THE crypto meme was strong in late 2024, with investors bidding up major tokens like Dogecoin (DOGE -3.39%), Shiba Inu (SHIB -4.59%)And Pepe (PEPE -4.52%) with even wilder tokens like dogwifhat, FarcoinAnd Bonk.
But the value of meme coins is as strong as that of the meme itself and it has declined in 2025. According to data provided by S&P Global Market IntelligenceAs of noon ET Friday, Dogecoin is down 10.4% in the past week, Shiba Inu is down 11.7%, and Pepe is down 19.9% in the past week alone. And this may just be the beginning of the decline of meme coins.
Cryptocurrencies and memes
The macro market environment is more important for cryptocurrencies and meme coins than you think. In 2022, when the stock market and growth stocks collapsed, cryptocurrencies also collapsed. Dogecoin reached its all-time high in 2021 and has not returned to these levels since.
Thus, the hot market of 2024 was beneficial for cryptocurrencies and the last two months of the year were supercharged after the elections. Investors have speculated that a more favorable regulatory environment would be helpful for cryptocurrencies and blockchain, pushing up values.
But the speculative popularity has not been driven by fundamentals, whatever you consider to be the fundamental drivers of cryptocurrencies. Transactions do not increase with Dogecoin or Pepe as a medium of exchange. Meme coins don’t launch apps that people flock to. So when the meme declines, so does the coin.
Crypto’s macro crash
This week’s move was exacerbated by the decline in growth stocks and major crypto tokens, which came after the release of positive economic data. There are more jobs available and better confidence in service businesses than expected, meaning the Federal Reserve may have less reason to cut interest rates in 2025.
It may seem counterintuitive that risk assets like cryptocurrencies and growth stocks fall when economic news is good, but that’s how short-term trading generally works. Investors want lower interest rates, which lower the discount rate on growth assets and promise easier borrowing and growth in the future. But when that growth materializes and policymakers aren’t forced to cut rates, valuations fall.
This has had an overall impact on the market this week and high-risk assets like meme coins are bearing the brunt of the market decline.
The meme party may be over
The crypto market went a little too far with post-election enthusiasm and coins have been big beneficiaries, but now the rubber is hitting the road. The new Congress has been sworn in and President-elect Donald Trump takes office on January 20, 2025. It will then be politicians and lawmakers who decide the story of cryptocurrencies in 2025, not meme creators.
This could end badly given that the story is often better than reality in the crypto market. I think we’ll see many more uses for blockchain, but that doesn’t mean Bonk or Dogecoin will benefit. Meme coins are down, as are meme stocks, and that could be a theme for 2025.
Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the securities mentioned. The Mad Motley has a disclosure policy.