As the recent selloff in the cryptocurrency market shows signs of slowing down, Dogecoin, the largest memecoin by market capitalization, has been hit the hardest. Dogecoin experienced a 25% decline last week, especially impacted by the downturn in Bitcoin and Ethereum prices. Memecoins, like Dogecoin, tend to experience more significant liquidations during market contractions.
According to industry experts, when major cryptocurrencies such as Bitcoin and Ethereum experience pullbacks, there are usually buyers waiting to enter the market with confidence that prices will eventually bounce back as the overall market recovers. However, memecoins and small-cap crypto assets do not attract the same type of value buyers. In times of market downturns, there is a lack of investors willing to step in at lower prices to support memecoins like Dogecoin.
The recent decline in Dogecoin’s value has been attributed to the Federal Reserve’s latest decisions. Following a meeting where the central bank announced a third interest rate cut of the year, it also hinted at fewer rate reductions in 2025, signaling a tightening of economic conditions. This led investors to sell off risky assets, including cryptocurrencies and specifically memecoins.
Despite the recent setback, the overall crypto market has seen substantial growth this year, driven by renewed interest from investors after President-elect Donald Trump secured a second term and pledged to create a favorable regulatory environment for the industry, which includes establishing a strategic Bitcoin reserve. Dogecoin has surged by over 230% in value this year, partly due to the involvement of tech mogul Elon Musk, who has been appointed as one of Trump’s key advisors. Musk’s appointment to head a new department focused on enhancing government efficiency, known as the Department of Government Efficiency (DOGE), is seen as a testament to his support for Dogecoin, bolstering the memecoin’s relevance.
Looking ahead to 2025, experts remain optimistic about the future of cryptocurrencies, anticipating a bullish trend for Bitcoin, Ethereum, and other high-profile memecoins like Dogecoin. The overall sentiment in the crypto market is positive, fueled by various factors that are expected to drive growth and adoption in the coming years.
This article was originally published on Fortune.com.
