Meme Coins and Macro: U.S. Credit Card Holders Facing the Most Stress Since 2012
The percentage of credit card loans in serious delinquency has surged to its highest level in over a decade.
This could indicate a challenging period ahead for the U.S. economy and speculative activities.
In the last four weeks, popular meme coins have experienced a 20% drop.
American consumers are increasingly struggling to meet their credit card loan payments, painting a bleak picture for both the economy and speculative investments in non-serious assets like meme coins.
According to recently published data from the New York Federal Reserve, the percentage of credit card loans in serious delinquency – those with outstanding balances for more than 90 days – reached 10.69% in the first quarter. This is the highest level since the second quarter of 2012. Although balances declined by $14 billion to $1.12 trillion during the first quarter, they remain 13.1% higher than the previous year.
Cracks in consumer finances are among the most concerning economic indicators, as pointed out by Austan Goolsbee, President of the Chicago Federal Reserve Bank. He stated earlier this year that it often signifies that “things are about to get worse.”
Increasing levels of debt lead to less disposable income and a reduced appetite for investing in risky assets like meme coins. A research paper published in the American Economic Review by Luigi Guiso, Tullio Jappelli, and Daniele Terlizzese explains that borrowing constraints can cause individuals to allocate a smaller portion of their wealth to illiquid and risky assets.
Interestingly, meme coins, considered some of the riskiest digital assets, have faced significant pressures in the past four weeks. Popular meme coins like DOGE, SHIB, and WIF have dropped over 20% compared to Bitcoin’s 2.4%, according to Coingecko data.
While consumer finances are weakening, it does not necessarily spell the end for meme coins, as “degens” could persist. “Degens,” or individuals engaging in high-risk speculative trading in the crypto market, are similar to early internet adopters, according to AllianceDAO’s Qiao Wang. He characterizes them as “financial risk-takers who are brave enough to try unproven products.”
Degens typically do not pay much attention to metrics, tokenomics, fundamental analysis, or technical analysis, as noted by Ledger Academy. They are “committed to the projects and communities they invest in.”
Kelly Greer, Head of Americas Sales at Galaxy, believes that despite rising debt levels, degens are likely to remain active in the market.
“60% of Americans hold credit card debt, and this figure continues to rise. Not coincidentally, gambling and degeneracy are also widespread. @zerohedge may argue that the economy is doomed, but I disagree that memes will die with it. Degens will gamble longer than the economy will remain solvent,” Greer stated on X.