Liquidity Improves, Meme Coins Lag, Bitcoin Risks Persist｜Matrixport Research

In our February 21, 2025 report, “Part 2: How Liquidity and Macro-Economic Indicators Impact Bitcoin,” we demonstrated how global liquidity — measured by the money supply across 28 central banks — has historically led Bitcoin’s price movements by approximately 13 weeks.

However, the US dollar has recently weakened, leading to a rebound in liquidity indicators and some marginal improvements in inflation data. Despite these positive shifts, meme coins — previously one of the strongest narratives during this bull market — continue to struggle significantly, with no apparent recovery.

The altcoin rally peaked in early December 2024 due to a strengthening US labor market as some started to worry about a less dovish US Federal Reserve. By mid-December 2024, Bitcoin entered a consolidation phase after Fed Chair Powell indicated that interest rates might remain unchanged amid inflationary pressures from the Trump administration’s tariff policies. Although the Fed anticipated some inflationary impact from tariffs, Trump’s aggressive and rapid tariff implementation exceeded most economists’ expectations, creating ripple effects across stock and crypto markets.

Although this week’s US inflation report was slightly better than anticipated, it provided little comfort. Persistent uncertainty around trade policies continues to overshadow the possibility of the Fed easing soon.

In our February 7, 2025 report, “Solana Whales Cash Out: Bitcoin Rotation and the Fading Meme Coin Hype,” we warned of a looming consolidation, particularly among meme coins. Since that analysis, Raydium — a Solana-based automated market maker (AMM) and liquidity provider for Serum decentralized exchange (DEX) — has dropped 71%, while Solana itself has fallen 37%.

Pump.fun, a decentralized exchange (DEX) built on the Solana blockchain, has become a popular platform among traders for rapidly launching, discovering, and speculatively trading meme coins. It enables quick token creation and trading, often resulting in highly volatile market activity. Over the past 12 months, Pump.fun generated revenues exceeding $582 million, making it one of this cycle’s most profitable crypto projects. Recently, however, revenue growth has sharply declined.

The altcoin market’s weak momentum in December and the meme coin bubble peaking in January contributed significantly to a $1 trillion decline in crypto market capitalization — from $3.6 trillion down to $2.6 trillion. This redistribution of wealth may lead investors to remain cautious about deploying further capital, causing rebounds — even those triggered by better-than-expected inflation data — to be limited.

In our February 28 report, “Bitcoin Selling: Hedge Funds, Not Wall Street, Behind the Selling,” we highlighted that hedge funds' unwinding fully realized arbitrage positions were a primary driver behind recent selling pressure. This anticipated selling has largely played out and is likely approaching its peak intensity.

Disclaimer: The above content is for informational purposes and reference only. The content does not constitute investment advice. Digital asset transactions can be precarious and volatile. Investment decisions should be made after carefully considering individual circumstances and consulting financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.

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