Most meme coin prices rebounded on Saturday, December 21, after falling for most of the week, as their combined market capitalization increased 4.7% to $109 billion.
Shiba Inu (SHIB) price rose 12.6% to an intraday high of $0.00002397. Bonk (BONK), the largest meme coin in the Solana ecosystem, rose 20% to $0.000032. Pepe (PEPE) and other popular coins like Dogwifhat and Pudgy Penguins are up over 15%.
This rebound occurred after a fall in Bitcoin (BTC) from $108,200 to $97,000 triggered a significant crash in most altcoins. The total market capitalization of all cryptocurrencies increased from over $3.7 trillion to $3.37 trillion.
This rebound is likely due to the encouraging report from the United States on personal consumption expenditure. Headline PCE, the Federal Reserve’s preferred inflation gauge, rose from 0.2% in October to 0.1% in November. The core PCE rose from 0.3% to 0.1%, a sign of slowing inflation in urban and rural areas.
US stocks also reacted positively to Friday’s PCE report, with the Dow Jones, S&P 500 and Nasdaq 100 indexes rising over 1.18%, 1.10% and 0.85%, respectively.
The figures came days after a hawkish Fed decision triggered a sell-off in risky assets like stocks and cryptocurrencies. The bank cut rates by 0.25%, bringing annual cuts to 1%, and hinted it would make two more cuts in 2024. The dot chart from the last meeting showed four cuts.
The Fed justified its hawkish stance with stubbornly high inflation. Recent data showed that the overall consumer price index increased to 2.7%, while the core CPI remained at 3.3%. The bank also suspects that some of President-elect Donald Trump’s policies (like tariffs) will be inflationary.
The rise of Shiba Inu, Bonk and Pepe could be a dead cat rebound
Meme coins like Shiba Inu, Pepe and Bonk also likely surged as crypto investors bought the dip after falling for three straight days.
A potential risk to the ongoing bounce is that it could be a dead cat bounce. A DCB is a situation in which falling asset prices cause a brief rebound and then resume the downward trend.
For example, the Shiba Inu fell 15% on December 9 and 1% the next day. It then formed a DCB by increasing by 6% on December 11 and then resumed its downward trend, reaching a low of $0.00001855 on December 20.
The other potential risk for these pieces, especially Shiba Inu, is that some of them form a head and shoulders graphic pattern.
An H&S pattern is a popular bearish reversal sign consisting of a head, two shoulders, and neckline, which sits at $0.00002280. This is a sign that the coin could continue its downward trend.
