Most meme coins experienced a notable rebound on Saturday, December 21, after a tumultuous week that saw their prices plummet. The collective market capitalization of these coins surged by 4.7%, reaching a total of $109 billion.
Shiba Inu (SHIB) led the charge with a 12.6% increase, peaking at $0.00002397. Bonk (BONK), the standout meme coin within the Solana ecosystem, rose by an impressive 20%, hitting $0.000032. Other favorite meme coins such as Pepe (PEPE), along with Dogwifhat and Pudgy Penguins, also enjoyed significant gains, soaring over 15%.
This resurgence came on the heels of a sharp decline in Bitcoin (BTC), which fell from $108,200 to $97,000, triggering a wider sell-off across many altcoins. The overall cryptocurrency market cap dropped from a staggering $3.7 trillion to $3.37 trillion, leaving many investors anxious.
The positive movement in meme coin prices can largely be attributed to encouraging findings from the U.S. Personal Consumption Expenditure (PCE) report. This report, which the Federal Reserve closely monitors as an inflation indicator, revealed a drop in the headline PCE from 0.2% in October to 0.1% in November. Similarly, the Core PCE decreased from 0.3% to 0.1%, suggesting a slow down in inflation across both urban and rural areas.
American stock markets reacted positively to these PCE figures, with the Dow Jones, S&P 500, and Nasdaq 100 all climbing—up by over 1.18%, 1.10%, and 0.85%, respectively. These rises come just a few days after a decisive Federal Reserve meeting prompted a sell-off in risky assets like stocks and cryptocurrencies. The Fed had recently decided to reduce rates by 0.25%, contributing to a cumulative cut of 1% for the year, while indicating that more rate reductions could be on the menu in 2024.
Despite the bounce in prices, caution should be exercised. There’s a real possibility that the upswing could just be a classic dead cat bounce (DCB), where declining asset prices temporarily rise before ultimately continuing their downward trajectory. For instance, Shiba Inu experienced a 15% dip on December 9 and a further 1% drop the following day. It managed to recover by 6% on December 11, only to then tumble again to a low of $0.00001855 by December 20. Such price movements highlight the potential for a disastrous pattern known as a DCB.
Adding to the concern, some coins, particularly Shiba Inu, are showcasing a head and shoulders chart pattern—a recognized bearish reversal formation consisting of a head, two shoulders, and a neckline situated at $0.00002280. This signals a likely continuation of its downward trend.
Investing in meme coins like Shiba Inu, Bonk, and Pepe may have been influenced by a wave of investors looking to capitalize on lower prices after several days of losses. However, it is essential for all investors to remain vigilant and well-informed, as the landscape for these coins can shift dramatically in a short span.
