Memecoin Hype Cools Down: Bitcoin Users Rejoice, Investors Cautious

The memecoin frenzy that has gripped the cryptocurrency market appears to be waning, with prices of popular coins such as PEPE in retreat. While this may be good news for Bitcoin users, it may not bode well for investors, as crypto markets continue to correct.

Last week, the memecoin minting frenzy clogged up the Bitcoin network, but it has since abated. The frog-themed PEPE memecoin, which was the center of attention, has lost 60% since its peak earlier this month.

PEPE's surge from obscurity to an all-time high of $0.00000431 on May 5 was impressive, but it has since dropped more than 60% to current prices of $0.00000172. The memecoin is down 4.5% on the day, while markets have gained 1.7%, suggesting that memecoin fever is over for the time being.

The coin's market value peaked at $1.6 billion before retreating to current levels of around $720 million. Speculators often sell some of their Bitcoin and Ethereum holdings for high-risk memecoins, and this appears to be what has happened recently, as the top two fall back following several months of gains, according to Bloomberg.

Commenting on PEPE, a trader at digital-asset manager Arca, Kyle Doane, said, "At the end of the day, it's a lottery ticket," before adding, "That type of trading is basically a centralized casino."

The memecoin craze could likely signal a local market top, which is often followed by multi-month drawdowns for Bitcoin and its brethren. A similar scenario played out in May 2021 when Dogecoin (DOGE) led the memecoin boom.

Joe Rotunda, director of the Texas State Securities Board enforcement division, warned that "when the buzz disappears and the hype dissipates, the value tends to plummet, and investors can suffer significant losses." Cashing out of memecoins can also be problematic due to liquidity issues. However, PEPE still has around $360 million in daily trading volume.

The Bitcoin network has taken a breather now that the meme coin-minting madness is waning. The number of pending unconfirmed transactions in the mempool has fallen to 242,837 as transaction fees stabilize.

Daily transactions still remain high, above 600,000, according to BitInfoCharts data. Fortunately, average transaction fees have fallen back down to around $3.76. On May 8, fees spiked to over $30 as demand for block space skyrocketed during the height of the BRC-20 and Ordinal inscription craze.

BTC prices were trading up 1.4% on the day at $27,191 during the Monday morning Asian trading session.