Are traders ditching Bitcoin for memecoins now? Data shows…

• Memecoins thrive when Bitcoin approaches exhaustion levels.
• Currently, investors are focusing on short-term speculation to maximize their returns.

Typically, a good trading strategy involves entering positions at lower prices, allowing traders to maximize gains when the market recovers, rather than focusing on timing the market top.

Amid Bitcoin-led volatility and crashes in high-cap tokens, AMBCrypto sees a pattern where traders might be shifting to memecoins, capitalizing on fear-driven price drops.

Most memecoins in green

In the past week, Bitcoin faced turbulence as bulls struggled to defend the $62K support level, ultimately retreating near $60K. 

Currently trading at $60,820, the $61K mark is now under scrutiny as the next potential support, but holding it may prove challenging.

In contrast, about 70% of the top 10 memecoins by market cap ended in the green during this period, with NEIRO leading the pack with an impressive surge of around 100%.

This leg up suggests that memecoins may be allowing traders to maximize gains in a risk-on environment, as confirmed by the chart below.

Source : Glassnode

PEPE, the third-largest meme token by market cap, has been flowing back into holder wallets, indicating a potential market bottom.

Historically, significant buyouts of PEPE have coincided with its price hitting a floor, often resulting in a surge the following day. If this trend holds, PEPE could be primed for a correction.

This pattern isn’t exclusive to PEPE; it applies to other meme tokens as well. Traders buy low-cap assets when market sentiment is uncertain, allowing them to sell when high-potential tokens begin to recover. 

Therefore, if BTC manages to hold its support without any bearish pressure, these memecoins might see a wave of profit-taking. Conversely, a rising dominance in memecoins could indicate that Bitcoin isn’t close to breaking out just yet.

Investors might be looking for short-term opportunities

While selective memecoins are gaining independence from Bitcoin’s volatility, their initial momentum often spikes during BTC’s bull rallies.

During each bull cycle, memecoins tend to mirror Bitcoin’s dominance, achieving similar daily gains. However, as the cycle progresses, memecoins often see their daily gains double those of BTC, primarily due to BTC’s extreme volatility.

As fears of a reversal rise, traders often move their capital from Bitcoin to memecoins for better returns.

Therefore, last week, as BTC retested the $63K ceiling, many traders exited, fearing a retracement. Meanwhile, memecoins experienced significant surges, highlighting short-term opportunities for traders.

Source : Coinalyze

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According to AMBCrypto, memecoins also influence BTC’s price action, particularly toward the end of a cycle. As a result, the next “memecoin cycle” may align with BTC hitting a key resistance level around $66K.

Until then, investors are likely to engage in speculative trading for short-term gains.