The Memecoin sector is experiencing a liquidity crisis: dominance has fallen to 2022 levels

The Memecoin market has undergone a dramatic shift. The market capitalization, which peaked at $10-12 billion at the end of 2024, has now significantly retraced, with several popular coins rapidly losing market appeal. According to on-chain data analysis, the entire niche is facing structural decline rather than a simple cyclical adjustment.

Data Shows Market Dominance Plummeting

The latest analysis from on-chain data providers shows worrying signals. Memecoin’s dominance within the altcoin market has dropped from 0.11 at the end of 2024 to currently 0.04, returning to the levels seen at the end of 2022. What does this data change reflect? It’s not just a price decline but a comprehensive contraction in market participation.

According to tracking data from CoinGecko, representative coins like DOGE (market share 0.65%), WIF (market share 0.010%), and SHIB have retraced to mid-2023 levels. Memecoins within the Solana ecosystem, frog-themed tokens, and AI-related meme coins are all declining in tandem. This uniformity itself indicates the severity of the problem — this is not a failure of a single project but a loss of confidence across the entire niche.

Liquidity Crisis and Rotation Mechanism Breakdown

In past market cycles, when a memecoin category lost momentum, funds would quickly flow into the next hot spot. But the current situation is entirely different — liquidity is contracting simultaneously across almost all memecoin subcategories, like a microphone that cannot be turned on, with no sound capable of awakening the silent market.

This synchronized decline pattern indicates that the rotation motivation among retail investors has been exhausted. High-beta assets are the first to be hit, and the new narrative cues — usually the “next big theme” that can attract retail attention — have yet to emerge. Data shows that sentiment indicators have bottomed out, and market engagement has plummeted.

Signs of Structural Decline

Analysts point out that this decline has structural features rather than being a cyclical adjustment. Historical pullbacks are usually brief pauses followed by asset rotation rebounds. But the current situation is different — evaporating liquidity and synchronized declines suggest that unless new capital flows in or retail investors re-enter the market, this downturn could last quite a while.

The freeze in the memecoin market has shattered market participants’ expectations. Based on data from CryptoQuant and CoinGecko, speculative demand has disappeared, leaving only a long-term stagnation in the memecoin domain — the acid test of retail investor confidence has failed. The market is entering a prolonged cooling period, with no signs of recovery in the short term.

Author: András Mészáros

Senior cryptocurrency analyst and Web3 researcher, founder of Kriptoworld. Dedicated to blockchain industry reporting for years, providing in-depth analysis on DeFi, tokenization, altcoins, and crypto regulation, offering insights into digital economic development trends.