According to the latest data provided by Santiment, “meme coins” such as SHIB, DOGE and ELON act in an inverse correlation with the so-called “Social Dominance” indicator. Once the indicator hits new lows, the price of the aforementioned cryptocurrencies skyrocketed.
SHIB, DOGE and ELON on the rise
Overall, the meme-based and hype-based products have been around in recent months, with Shiba Inu (SHIB) showing a 490% price increase, Dogecoin (DOGE) rising 28% last month, and Elon Musk (ELON) showing an unrealistic 889% price increase. community-driven cryptocurrencies are trending. One way or another, the community is the main fuel for these cryptocurrencies rather than institutional investors or use cases.
While trading pairs for such altcoin projects remain highly volatile, there is no convenient way to analyze them using financial or technical analysis, leaving traders with on-chain and market metrics such as those offered by Santiment.
What does inverse correlation mean?
In the chart provided by Santiment, users can see the price of each specified coin and the Social Dominance indicator. When communities “forget” cryptocurrencies and the indicator starts to move downwards, their prices drop rapidly and only return when whales buy them back.
While the indicators actually have an inverse correlation with the price of these cryptos, they only show the common accumulation and distribution cycles that traders get their coins only when individual investors are less interested in them.
But as the community gets excited and starts buying, the big addresses are profiting and putting selling pressure on altcoins, leading to a quick pullback. As cryptocurrencies lose their monetary value, individual traders also lose interest.
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