Community coins only seem to increase when the community forgets them
- Memecoins on the rise
- Inverse correlation
According to the most recent data provided by Santiment, “memecoins” like SHIB, DOGE and ELON evolve with an inverse correlation with the indicator called “Social Dominance”. Once the indicator hits new lows, the price of the aforementioned coin increases rapidly.
Memecoins on the rise
Overall, memes-based and community-driven pieces have been the trend in recent months with Shiba Inu posting a 490% price increase, Doge rising 28% last month and Elon Musk posting an increase. ridiculous price of 889% in the last month alone. Either way, the community is the primary fuel for these coins rather than institutional investors or use cases.
Although trading pairs for such coins remain extremely volatile, there is no proper way to analyze them using financial or technical analysis, leaving traders with on-chain and market metrics like those presented by Santiment.
On the graph provided by the service, users can see the price of each mentioned coin and the social dominance indicator. Once communities “forget” the coins and the indicator begins to drop, their price drops rapidly and only rises when the whales buy them back.
While the indicator actually has an inverse correlation with the price of these assets, it only shows common accumulation and distribution cycles in which investors only get assets back when retail traders are less interested. .
But once the community catches the hype and starts buying, the big addresses take profit and put selling pressure on the asset, which leads to a quick comeback. As the coin loses its monetary value, it also loses the interest of the retail trader.