Meme coins led crypto's rally last year. Now they may be hurting the entire crypto market.

By Frances YueWelcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.Meme coins were having a moment not too long ago - but it seems that it has passed, for now.Last year, it was mostly bitcoin and meme coins that led digital-asset gains. In 2024, bitcoin (BTCUSD) rose 119.6%, while the Elon Musk-endorsed dogecoin (DOGEUSD) rallied 252.8%. Another dog-themed meme coin, shiba inu (SHIBUSD), advanced 104.5% during the same period, while bonk coin (BONKUSD) rose 132.1%. Pepe coin (PEPEUSD), which was inspired by the "Pepe the Frog" meme, surged 1,444.7% last year.Though most of these meme coins don't have much economic purpose, they outperformed many tokens that were supposed to have more use cases last year - including ether (ETHUSD), the token behind the Ethereum blockchain, which hosted the most decentralized applications among all blockchains. Ether rose 53% in 2024.However, so far in 2025, most if not all meme coins have tumbled, with controversies and scandals around certain coins weighing on the entire crypto market. Meme-coin market capitalization peaked on Dec. 8 at $137 billion, but has since fallen 59% to around $56.2 billion as of Wednesday.I caught up with Alice Liu, research lead at CoinMarketCap, about the latest on meme coins.Find Frances Yue on X to share your thoughts on meme coins.The meme-coin correctionMeme coins have tumbled as "people are getting tired because they think the game is rigged," Liu noted."The whole idea at the beginning for the meme coins was the fair launch: Everyone has an opportunity and everyone can participate. ... You can still get that 10x, potentially 100x opportunity even if you don't [have] any resources in crypto or insider knowledge," Liu said. "That is often not the case any more."As the meme coin libra, once promoted by Argentina President Javier Milei, quickly rose and fell earlier this month, investors have been questioning whether insiders have profited from the trade.Milei on Feb. 14 endorsed the little-known cryptocurrency in a post on X shortly after its launch earlier that day, which led to a brief rally for the token. A few hours later, however, Milei deleted the post, and libra soon lost over 90% of its value.Analysis by blockchain-intelligence firm TRM Labs showed that crypto wallets that were associated with libra's creators received 1 million tokens after its launch and then put the tokens in a liquidity pool, where they could trade the asset for others. Such wallets later withdrew over $90 million worth of solana (SOLUSD) and USD coin (USDCUSD) from the pool, contributing to the decline in libra's price, the TRM analysts noted.Milei has been facing impeachment calls, while a judge in Argentina was selected to investigate allegations of fraud against the president, who has denied the allegations.Meanwhile, some traders that were new to crypto but invested in politician-linked meme coins have suffered losses, which have deterred them from investing further in crypto, Liu said.On Jan. 17, Donald Trump launched his own namesake meme coin just days ahead of his inauguration as U.S. president. Two days later, Trump's wife, first lady Melania Trump, launched her own eponymous token (MELANIAUSD).The Trump meme coin (TRUMPUSD) soon rallied 1,108%, from around $6.20 at launch to a peak of $75.35 on Jan. 19. However, it has since tumbled, trading at around $12.70 Wednesday afternoon and down 83% from its record high.According to Chainalysis, roughly 50% of Trump and/or Melania token holders had never bought a token on the Solana blockchain before, excluding solana and stablecoins. Almost half of the buyers created their crypto wallets the day they purchased the tokens, noted the Chainalysis analysts.Losses for the Trump tokens may have hurt the enthusiasm of the new crypto entrants and deterred them from exploring other parts of the Solana ecosystem, Liu said.Crypto in a snapBitcoin (BTCUSD) lost 14% over the past seven days to trade at around $84,644 at last check Wednesday. Ether (ETHUSD) declined 12.8% over the past seven days to around $2,362, according to Dow Jones Market Data.Must-readsNorth Korea's $1.5 billion crypto hack exposes bitcoin's weakness (MarketWatch)Trump was supposed to be good for crypto. So why is bitcoin in danger of falling toward $70,000? (MarketWatch)MicroStrategy now owns $47.4 billion worth of bitcoin after latest purchases (MarketWatch)Crypto exchange Bybit suffers $1.4 billion hack. Here's why it's troubling for the industry. (MarketWatch)A new crypto clash looms for Elizabeth Warren (Politico)Crypto Trader OKX Pleads Guilty to Running Illegal U.S. Operation (The New York Times)-Frances YueThis content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.