The craze for memecoins has taken the crypto community by storm during this bullish season. Within just one year of their public launch, Pepe and WIF have skyrocketed into the top 20 cryptocurrencies by market capitalization.
These memecoins have gained significant popularity in the crypto leverage market, where traders can take either short or long positions on their prices.
Interestingly, four out of the top 10 cryptocurrencies in terms of open interest (OI) are memecoins. Leading the pack is Pepe (PEPE), with an impressive $812.6 million in OI, accounting for nearly half of Solana’s (SOL) $1.7 billion in OI.
In addition to Pepe, Dogecoin (DOGE), Bonk (BONK), and Dogwifhat (WIF) have also made it to the top 10. Bitcoin (BTC) takes the lead with a staggering $11.1 billion in OI, followed closely by Ethereum (ETH) with $9.15 billion.
It’s worth noting the significant difference in OI between the top and bottom cryptocurrencies. While Bitcoin’s OI amounts to $11 billion, the tenth-placed Near Protocol (NEAR) only has $230 million in OI, highlighting the varying levels of interest among traders.
The recent surge in OI for memecoins can be attributed to their bullish momentum over the past few weeks. Pepe reached a new all-time high, while WIF soared to a new multi-week high above $3.30.
Open Interest refers to the total value of pending derivative contracts that have yet to be settled. In futures contracts, a buyer is required to settle the contract for every seller. A contract is considered “open” from the moment it is initiated until it is closed by the counterparty. OI increases when new contracts are added and decreases when contracts are settled. Unlike trading volume, OI provides ongoing data.
A growing OI indicates a bullish market sentiment as leverage traders open more contracts in anticipation of price momentum.
Despite the surge in memecoin prices and the increase in OI, the funding rates for these memecoins remain negative across various crypto exchanges.
Funding rates represent the cost of holding a position in a perpetual swap or futures contract relative to the spot price of the asset. Positive funding rates indicate a bullish market sentiment, while negative funding rates suggest a bearish sentiment.