Meme Coins Face Dual Threat: Market Manipulation and Liquidity Issues

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Since Dogecoin’s debut in 2013, the meme coin market has seen significant growth, reaching a total market cap of $60 billion by June 2024.

Larger holders or whales can significantly impact the token’s price by making large trades, causing volatility. Furthermore, if a small number of addresses hold most of the tokens, liquidity issues can arise. This is particularly true if the same addresses also control the liquidity provision on decentralized exchanges.

For the uninitiated, this metric assesses the distribution of tokens among different addresses. Such centralization poses risks like potential market manipulation, liquidity challenges, and increased investor caution, all of which need careful consideration when evaluating these “joke” tokens. This shift reflects a recent investor preference toward newer meme coins. There are several factors at play such as growing communities, blockchain ecosystems, as well as the potential for higher returns.Correspondingly, the high futures open interest reflects the massive market footprint of these coins and suggests increased speculative trading. For instance, Dogecoin’s open interest hit a record of $1.8 billion recently, while that of PEPE surged nearly 50% to $850 million in May.

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