Memecoin Trading Volume Hits $16 Billion, Sparks Liquidity Crisis in NFT Market

Memecoins are gaining significantly, with trading volumes rising fivefold to US$16 billion, drawing retail interest.
In contrast, the NFT market faces a liquidity crisis, with daily volumes collapsing to around US$300k and only 4,000 active users.
The preference for memecoins, seen as fairer than VC-backed tokens, is impacting other asset categories like NFTs.
Despite this, new developments like Yuga Labs’ ApeChain could potentially rejuvenate interest in the NFT sector.

Memecoins are continuing to have a bit of a moment, with some of the biggest gainers coming from that genre. And while Bitcoin and Co are slowly making their way up, signalling interest by institutional investors, retail investors seem more into the memecoin game right now.

But, according to Alvin Kan, Chief Operating Officer at Bitget Wallet, this preference of memecoins has come at a cost to another asset category: NFTs.

Memecoin Rush Drains NFT Liquidity

In an emailed statement, Kan said that the “current state of the NFT market is indeed concerning, especially when we compare it to the peak trading activity in February 2023”.

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He noted that despite Bitcoin making its way toward US$70k, NFT trading volumes have collapsed. There’s now just around US$300k (AU$450k) in daily volume and 4,000 active users.

That’s a striking contrast to Solana’s daily memecoin volume of US$100 million (AU$150 million).

Kan explained that the NFT sector clearly faces a liquidity crisis and needs to “regain momentum”:

This sluggishness indicates that NFT projects, including Yuga Labs, are facing a liquidity crisis and are actively seeking new strategies to attract users. The NFT sector clearly needs to regain momentum, as current engagement levels reflect a bear market sentiment.

Alvin Kan, Bitget Wallet

Fittingly, Yuga Labs has just launched its ApeChain blockchain which has seen the APE coin rally by over 100%. This has led some to speculate whether we may see renewed interest in NFTs.

Memecoins Outperform Altcoins

Nevertheless, as mentioned, memecoins are surging in 2024. And the trading volume of these ‘alt-Altcoins’ is up more than fivefold, currently at US$16 billion (AU$24 billion) from just US$3 billion (AU$4.5 billion) in 2023.

Data from Kaiko shows that the share of memecoins is also increasing. Compared to altcoins, that share went from 7% in the beginning of 2023 to currently around 25% – 30%.

Memecoin share in top 50 altcoin volume, source: Kaiko

The analysts at Kaiko believe this increased appetite for memecoins is largely a fairness issue.

They wrote that investors often prefer memecoins for their perceived fairness compared to VC-backed tokens, which often reserve significant portions of their supply for teams and investors and launch at inflated valuations.

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Memecoins typically feature fully circulating supplies without future unlocks, facilitating more natural price formation.

Meme tokens usually have fully circulating supplies with no future unlocks, allowing for more organic price discovery. Overall, their potential for growth and the hype surrounding them have attracted retail communities in an increasingly competitive environment.