What happened
Today, a range of more speculative meme tokens are seeing increased selling pressure. Popular dog-inspired cryptocurrencies Shiba Inu (SHIB -3.22%) and Dogecoin (DOGE -2.55%) have declined 6.8% and 4.4%, respectively, over the past 24 hours as of 12:30 p.m. ET. Other high-momentum tokens such as metaverse crypto The Sandbox (SAND -3.75%) haven't been spared, with this token declining 3.1% over the same time frame today.
A string of catalysts appear to be behind this meme token decline today. For one, Sen. Joe Manchin's rebuttal of President Joe Biden's Build Back Better plan has sent risk assets lower today. Stocks, crypto, and commodities all got hammered on this news. Continued concern around the omicron variant has investors on edge. And there remains a growing number of investors who are unsure as to whether inflation, and the monetary tightening that appears underway from the Federal Reserve, will prove to be bullish or bearish for risk assets.
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So what
There's really quite a bit of macroeconomic data investors are forced to grapple with right now. These aforementioned headwinds certainly present a rather unflattering near-term outlook for high-risk, high-upside asset classes. For digital currencies, and meme tokens in particular, one may argue that capital outflows from riskier assets could provide some serious volatility for markets.
Dog-themed tokens such as Shiba Inu and Dogecoin have surged in interest among investors as speculative momentum bets during this cheap money-fueled rally in some of the riskiest assets. As this trade winds down, concerns around how much capital will flow out of such assets, and to which sectors, remain.
For metaverse-themed cryptocurrencies such as The Sandbox, there's perhaps a stronger bull case that can be made for such tokens. That said, the valuations of these tokens continues to be debated among investors, many of whom are skeptical about how quickly these tokens have appreciated in such short order.
Now what
It's really hard to predict where high-risk, high-return assets, particularly meme tokens, will go from here. On the one hand, there's still a tremendous amount of excess capital in the markets that will look to find a home. On the other, it appears pretty clear that investors are intent on de-risking their portfolios right now. For meme tokens, this environment could be a rocky one over the near term.
For those looking to be aggressive in this downturn, doing so in a prudent way via ensuring proper position sizing and portfolio allocation to risk assets is important. For most others, watching from the sidelines may be the best course of action.
That said, there's likely a lot more excitement to come, so get the popcorn ready.
