Community coins only seem to increase when the community forgets them
According to the most recent data provided by Santiment, “memecoins” like SHIB, DOGE and ELON are moving with a reverse correlation with the so-called “Social Dominance” indicator. Once the indicator hits new lows, the price of the aforementioned coin increases rapidly.
Memecoins on the rise
Overall, meme-based and community-driven coins have been the trend in recent months with Shiba Inu showing a 490% price increase, Doge being up by 28% percent in the last month, and Elon Musk showing a ridiculous 889% price increase in the last month only. Either way, the community is the primary fuel for these coins rather than institutional investors or use cases.
While trading pairs for such coins remain extremely volatile, there is no proper way to analyze them by using financial or technical analysis, which leaves traders with on-chain and market metrics like the ones presented by Santiment.
Inverse correlation
On the graph provided by the service, users can see the price of each mentioned coin and the social dominance indicator. Once communities “forget” about the coins and the indicator starts moving downwards, their price rapidly goes down and retraces back up only when whales are buying them back.
While the indicator actually has an inverse correlation with the price of these assets, it only shows common accumulation and distribution cycles in which investors only get assets back when retail traders are less interested.
But once the community picks up the hype and starts buying in, large addresses are taking profits and putting selling pressure on the asset, which leads to a rapid retrace down. As the coin loses its monetary value, it also loses the interest of the retail trader.
