Nick, a Pennsylvania resident, faces a significant loss as the value of memecoins crashes, wiping out $60,000 from his savings. The volatility of these speculative cryptocurrencies has intensified, largely influenced by Donald Trump’s economic statements. While Bitcoin remains relatively stable, memecoins and Ether suffer severe declines. Experts warn of ethical concerns and potential contagion effects in the crypto market, as influential figures like Trump and Elon Musk contribute to drastic price fluctuations, leading many investors to experience anxiety and regret.
Nick is taking a well-deserved Saturday break after a taxing week on the construction sites, but he can’t shake off the news that has him worried: the value of ‘memecoins,’ those highly speculative cryptocurrencies that witnessed a surge during Donald Trump’s election, is crashing. With this decline comes a significant hit to his savings.
“I clicked on it and for a minute, I watched the prices plummet. And I thought: ‘Well, I guess I better stop looking now,'” shares the 28-year-old American from Pennsylvania, who prefers to remain anonymous.
In a matter of hours, his digital wallets, mostly filled with memecoins, have lost a staggering $60,000 from the $150,000 he had built up over the past five years.
The volatility of digital currencies has intensified recently, influenced by Trump’s pro-crypto rhetoric post-election and his sweeping economic statements, causing turmoil for both small and large investors alike.
Such erratic behavior is particularly evident in memecoins, which are cryptocurrencies lacking intrinsic economic value, created out of thin air in response to a viral internet trend or a charismatic personality.
Understanding ‘Conflicts of Interest’
Unlike Bitcoin, the leading and more reputable digital currency that has reached new heights since Trump’s election, memecoins are primarily driven by fun and speculation within the crypto community.
Last weekend, it was Trump’s trade threats against Canada and Mexico that sent these memecoins into a downward spiral. In a panic, investors sought refuge in other assets.
On that day, Bitcoin fared relatively well, losing just 6%, bolstered by Trump’s plans to create a national reserve in the cryptocurrency.
However, Ether, another credible cryptocurrency, suffered a 26% loss, alongside the memecoins.
Despite the turmoil, Nick remains optimistic, believing these currencies are poised for another upswing similar to the trend seen in 2021.
“It’s a bubble,” cautions Larisa Yarovaya from Southampton Business School in England. “If it bursts, the contagion effect could ripple through the entire crypto ecosystem and beyond,” she adds.
Yarovaya also highlights the risks posed by “powerful individuals” who might exploit the trust of their followers for personal gain, leading to significant ethical dilemmas.
Her focus is on Donald Trump, who introduced his own memecoin, ‘Trump,’ just prior to his inauguration, raising serious ethical concerns during a time when the crypto community was eagerly awaiting his direction.
Rapid Gains and Their Consequences
Statements from influential figures like Elon Musk can also lead to drastic price shifts, particularly for dogecoin, a cryptocurrency he openly supports.
“When Musk speaks or tweets, the price of a cryptocurrency can skyrocket almost instantly, fueled by the fear of missing out (FOMO),” explains Stan, a 28-year-old public affairs consultant who chooses to stay anonymous.
For him, investing in memecoins feels akin to “buying a lottery ticket.”
Savva, a research assistant at a London university, knows this all too well. “The first time I invested in a memecoin, I made $700 in just two minutes: that’s what got me hooked,” the 26-year-old admits.
This thrill can lead to anxiety. “Often, I couldn’t hold a conversation because I was worried about my investments,” says Savva, who even developed a trading robot for memecoins, which ultimately failed. “I paid a heavy toll, both physically and mentally.”
While he still believes in the potential of cryptocurrencies to liberate individuals from traditional financial systems, he has since walked away after losing all $5,000 he initially invested in memecoins.
With a sigh, he reflects, “It’s always too late when you realize it.”