Why Memecoin Frenzy is bad for Bitcoin

Information reveals that Dogecoin and different meme cash are getting quite a lot of consideration on social media, an indication that is probably not preferrred for Bitcoin.

The highest 6 memecoins have seen their social dominance rise these days

In a brand new publish on

The ‘social dominance’ right here refers to an indicator that principally tells us concerning the mindshare {that a} explicit asset or group of cash at present has on the main social media platforms.

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Extra formally, the worth of the metric is calculated as a share of the discussions concerning the highest 100 cryptocurrencies by market capitalization that the given asset makes up for.

To find out this, the indicator collects posts/threads/messages obtainable on 5 platforms: X, Reddit, Telegram, 4Chan and BitcoinTalk. They’re then filtered by the related key phrase.

Notice that for measuring ‘dialogue’ the metric merely counts these posts that include a minimum of one point out of the merchandise, slightly than counting the mentions themselves. The benefit of this system is that outliers with tons of of entries don’t distort the information.

Right here is the graph shared by the analytics agency displaying how social dominance concerning three subsections of the market has modified in current months:

The three segments in query are the highest six tier 1, the highest six tier 2, and the highest 6 memecoin. “Layer 1” networks discuss with the first blockchains that present their very own safety, corresponding to Bitcoin and Ethereum. Networks like Polygon which can be constructed on prime of those chains are often known as ‘layer 2’. Naturally, the meme cash discuss with the favored meme-based tokens, corresponding to Dogecoin and Shiba Inu.

The chart reveals that the social dominance of layer 1, prime 6, had skyrocketed a couple of days in the past on account of Bitcoin setting a number of new all-time highs (ATHs).

BTC has continued to discover new highs since then, however it seems that the main target of social media customers has shifted elsewhere, with the social dominance of the tier 1 giants witnessing a cooling off.

The indicator has remained comparatively low for the tier 2 cash throughout this era, implying that merchants haven’t cared a lot about it these days. The belongings which have attracted all the eye are the memecoins, which have simply seen their dialogue attain a brand new excessive.

The rationale behind this excessive curiosity in these tokens is the spectacular rally that Dogecoin has skilled over the previous week, leaving the remainder of the sector within the mud after gaining over 104%. Nevertheless, if historical past is something to go by, this outperformance is probably not such a great factor.

“Traditionally excessive social dominance in speculative belongings tends to point greed and emotional buying and selling,” Santiment notes. Belongings within the cryptocurrency sector have a tendency to maneuver reverse to the general public’s views, so greed is one thing that has typically led to prime costs for the market.

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As such, there might have to be a shift in focus away from Dogecoin if Bitcoin and others are to proceed their bull run.

Dogecoin worth

On the time of writing, Dogecoin is buying and selling round $0.398, up greater than 2% within the final 24 hours.

Featured picture from Dall-E, Santiment.web, chart from TradingView.com