Decline in Futures Open Interest Signals Shift in Memecoin Market Sentiment

The memecoin market, which saw a meteoric rise in 2024, has undergone a dramatic drop in futures open interest (OI) for several popular tokens.

This signals that speculative interest may be cooling. Since “their respective peaks,” major memecoins like $DOGE, $PEPE, $BONK, and $WIF have seen “sharp declines in futures contracts.” This suggests that market participants are unwinding leveraged futures positions and reassessing their exposure to these highly speculative assets. A number of trends indicate that investor sentiment is shifting here. Some of these trends are frankly amusing.

A Steep Decline Across Multiple Memecoins

The total value of open contracts for a specific asset is referred to as futures OI. It is noteworthy that the memecoin domain has seen a sharp decrease in OI. For $DOGE, the chief memecoin by market capitalization, the 7-day moving average of futures OI has tumbled by an incredible 58.45%. From a high of $3.58 billion on December 9, 2024, $DOGE’s futures OI has dived down to $1.49 billion as of today. This significant drop seems to indicate an unwinding of speculative activity that had been centered around the memecoin, with investors liquidating their positions and moving to cash.

In the same way, other well-known memecoins have also followed this path and have experienced the same type of deleveraging. $PEPE, which had received a good deal of attention in 2024, watched its futures OI plummet by an unbelievable 71.93%, from $1.25 billion to $351 million. This steep drop reflects the pattern of traders moving away from leverage and is indicative of the sort of pullback that happens when an initial speculative frenzy burns out.

$BONK, yet another memecoin that saw huge speculation earlier in the year, was not spared. Its futures OI dropped by an incredible 75.10%, going from $715 million to $178 million. Another lesser-known memecoin, $WIF, also saw a tremendous drop when it came to OI—69.83%, going from $653 million to $197 million. These sharp corrections really do point to a cooling of sorts in the overall market as traders step down from the highs of 2021 and reassess the leveraged conditions they had built up in both the long and short directions.

Smaller Memecoins Feel the Pressure

The larger memecoins such as $DOGE, $PEPE, $BONK, and $WIF have not affected the trend of decreasing open interest in the futures market for smaller tokens in the sector. $SHIB and $FLOKI, less prominent but still known, saw their futures open interests decline sharply. $SHIB, at one point the most hyped memecoin, saw its futures open interest drop 74.41%, from $323 million to $83 million. $FLOKI, while not even close to the same level of notoriety as $SHIB, saw a 69% decline in its OI, dropping from $41.7 million to $12.9 million.

This pattern in the memecoin sector underscores a larger trend: Tokens that were once buzzing with activity are now having trouble holding even a low level of speculative interest. The token’s massive plummet in open interest, or OI, signals a dramatic shift in sentiment within the memecoin market. Investors who were once fueling the fiendishly speculative frenzy surrounding these assets may now be pulling back, either because they’re cashing out their profits or because they’re starting to be concerned about the long-term sustainability of these supposedly “meme”-worthy tokens.

Futures Open Interest across memecoins sector has dropped significantly since their peaks.$DOGE‘s Futures OI 7D moving average saw a 58.45% decline, falling from $3.58B on Dec 9, 2024, to $1.49B today: https://t.co/5yBcLzcXMA

How do other memecoins compare? Let’s dive in 👇 pic.twitter.com/oIKRmQdsBx

— glassnode (@glassnode) February 19, 2025

A Sign of Leverage Flushing Out

The sharp decrease in futures open interest across many memecoins suggests that a deleveraging process is taking place. In financial markets, deleveraging refers to the process of paying back debt and reducing the use of borrowed money to finance investments. It usually occurs when a decline in the value of an asset or an increase in risk makes it clear that too many people have been investing with too much borrowed money. Memecoin investors hoping to profit from price increases have almost certainly been one group using futures accounts to invest with leverage. The winding down of this deleveraging process has probably now reached memecoins.

This reduction in leverage could also be an early sign that the speculative boom in the memecoin sector is coming to an end. As prices for these tokens have come down and with a reduction in traders taking on leveraged bets in the sector, it now seems to be the case that the once very frothy memecoin market is starting to settle down.

What Does the Future Hold for Memecoins?

The sector of memecoins has shown extreme volatility. They are often worth very little, and their value is frequently driven more by sentiment and speculation than by any real fundamentals. Some memecoins, like $DOGE, have long-standing followings and are more integrated into the cryptocurrency ecosystem. Others, like $PEPE, $BONK, and $WIF, are prone to the whims of short-term traders. The future of the even fewer memecoins with some real utility seems hardly a sure bet.

The decline in futures OI across these tokens could mean a drawn-out consolidation period for the sector. Traders seem to be stepping back, which normally would mean less price volatility and fewer large price swings that are attractive to speculators. But while futures markets have been relatively quiet lately, Tornado Cash has been in the news. And that could make the next 48 hours or so quite interesting for anyone with spec positions in the tokens listed above.

To conclude, a significant decrease in futures open interest in the memecoin sector has occurred, and this reflects a wider unwinding of speculation and a shift in sentiment. Currently, traders are exercising more caution. They are likely waiting for better market conditions to re-enter the memecoin space. The future of these tokens is hazy, but right now, the spaces where they trade in have cooled off considerably.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

Follow us on Twitter @nulltxnews to stay updated with the latest Crypto, NFT, AI, Cybersecurity, Distributed Computing, and Metaverse news!

Image Source: iqoncept/123RF // Image Effects by Colorcinch