Memecoins Slump in April, Layer-1s Resilient: Is Crypto Market Shifting?
Hedge funds are jumping on the meme coin bandwagon | Credit: Hameem Sarwar
Key Takeaways
- Memecoins have been the worst performing crypto sector in April.
- Layer-1s have been the best performing sector, falling less than BTC.
- Is a shift away from small caps and toward large caps underway?
In March, memecoins and gaming were the best performing crypto sectors, with the former increasing over 140%. With the exception of DOGE and SHIB, the baskets for these sectors comprise of small cryptocurrencies based on their market capitalization.
The outlook completely flipped in April, with memecoins being the worst performer, while large cap Layer-1s took the spotlight. This often occurs in market corrections, when investors move away from riskier investment and toward more well-established ones.
Memecoins Slump in April
The crypto market has corrected in April, and baskets from various narratives have also posted negative rates of increase. It fell over 23% since its yearly high in March, while BTC decreased by 18% before bouncing.
The narratives analyzed are Layer 1-s (orange), AI tokens (purple), the Cosmos ecosystem (orange), Gaming tokens (yellow), Decentralized Finance (DeFi) (blue), Liquid Staking (black) and memecoins (white).
The only one to significantly outperform the market and Bitcoin is the Layer-1 basket, which has fallen only 12%.
The second-best performer is AI, which has fallen by 20%. This relative strength can be partially attributed to the news about the ASI alliance merger. Interestingly, the worst performer is the meme coin basket, which has declined by 40%. This is a stark change to March, when memecoins soared over 140%.
All cryptocurrencies in the Layer-1 basket are part of the 12 largest cryptocurrencies ranked by their market capitalization. Considering their performance and the slump of smaller cap cryptocurrencies which make up the meme coin, Liquid Staking and DeFi baskets, it is possible that a shift toward large caps is underway.
Will Large Caps Take the Spotlight?
A method to determine where money is flowing is to look at charts versus BTC. Since BTC has already reached an all-time high, money could flow out from it and toward altcoins that provide higher returns. Those that perform well against it are often the ones moving toward a new all-time high.
The Layer-1 basket consists of ETH, BNB, SOL, ADA and AVAX. BNB has actually increased incrementally in April, while ETH has fallen only 4% against BTC. Conversely, ADA, SOL and AVAX have all fallen over 20%.
ETH and BNB are the two largest cryptocurrencies in this basket. ETH trails only BTC at #2, while BNB is at #4. The stablecoin USDT ranks #3, so BNB is the second largest altcoin. On the other hand, the worst performer, AVAX, is the lowest ranked cryptocurrency in the basket at #12.
The chart further supports the idea that large caps are taking the spotlight and could be the category to lead once the crypto market bottoms. If this holds true, BNB and ETH will be the best performers in the second quarter of 2024.
Money Rotation Toward ETH and BNB
ETH and BNB have been two of the most resilient cryptocurrencies during the ongoing crypto market correction. This is especially visible in BNB’s case, which has outperformed BTC.
If a shift toward large cap Layer-1s such as ETH and BNB happens, smaller tokens in their ecosystem could be beneficiaries. This could be especially useful to Ethereum Layer-2s such as MATIC, which has severely underperformed in 2024.
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