The crypto meme was strong at the end of 2024 with investors bidding up major tokens like Dogecoin (DOGE +1.63%), Shiba Inu (SHIB +1.06%), and Pepe (PEPE 1.07%) along with even wilder tokens like dogwifhat, Fartcoin, and Bonk.
But the value of meme coins is only as strong as the meme itself and that's subsided in 2025. According to data provided by S&P Global Market Intelligence, at noon ET on Friday, Dogecoin is down 10.4% in the past week, Shiba Inu has dropped 11.7%, and Pepe is down 19.9% in just the last week. And this may be just the beginning of the decline in meme coins.
CRYPTO: PEPE
Key Data Points
Cryptocurrencies and memes
The macro market environment is more important to crypto and meme coins than you may think. In 2022 when the stock market and growth stocks were crashing, so were cryptocurrencies. Dogecoin hit its high in 2021 and hasn't been back to those levels since.
So, the hot market in 2024 was helpful for cryptocurrencies and the last two months of the year were supercharged after the election. Investors speculated that a more friendly regulatory environment would be helpful for cryptocurrencies and the blockchain, which drove values higher.
But the speculative pop wasn't driven by fundamentals, whatever you view as fundamental drivers in cryptocurrencies. Transactions aren't increasing with Dogecoin or Pepe as the medium of exchange. The meme coins aren't launching apps that people are flocking to. So, when the meme declines so does the coin.
Crypto's macro crash
The move this week was exacerbated by the decline in growth stocks and major crypto tokens, which happened after positive economic data was released. There are more jobs available and a better sentiment from services businesses than expected, which means the Federal Reserve may have fewer reasons to lower interest rates in 2025.
It may sound counterintuitive that risk assets like cryptocurrencies and growth stocks fall when economic news is good, but this is how short-term trading typically works. Investors want lower interest rates, which reduces the discount rate for growth assets, and promises easier borrowing and growth in the future. But when that growth is actually experienced and policymakers don't have to lower rates, valuations fall.
This impacted the market broadly this week and high-risk assets like meme coins are taking the brunt of the market's decline.
The meme party may be over
The crypto market went a little overboard with excitement following the election and meme coins were a big beneficiary but now rubber is meeting the road. The new Congress has been sworn in and President-elect Donald Trump takes office again on Jan. 20, 2025. Then it will be policy and lawmakers who decide what the story of cryptocurrencies will be in 2025, not meme makers.
That could end badly given the story is often better than reality in the crypto market. I think we will see many more uses of the blockchain, but that doesn't mean Bonk or Dogecoin will benefit. Meme coins are down and so are meme stocks and that could be a theme for 2025.
