What happened
Today, cryptocurrency investors are seeing some consolidation following a rally this week that brought the crypto sector above the important $1 trillion valuation mark. With the overall market down 5.5% over the past 24 hours as of this morning's session, it's clear some profit taking is in order after a rather rosy start to this week.
However, for meme token investors, today's decline has been much more steep. Shiba Inu (CRYPTO: SHIB) and Dogecoin (CRYPTO: DOGE), two of the most prominent meme tokens, dropped 10.1% and 8.5%, respectively, over the past 24 hours as of 10:45 a.m. ET. Other meme tokens that have gained in popularity with investors of late, such as ApeCoin (CRYPTO: APE) and STEPN (CRYPTO: GMT), also saw double-digit declines over the same time frame.
Accordingly, many investors may be asking, "What gives?"
Well, today's decline actually began yesterday afternoon, following a rather interesting Tesla (NASDAQ: TSLA) earnings call. CEO Elon Musk noted he sold 75% of his Bitcoin (CRYPTO: BTC) holdings over the past quarter, in a bid to boost the company's liquidity in the face of supply chain issues and other macro factors. While Musk also reiterated his support for Bitcoin over the long term on the call, suggesting he may add to his position in the future, the electric vehicle maker did previously retract the ability for the token to be used as payment for Tesla vehicles following a short-lived experiment.
Musk also stated that Tesla hasn't sold any of the Dogecoin it holds. How much is held, and whether this token will be used for anything other than merchandise sales in the future, remains uncertain.
So what
Musk's massive Bitcoin divestiture sent a pretty strong signal to the market that Tesla's view of Bitcoin as a long-term investment has shifted. In a tweet he sent in May of last year, he noted, "Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy." As with anything Musk says, investors who didn't take these comments with a (big) grain of salt have been disappointed.
That said, his apparent support for Dogecoin (relative to Bitcoin) is notable. In previous interviews, Musk has indicated that his support for meme coins has been driven by a feeling that he's helping out smaller investors by remaining bullish. Whether that's an indication this bullish stance will hold forever or -- like his views on Bitcoin -- is a moving target remains to be seen.
Today's price action among most cryptocurrencies, and especially meme tokens, suggests the market isn't buying any of it.
Now what
The fact that a single man can have such an impact on a $1 trillion sector is rather incredible. Investors considering any of these highly volatile digital tokens ought to consider that reality before jumping in. Indeed, Musk's unpredictable nature adds to the potential volatility these tokens could see moving forward.
Given where we're at in the market cycle, and the macro headwinds that remain, today's sell-off appears to be warranted. I'm sure meme token investors will be watching how Musk pivots from here. If one thing is certain, it's that nothing is a sure thing in the world of memes.
