Beware of Dead Cat Bounce: Rebound in Shiba Inu, Bonk, and Pepe Prices
Most meme coin prices rebounded on Saturday, December 21, after falling for most of the week, with their combined market cap rising by 4.7% to $109 billion.
The price of Shiba Inu (SHIB) rose by 12.6% to an intraday high of $0.00002397. Bonk (BONK), the largest meme coin in the Solana ecosystem, rose by 20% to $0.000032. Pepe (PEPE) and other popular meme coins like Dogwifhat and Pudgy Penguins rose by over 15%.
This rebound occurred after a Bitcoin (BTC) plunge from $108,200 to $97,000 triggered a significant crash in most altcoins. The total market cap of all cryptocurrencies dropped from over $3.7 trillion to $3.37 trillion.
The rebound is likely due to the US’s encouraging Personal Consumption Expenditure report. The headline PCE, which is the Federal Reserve’s preferred inflation measure, softened from 0.2% in October to 0.1% in November. Core PCE dropped from 0.3% to 0.1%, indicating that inflation in urban and rural areas was slowing.
American stocks also reacted positively to the PCE report on Friday, with the Dow Jones, S&P 500, and Nasdaq 100 indices rising by over 1.18%, 1.10%, and 0.85%, respectively.
These figures come a few days after a hawkish decision by the Federal Reserve triggered a sell-off in risky assets such as stocks and cryptocurrencies. The bank cut rates by 0.25%, bringing the total cuts for the year to one percent, and hinted at two more cuts in 2024. The dot plot from the last meeting indicated four cuts.
The Fed justified its hawkish stance due to persistently high inflation. Recent data showed that the headline Consumer Price Index rose to 2.7%, while the core CPI remained at 3.3%. The bank also suspects that some of President-elect Donald Trump’s policies, such as tariffs, will contribute to inflation.
The rise in Shiba Inu, Bonk, and Pepe could be a dead cat bounce. Meme coins like Shiba Inu, Pepe, and Bonk likely jumped as crypto investors bought the dip after they dropped for three consecutive days.
A potential risk for the ongoing rebound is that this could be a dead cat bounce. A dead cat bounce is a situation where falling asset prices stage a brief rebound and then resume the downward trend.
For example, Shiba Inu dropped by 15% on December 9 and by 1% on the following day. It then formed a dead cat bounce by rising by 6% on December 11 and then resumed its downtrend, reaching a low of $0.00001855 on December 20.
Another potential risk for these coins, especially Shiba Inu, is that some of them have formed a head and shoulders chart pattern.
A head and shoulders pattern is a popular bearish reversal sign consisting of a head, two shoulders, and a neckline, which is at $0.00002280. This indicates that the coin may continue its downtrend.
