The cryptocurrency community has been abuzz with the frenzy surrounding memecoins during this bull season. Within just one year of their public launch, Pepe and WIF have skyrocketed into the top 20 cryptocurrencies by market capitalization.
These memecoins have gained significant traction in the crypto leverage market, where traders can either go short or long on their prices. Interestingly, four out of the top 10 cryptocurrencies by open interest (OI) are memecoins, with Pepe (PEPE) leading the charge with an impressive $812.6 million in OI, accounting for nearly half of Solana’s (SOL) $1.7 billion in OI.
In addition to Pepe, Dogecoin (DOGE), Bonk (BONK), and Dogwifhat (WIF) have also made their way into the top 10. However, it’s important to note that Bitcoin (BTC) is still leading the chart with a staggering $11.1 billion in OI, followed closely by Ethereum (ETH) with $9.15 billion.
The open interest chart reveals a significant difference in OI from the top to the bottom. While Bitcoin’s OI stands at $11 billion, the tenth-placed Near Protocol (NEAR) has a mere $230 million in OI, highlighting the contrasting levels of interest among traders.
The recent surge in OI for memecoins can be attributed to their bullish momentum over the past few weeks. Pepe reached a new all-time high, while WIF soared to a multi-week high above $3.30.
Open Interest refers to the total value of pending derivative contracts that have not yet been settled. In futures contracts, both a buyer and seller are required to settle the contract. A contract is considered “open” from the moment it is initiated until it is closed by the counterparty. OI increases when new contracts are added and decreases when contracts are settled. Unlike trading volume, OI provides continuous data.
A growing OI indicates bullish momentum in the market as leverage traders open more contracts in anticipation of price movements.
Despite the surge in memecoin prices and the rise in OI, the funding rates for these memecoins remained negative across crypto exchanges. Funding rates represent the cost of holding a position in a perpetual swap or futures contract relative to the spot price of the asset. Positive funding rates indicate a bullish market sentiment, while negative funding rates indicate a bearish sentiment.
Overall, the memecoin frenzy has attracted significant attention in the cryptocurrency world, and the rise in OI reflects the market’s bullish outlook. However, it’s important to keep an eye on funding rates and other factors to gauge the overall sentiment and potential risks associated with these memecoins.