Memecoin and DeFi Lead Market Correction: Opening a New Chapter in Crypto Volatility

After entering a new growth phase, the crypto market is now experiencing significant correction pressures. Recent data shows that assets previously leading the rally, especially memecoins and DeFi protocols, have suffered the deepest declines across all sectors. The CoinDesk Memecoin Index (CDMEME) plummeted 8.6% in the last 24 hours, surpassing the average market loss. A renewed awareness of macroeconomic risks and policy uncertainties has shifted investor sentiment from euphoria to defensiveness, creating a new chapter in market dynamics that forces participants to adjust their strategies.

At the same time, both the DeFi Select and Metaverse indices corrected by more than 5%, indicating that risk-off sentiment is hitting sectors that were previously favorites. Bitcoin (BTC), as the most liquid asset, fell below $78.69K at the start of February, recorded a -6.59% drop in 24 hours. Ethereum (ETH) experienced more intense pressure with a -10.06% decline to $2.44K, while Solana (SOL) weakened by -11.03% to $104.90. Dogecoin (DOGE), which previously gained retail momentum, dropped -10.04% to $0.10, reflecting how sentiment shifts are impacting various market segments evenly.

Memecoins and DeFi as Victims of Sentiment Changes

The vulnerability of memecoins to market sentiment shifts has been proven again in this correction. Assets with limited fundamentals are more easily shaken when risk reassessment occurs in the macro market. Institutional and sophisticated investors are beginning to take profits from their speculative positions, creating a domino effect that pressures prices across these categories. Bitcoin’s (BVIV) implied volatility remains steady around 45% for five consecutive days, signaling that although a correction is underway, the market has not yet experienced extreme panic selling—yet the VIX index on Wall Street has jumped close to 15%, the highest since December 19, indicating increasing global investor caution.

Technical Signals and Critical Support Levels

Chart analysis shows patterns concerning for bullish traders. Zcash (ZEC), which focuses on privacy, dropped 15% to $303.88 after the Electric Coin Company development team withdrew from the Bootstrap nonprofit organization. This event is not just an internal conflict but signals tensions within the ecosystem that could erode investor confidence in governance and project stability. The daily chart of ZEC shows a support level breach below the previous uptrend, with MACD histogram indicating negative momentum—this combination suggests potential further losses ahead.

For Bitcoin overall, technical support is around the $89,200 level, derived from the 50-day moving average widely followed by traders. “This weekend will provide answers on whether this level will hold or if we’re seeing a false breakout at the start of the year,” said a leading market analyst. This question reflects the current uncertainty—whether this correction is a healthy adjustment or the beginning of a deeper pullback.

ETF Outflows and Changing Capital Flows

Another dimension of market pressure is evident from the net outflows of spot Bitcoin ETFs listed in the US. In the last day, there was a net withdrawal of $486.1 million, reversing more than 50% of the $1.16 billion inflows seen in the first two days of the week. Similar trends are observed in Ethereum, XRP, and Solana ETFs—previous strong institutional interest is now waning. Cumulative data shows total BTC in ETF custody reaching approximately 1.31 million coins, while ETH is held at around 6.19 million in spot ETFs.

This shift is significant because it indicates that institutional investors are not only under pressure from falling prices but are actively reducing their exposure. While total holdings remain high, the momentum of capital flows that previously supported the rally has turned neutral or negative—a new chapter in institutional attitudes toward digital assets.

Macroeconomic Factors and Policy Pressures Intensify

Behind this crypto market correction lies increasing macroeconomic uncertainty. The US employment report due Friday is anticipated as a key catalyst that could influence Fed interest rate expectations. In Kalshi’s prediction market, participants assign a 30% probability to a Supreme Court decision supporting US import tariffs, meaning a 70% chance that tariffs will be canceled—this uncertainty itself creates volatility in risk assets including Bitcoin.

The dollar index remains stable near 98.77, maintaining recent gains that signal a bearish outlook for high-risk assets like crypto. This trend indicates the dollar is strengthening as a safe haven, creating additional headwinds for capital inflows into the digital sector.

Stocks and the Crypto Ecosystem Also Feel the Pressure

External market factors in the crypto sector are also experiencing corrections. Coinbase Global (COIN) closed Wednesday at $245.93, down 1.85%, then was pressured by another -1.26% in pre-market trading. Galaxy Digital (GLXY) fell 2.19%, Circle Internet Financial (CRCL) dropped 5.02%, and Riot Platforms (RIOT), despite a slight increase (+1.94%), also declined in pre-market. Treasury crypto holdings like MicroStrategy (MSTR) showed resilience with a 2.44% increase, but this is not enough to offset systemic pressures.

Facing a New Chapter with the Right Strategy

This correction marks a new chapter for the crypto market—a phase where excessive euphoria begins to align with fundamental realities and economic data. For investors, this period offers an opportunity to reassess positions and risk exposure. This short-term pressure is not the end of the cycle but a normal phase in the evolution of digital assets toward maturity. How the market reacts to Friday’s employment data and tariff policy decisions will determine whether technical support levels can be maintained or if digital assets enter a deeper correction phase.

Volatility will remain a dominant feature in the coming weeks, but the fundamentals of the crypto ecosystem remain intact. The key is how market participants adapt to this new chapter—distinguishing between short-term noise and long-term trends that benefit the industry.