- Memecoins are regaining their momentum.
- It comes as several bullish signals flash for the market segment.
- But analysts warn that the rally could be halted at any moment.
Memecoins are back — for now anyway.
The entire market’s value has surged over 14% in the past seven days to almost $82 billion, according to data from CoinGecko.
Investor appetite has been piqued by easing geopolitical tensions, crypto laws being signed, and Bitcoin’s consolidating price, James Butterfill, head of research at CoinShares, the crypto investment firm, told DL News.
“As risk appetite improves across all asset classes, the combination of subdued Bitcoin volatility and investor demand for higher returns is beginning to push capital towards riskier altcoins,” Butterfill said.
The rally highlights a growing bullishness for digital assets. Investors’ optimism has driven Bitcoin as well as altcoins like XRP and BNB to new record highs. It also comes as Ethereum has climbed within spitting distance of breaking another record.
What are memecoins?
Memecoins, sometimes derisively referred to as shitcoins, are joke tokens that trade purely on speculations and have no intrinsic value.
They’re usually based on celebrities, online jokes, and odd news items, such as Peanut, the squirrel that became a MAGA symbol ahead of last year’s US election.
A combination of celebrity memecoins — including those launched by the Trump family — and the overall buzz around the crypto industry propelled the market’s value to over $137 billion in January, according to CoinMarketCap.
Following a number of scandals, including one involving a token connected to Argentina’s president Javier Milei, and the general pullback of the crypto industry, the memecoin market deflated to just under $40 billion in April.
“Many memecoins represent a complete ‘random walk,’ where the only real investment rationale is that if you’re not on the inside of the pump, you’re likely on the receiving end of the dump,” Butterfill said.
“For institutions, it remains extremely difficult to construct rational investment cases for memecoins outside of the top 20 assets by market cap.”
Bullish signals
There are several reasons behind the rally.
For one, while the controversial memecoin generator Pump.fun has lost market dominance to upstarts like LetsBonk and Bags, it did successfully raise $600 million in minutes during its July initial coin offering.
The bullishness is partly driven by investors betting that the tariffs Donald Trump threatened trading partners with won’t be as damaging as some expected when they were announced in April. This, Butterfill said, supports investors’ risk appetite.
This week also provided another potential boon to risk-on assets like cryptocurrencies: The expectation that the Federal Reserve will cut interest rates in September.
The market is counting on those cuts after consumer data showed that Trump’s trade war with the rest of the world hasn’t had as much of an impact as previously feared.
The CME FedWatch tool now shows a 100% chance of a 25 basis point cut in September, up from 84.4% on Tuesday ahead of the report.
The entire crypto market is up over 2% to a record value above $4.2 trillion over the past 24 hours.
But it’s not just digital asset purveyors who are euphoric. Both the S&P 500 and the Nasdaq have notched record high closes this week.
‘Still early’
It’s against that backdrop that the memecoin market has regained some momentum.
And it’s still early days, according to Alexia Theodorou, head of derivatives at Kraken, the crypto exchange.
She told DL News in July that Doge perpetual futures volume on Kraken doubled in that month, and that the memecoin’s funding rates are the highest they’ve been since the start of the year.
That puts “it firmly on track to challenge the all-time record we saw back in November during the US election cycle,” she said.
Most of the activity has so far concentrated on bigger memecoins, Theodorou said.
“This suggests we’re still early in the rotation, with risk appetite building but not yet spilling into the broader speculative fringe,” she said.
Potential pullback
To be sure, memecoins remain volatile and the pendulum could swing back at any moment.
While crypto is famous for its volatility, memecoins take it to another level.
“Any sharp pullback, like profit-taking after recent peaks, could trigger a rapid correction and we see this happen all the time,” James Toledano, COO at Unity Wallet, told DL News in July.
“If Bitcoin and crypto sentiment shift downward, memecoins which do lack fundamentals, would likely suffer sharper reversals. The biggest threat is always sentiment when it comes to memecoins.”
Eric Johansson is DL News’ interim managing editor. Got a tip? Email at eric@dlnews.com.
