Crypto Market Sees Steep Decline in May 2023 Amid Meme Coin Frenzy and Macroeconomic Uncertainty

In May 2023, the crypto market experienced significant volatility and a sharp decline in overall market capitalization. This came as a result of macroeconomic news and developments, with uncertainty surrounding the US debt ceiling casting a shadow over financial markets.

The crypto market capitalization decreased by 6%, marking the steepest fall of the year so far.

However, amidst the market turmoil, there were positive regulatory developments in Asia as Beijing released a whitepaper emphasizing Web3 innovation and development, signaling China’s growing openness to blockchain technologies. Also, Hong Kong announced its decision to permit retail trading of cryptocurrencies, starting from June 1, with digital asset exchanges now able to apply for licenses.

During May, XRP emerged as the strongest performer among the top 10 coins. Ripple made strategic moves to expand its capabilities, including the launch of a new platform enabling the issuance of digital currencies by central banks, governments, and financial institutions.

On the other hand, DOGE and SHIB, two popular meme coins, were the weakest performers in May. Despite the meme coin frenzy that took place throughout the month, these coins couldn’t escape the broader market declines. Notably, Dogecoin experienced a surge in daily transaction volumes after the introduction of “DRC-20 tokens,” but it remains to be seen if this heightened activity will be sustained.

In the decentralized finance (DeFi) sector, markets experienced a 3.4% decline in total value locked (TVL), amounting to $47.9 billion. The distribution of TVL across the top blockchains remained relatively unchanged, with Ethereum holding 58.1%, Tron with 11.9%, and BNB Chain with 9.3%.

Ethereum witnessed a slight decrease in TVL, reaching $27.9 billion, which was part of a broader pullback in on-chain liquidity. Fantom, however, experienced the steepest drop, losing over one-third of its TVL due to rumors and uncertainty surrounding Multichain.

In the non-fungible token (NFT) market, trading volume slightly increased in May, reaching just over $740 million.

The total number of buyers and sellers hit a yearly high at 1.67 million, with a total of 8.92 million transactions. Despite this, the Nansen’s NFT-500 index continued its decline as the floor prices for notable NFT collections dropped.

Noteworthy sales of major collections, such as Doodles and Mutant Ape Yacht Club (MAYC), occurred during the month. The meme coin frenzy may have played a role in traders selling their NFTs to join the rapidly growing meme coin trend.