and rapidly during a bearish run compared to other cryptocurrencies?

The Market Crash

The market crash of October 10 was a significant event, as multiple currencies dropped double-digit percentages within a short period of time.

Another reason that made this crash appear on major headlines was the liquidation count based on trading positions. In a 24-hour window, nearly 1.54 million traders worldwide were liquidated, with the total value of liquidations exceeding $10 billion.

This macroeconomic pressure was most brutal on Dogecoin as it fell by a significant 23% in a week, surpassing the major coins on the market like Bitcoin and Ethereum.

Factors That Caused The Crash

Tariff Announcement

Traditionally, when world leaders impose high tariffs on other nations, risky assets and stocks tend to take a plunge in the market.

This was the case with Dogecoin, when President Donald Trump announced a possible 100% tariff application on China, the market was in shock. Amidst the chaos and confusion, Dogecoin took a plunge; the characteristic of this plunge was that it was a steep plunge, steeper than what most analysts could estimate.

This raised questions about the validity of meme coins in general. Their inherent nature of sentimental value and lack of real-world applications soon put them in a risky position.

Why Dogecoin

Several people are wondering why Dogecoin experienced such a devastating drop. The experts in the crypto industry, however, seem to have predicted this outperforming fall.

Many experts suggest that it is the emotional swings that have caused a crash of this proportion. Meme coins like Doge are very susceptible to such emotional swings, as per Maja Vujinovic, who is the co-founder and CEO at FG Nexus.

The lack of use cases was yet another reason for the steep drop, as the coin itself does not have any intrinsic value. This amplifies the earlier statement about sentimental swings.

Dogecoin may be going through an identity crisis at the moment. Even though it was launched as a joke, it now has a significant position on exchanges all over the world. It is here that we must ask whether Dogecoin is merely another meme coin or something more deserving of our attention.

Caught between the crisis of a crash and that of identity, Dogecoin is struggling to stay afloat.

Implications Of The Crash On Meme Coins

The flash crash of October 10th should serve as a lesson in trading cryptocurrencies. When we have a closer look at the crash and its aftermath, we see a pattern among meme coins that is quite alarming.

With no particular use cases backing them, meme coins often find their market capitalization courtesy of market makers. During events like the flash crash, these market makers pull out of the market, causing liquidity to drop and consequently prices to plunge.

In the case of meme coins, what was once born as a joke has turned into millions of dollars worth of assets with the help of celebrity endorsements, trend setters, and politicians. However, by the inherent nature of their surge, they are highly volatile assets that can be susceptible to huge market swings.

The hype cycles, internet trends, and fan following, which are the sole backers of meme coins, can vanish in an instant. This makes them a gamble when it comes to systematic trading.

With pump-and-dump schemes plaguing the meme coin sector, the lack of intrinsic value, and internet-based speculative price swings, the future of meme coins seems bleak for systematic investors.

Conclusion

For an asset to be deemed worthy of tradable status requires more than hype and branding. Assets that lack intrinsic value are inherently susceptible to price swings and loss of liquidity.

These characteristics and the recurring patterns of drops are not helping the case of meme coins. Sooner or later, the market may decide their validity to be largely speculative, and they may fade from existence. However, there are chances that a follower backup can help them stay afloat. But with losses of titanic proportions, the chances of this happening are thin.

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