Memecoin Trading Driven by Short-Term Speculation, Analysis Finds

On-chain data shows that short-term traders are the main drivers of activity for most memecoins. Dogecoin has the largest number of short-term traders on its network, with 110,000 active traders. DEGEN, a reward token for the Farcaster Degen channel, has about 23,000 short-term active traders.

Interestingly, DEGEN’s 23,000 active short-term traders is the same as the number on the Shiba Inu network, even though Shiba Inu has a market cap ten times larger than DEGEN. These top three memecoins—DOGE, DEGEN, and SHIB—are far ahead of other projects in the memecoin space in terms of short-term trader activity.

Available data indicates that several mid-sized memecoin tokens have around 4,000 active traders. This category includes coins like Coq Inu, Turbo, Mog Coin, and MAGA.

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This data supports the long-held view that memecoin fans are mostly speculative, investing in these assets to capitalize on short-term price swings and take profits quickly. This explains the volatile nature of most memecoin tokens, especially during bull markets.

Crypto traders and investors use this kind of on-chain data to make informed investment choices. For example, understanding that most memecoin traders prefer short-term strategies could encourage new investors to follow suit, helping them avoid potential losses from prolonged price declines.

With this information, memecoin traders can use techniques like scalping or intraday analysis to maximize profits from short-term price movements. This allows them to potentially make frequent profits over short periods, rather than holding long-term positions and hoping for an extended bull run.