Speculative Bubble Bursts in Memecoins

The January bursting of a massive speculative bubble in memecoins was a significant factor in the recent crypto market selloff.

The declines accelerated this week, influenced by an increasing risk-off sentiment in the previously vibrant stock market.

As of Thursday, the Nasdaq was down more than 2% shortly before the market closed, totaling a decrease of roughly 7% over the past few sessions. Today’s losses were primarily driven by chipmakers following Nvidia’s (NVDA) disappointing fourth quarter earnings report, with NVDA dropping by 5%.

The stock market correction also resulted from many leading stocks selling at high valuations after months of sustained gains. Additionally, President Trump’s persistent tariff threats — including punitive measures against Mexico, Canada, and China set to take effect Tuesday — contributed to the current downturn.

Quinn Thompson, founder of hedge fund Lekker Capital, advised, “Maximum caution is warranted in risk assets.” He noted that inflation data is too high for the Federal Reserve to consider cutting rates soon, long-term inflation expectations are rising, and U.S. economic data suggests that the recent boost was likely a ‘dead cat bounce.’

Regarding cryptocurrencies, Thompson stated that despite all the positive news, there hasn’t been much upward price movement. He pointed out that investors seem to have forgotten that bear markets are a reality. He anticipates Bitcoin could target the $70,000 mark by the end of March.