NOIDA (CoinChapter.com) — On February 25, the memecoin sector experienced a significant crash, resulting in double-digit losses for major tokens such as Dogecoin (DOGE), Shiba Inu (SHIB), and Pepe (PEPE). As of now, DOGE has dropped by 20%, SHIB has fallen by 14%, and PEPE has plunged by over 20% since February 24. This downturn can be attributed to panic selling triggered by the collapse of the LIBRA token, reduced liquidity, and overall market instability.
The primary catalyst for this crash is the implosion of the Libra token, a Solana-based project associated with Argentine President Javier Milei. The token experienced a decline of over 90% within a few days after insiders sold off $87-110 million, leading to widespread distrust in memecoins. Additionally, whales have been depleting liquidity pools, leaving speculative tokens vulnerable to sharp declines. Meanwhile, Bitcoin (BTC) remains below $96,500 and rising U.S. Treasury yields are diverting capital away from riskier assets.
DOGE has fallen by nearly 5%, currently trading at $0.20005, down from its intraday high of $0.21390. SHIB is down 1.87%, reaching $0.000013386, continuing its downward trend. PEPE has experienced a loss of over 4.4%, trading at $0.0000075409, further reinforcing the sell-off.
Political memecoins are also suffering, with TRUMP plummeting to $12.687, a decrease of nearly 90% from its December peak of over $60. The biggest loser remains LIBRA, now at $0.1226, down over 16% in a day and almost 90% from its February 2025 high.
This collective drop highlights the liquidity crisis impacting the memecoin sector. The withdrawal of whales from liquidity pools, coupled with the aftermath of the Libra token collapse, has triggered a mass sell-off, leaving tokens with little support. Unless sentiment changes, memecoins may experience further losses in the coming days.
The current memecoin downturn is significantly influenced by a liquidity exodus, worsened by the collapse of the Libra token. Memecoins typically operate on low liquidity, making them susceptible to rapid price fluctuations. Recently, major whale wallets have been withdrawing liquidity, converting their holdings into stablecoins and Solana (SOL), while flooding the market with excess tokens.
This sudden increase in supply has led to significant price declines, particularly for tokens with inflated market caps and limited liquidity buffers.
The collapse of the Libra token has intensified market panic. Launched on February 14 on the Solana blockchain and endorsed by Argentine President Javier Milei, Libra’s market capitalization surged to $4.5 billion following Milei’s promotion.
However, the token’s value plummeted by over 90% within days after insiders, who controlled 82% of the supply, withdrew approximately $99 million from the liquidity pool.
This withdrawal caused the token’s price to drop to $0.50 by February 15. Milei’s subsequent deletion of his promotional post and denial of involvement further eroded investor confidence. This event has had a significant impact on Solana-based memecoins, with tokens like Bonk (BONK) and Dogwifhat (WIF) experiencing substantial losses.
Additionally, the market is facing oversaturation, with hundreds of new tokens being launched daily, diluting liquidity and leading to widespread sell-offs. This could be another reason for the recent memecoin market crash.
Solana, a prominent platform for memecoins, is also facing challenges, contributing to the broader market downturn. The network has lost approximately $50 billion in market value over the past month, with its native token, SOL, declining by 15-16% since mid-February. This decline is partly attributed to the fallout from the Libra token collapse and the proliferation of speculative memecoins, which have saturated the market and strained the network’s reputation.
As the value of SOL decreases, memecoins built on the Solana platform are experiencing disproportionate losses. This has led traders to withdraw funds from Solana-based projects, exacerbating the liquidity crisis.
The broader cryptocurrency market is also experiencing instability. The ongoing consolidation phase of Bitcoin’s price has dampened enthusiasm for altcoins. The failure of other high-profile tokens, such as Melania Trump’s token, which has declined by 72% from its peak, has further eroded speculative confidence.
Social media sentiment has undergone a significant shift, particularly on platforms like X. Memes that once drove significant price increases are now failing to gain traction, and large investors are choosing to liquidate their positions instead of engaging in new speculative ventures. Without a strong bullish catalyst, the current sell-off may continue, leading to further declines in the memecoin market.