Ai16z, the viral AI-focused Solana meme coin, suffered a harsh reversal and devolved into a local bear market.

This decline was mostly due to profit taking, with the token up more than 20,500% from its November low. Its market value peaked at $2.3 billion earlier this week.

Ai16z (AI16z) to a low of $2 on Saturday, January 4, down more than 21% from this month's high of $2.50.

Nansen data shows that the number of smart money holders fell from 118 in November to just 80 on Saturday. Their combined holdings dropped from more than 700 million tokens to less than 500 million.

Based on their strong historical performance, smart money investors are usually more sophisticated than retail investors. These investors have been known to buy cryptocurrencies and stocks early and leave before they go into the divestment phase.

Another evidence of this distribution is that the number of ai16z tokens on exchanges has risen in the past few days. They went from 12.32 million last week to more than 43.65 million on Saturday. Most of these tokens are on exchanges like Gate, Raydium, MEXC, and Orca.

Meanwhile, there are signs that many of ai16z's most profitable traders are starting to take profits. The most profitable investor made a profit of $148 million and sold $4.6 million. He still keeps 96% of the investment.

The three most profitable investors made $63 million, $57 million, and $44 million, respectively. These investors have maintained their positions. However, most of the other profit leaders have sold many of their tokens.

Ai16z price breakdown

In addition to profit taking, the continued decline in the price of ai16z is likely due to the Wyckoff method. This popular theory explains how assets rise and fall in four stages: accumulation, markup, distribution, and markdown.

The chart above shows that the token remained in the accumulation phase in early November and then entered tokenization in December. This tokenization occurred when cryptocurrency investors embraced the fear of missing out.

Therefore, it has now moved into the distribution phase followed by the markdown phase, which is characterized by more selling than buying (as shown in the charts above). As such, there is a risk that the token could drop to $1, a 50% drop from the current level.