The U.S. economy is facing a challenging period as the percentage of credit card loans in serious delinquency has risen to the highest level in over a decade. This could have an impact on speculative activities, such as investments in meme coins. The data from the New York Federal Reserve shows that the percentage of credit card loans in serious delinquency, with balances outstanding for more than 90 days, increased to 10.69% in the first quarter, the highest since the second quarter of 2012. While balances decreased by $14 billion to $1.12 trillion during the first quarter, they are still 13.1% higher than the previous year.
Austan Goolsbee, the president of the Chicago Federal Reserve Bank, has expressed concerns about cracks in consumer finances being a leading indicator of potential economic downturns. This mounting debt pile can lead to less disposable income and a decreased inclination to invest in risky assets like meme coins. According to an article in the American Economic Review, borrowing constraints can result in individuals keeping a lower proportion of their wealth in illiquid and risky assets.
Despite the weakening consumer finances, it does not necessarily mean a complete collapse in meme coins. “Degens,” or individuals engaging in high-risk speculative trading in the crypto market, may continue to be active. These degens are compared to early internet adopters, as they are willing to take financial risks and invest in unproven products without paying attention to traditional metrics or analysis methods. Kelly Greer, head of Americas sales at Galaxy, believes that degens will continue to participate in the market despite the increasing levels of debt among Americans.
While the future of meme coins and speculative activities remains uncertain, it is essential to be aware of the potential risks associated with investing in such assets. As the economy faces challenges and consumer finances weaken, individuals should exercise caution and make informed decisions when considering investments in speculative assets like meme coins.