Dogecoin, PEPE, Shiba Inu and top meme coins lose $5 billion in open interest as investor sentiment dips

Dogecoin (DOGE), PEPE, Shiba Inu (SHIB) and several top meme coins have shed about $5 billion in open interest (OI) since their initial peak in December, according to Glassnode. This follows the recent pump-and-dump of single-day meme coins and how they have slowed the crypto market recovery.

Meme coin open interest crash amid concerns of increasing meme scams

The meme coin sector has been experiencing negative investor sentiment in the past few weeks. This has led to a massive decline in the open interest of top meme coins since December 9, according to a post by Glassnode on X.

DOGE, PEPE, SHIB, FLOKI, BONK and WIF have seen a total of $5.06 billion wiped off their open interest during this period.

DOGE witnessed the highest decline, shedding over 52% of its OI, representing $2 billion.

Similarly, PEPE, SHIB and BONK's OI dropped by 71%, 74% and 75%, respectively, after reaching their peaks in December.

The rapid declines suggest waning interest in meme coins among investors. Glassnode notes that it reveals a leverage flush among the top memes and a shift in sentiment across the sector.

The declines could partly be attributed to the general crypto market crash on February 3, which also impacted the meme coin sector.

The downturn was exacerbated by broader market uncertainty and declining investor enthusiasm across major assets like Bitcoin, Ethereum and Solana.

Likewise, the controversy surrounding Argentine President Javier Milei-related meme token LIBRA played a significant role in further destabilizing the meme market.

After an initial surge fueled by Milei's endorsement, LIBRA's price crashed by 89% within hours. This led to accusations of a pump-and-dump scheme, sparked by a disclosure that a few wallets controlled 82% of the token's supply, according to Bubblemaps.

The impact of the LIBRA token scandal has raised questions and criticisms on the safety of celebrity-endorsed meme coins and their impact on the crypto market.

Crypto exchange MEXC COO Tracy Jin notes that the crypto market could face an extended consolidation if retail investors continue falling victim to these meme coin scams.

"If the average retail user begins associating cryptocurrencies primarily with scams, the market could face a prolonged recovery period," Jin wrote in a note to FXStreet.

The meme coin sector is down nearly 3%, with major tokens DOGE, PEPE and SHIB seeing weekly losses of 3%, 8% and 4%, respectively.