Dogecoin has plummeted by 20.6% this week, erasing much of its recent gains following the Federal Reserve’s updated interest rate plans. Once celebrated for its 252% surge in 2024, the meme coin hit a low of $0.267—its lowest in over a month.

The decline was triggered by the Federal Reserve’s December 19 announcement, which reduced its planned 2025 interest rate cuts from four to two. Investors, bracing for a stricter economic environment, pulled out of riskier assets like cryptocurrencies.

Federal Reserve Chair Jerome Powell explained, “From here, it’s a new phase, and we’re going to be cautious about further cuts.”

Dogecoin was not alone in its struggles. The broader cryptocurrency market faced significant sell-offs, as investors recalibrated their portfolios amid concerns about reduced economic stimulus. For a market that is driven heavily by speculative enthusiasm, the Fed’s stance delivered a sobering reality check.

Dogecoin’s sharp decline is a reminder of its highly speculative nature. Analysts like Ben Kurland of DYOR Labs described meme coins as “the sugar rush of the crypto world—fun, flashy, and easy to digest, but not exactly the healthiest long-term play.” While Dogecoin retains its status as a top cryptocurrency, with its price still five times higher than at the beginning of the year, the recent downturn has shaken investor confidence.

Despite the dip, some analysts suggest this correction could pave the way for a potential rebound. Dogecoin creator Billy Markus, also known as Shibetoshi Nakamoto, was characteristically reticent when asked about the coin’s future. “No idea,” he responded.

Dogecoin’s future might also hinge on broader macroeconomic and political developments. Investors are looking toward the incoming Trump administration and potential market-boosting statements from figures like Tesla CEO Elon Musk to rekindle bullish sentiment.

While this week’s plunge highlights Dogecoin’s volatility, its journey in 2024 has been nothing short of remarkable. Starting the year with a significant upward trajectory, the coin’s 252% rise demonstrated its enduring appeal among retail investors. Additionally, a price prediction from CoinCodex sees Dogecoin reaching a monthly high by February 2025 and eventually a high in March.

With Federal Reserve policies tightening and market corrections dampening enthusiasm, its next steps may hinge on external forces. For now, Dogecoin serves as a reminder of the cryptocurrency market’s unpredictable highs and lows.