The memecoin frenzy has been the buzz of the crypto community this bull season. Pepe and WIF have surged into the top 20 cryptocurrencies by market capitalization within a year of their public launch.
These memecoins have gained significant traction in the crypto leverage market, where traders either go short or long on their prices.
Four out of the top 10 cryptocurrencies by open interest (OI) are memecoins, with Pepe (PEPE) leading the charge with $812.6 million in OI and nearly half of Solana’s (SOL) $1.7 billion in OI.
Apart from Pepe, Dogecoin (DOGE), Bonk (BONK), and Dogwifhat (WIF) also made it to the top 10. Bitcoin (BTC) is leading the chart with $11.1 billion in OI, followed by Ethereum (ETH) with $9.15 billion.
Another thing to note is the significant difference in OI from top to bottom. Bitcoin's OI is $11 billion, while the tenth-placed Near Protocol (NEAR) has only $230 million in OI, indicating the major difference in traders’ interest.
The recent rise in OI for memecoins comes from its bullish momentum over the past couple of weeks when Pepe hit a new all-time high while WIF reached a new multi-week high above $3.30.
Open Interest refers to the total amount of pending derivative contracts that have not yet been settled. In a futures contract, for every seller, a buyer is required to settle the contract.
A contract is deemed “open” from the moment it is opened by the buyer or seller until it is closed by the counterparty. OI increases when new contracts are added and decreases when contracts are settled. In contrast to the trading volume, OI is continuous data.
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A growing OI indicates bullish momentum in the market as leverage traders open more contracts in anticipation of price momentum.
Despite the surge in the prices of memecoins and the rise in OI, the funding rates remained negative for the memecoins across crypto exchanges.
Funding rates represent the cost of holding a position in a perpetual swap or futures contract relative to the asset’s spot price. Positive funding rates indicate a bullish market sentiment while a negative funding rate indicates a bearish sentiment.
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