We have to accept we now live in an overly financialised world, where trading tickers provides you with more purchasing power than producing actual goods and services.
It’s not a situation I agree with hence my focus on Bitcoin, but it’s a reality we all have to live with, and we need to leverage it, or someone else will. I get the rationality of it; we all love the idea of wealth without work or getting that lucky break.
These moonshots used to be a playground for stocks; betting on the right companies or news could net you big wins, but as stocks hit new all-time highs, the chances of that reduce.
So people look further out the risk curve, and when the market is demanding more volatility products that offer that will formalise eventually, it just happened to be in the form of altcoins.
A sort of derivative market closely tethered to Bitcoin. Having had my shitcoin phase, I know what these products are about; I researched them, bought them, and used their services, and after some time, I grew to understand their faults.
The game presented versus the game that is being played.
The game we see at face value is where retail can get into revolutionary cutting edge tech early and profit from their early-stage bets. As venture capital would do with startups, you can do on the retail level and benefit from the upside; now that there are no middlemen or regulations, you have open access to the latest projects.
The game played, however, is pretty much the same; VCs, founders and angel investors get in even earlier with their pre-mine allocations. Once the coin is live on the open market, these insiders dump on retail without achieving product-market fit.
All they have to do is continuously spend on marketing and feign some milestone achievements that no one holds them to; they’ve already made their return, now they’re simply bleeding out the rest of their pre-mine, seeing how far it can go. Retail only hope that they can get in before the last investor in a game of musical chairs.
This is the altcoin game in a nutshell, but even that seems to not be scummy enough for this market of unregistered securities.
Are we taking the meme to the extreme?
In any system where the incentives are corrupt, we will see further corruption down the line. This is true in the fiat system, and it’s true in the altcoin system. These layer one protocols are only there to funnel capital to centralised sources, so why should any token built on opt of it act any differently?
As they say, the fish rots from the head, and meme coins seem to be the tail end of the fish.
Recently meme coins have become more popular than mainstream cryptocurrencies, with two meme cryptocurrencies, Shiba Inu and Dogecoin, are now among the top 10 by market value. To put this into perspective for you, both these coins have a 25 – 30 billion dollar market cap.
These market caps are more than the GDP of a country like Iceland. These market caps are more than LG electronics and Pinterest, large established technology companies that have products we use today and have millions of users.
Can you not see how out of touch with reality these meme coin valuations are?
What are meme coins?
Meme coins are those cryptocurrencies created to leverage specific internet trends. These coins could be inspired by popular social media jokes, sarcasm or puns. According to the data aggregation site Coinmarketcap, at present, there are about 124 meme coins. Meme coins have made headlines for their price appreciation, with tokens such as Shiba Inu and Dogecoin running up into the top 10 by market cap.
An event I think showcases more than altcoin proponents would like to admit. I think that meme coins expose the narrative of functionality or future product-market fit is where the value comes from or how these assets are priced.
Meme coins are the momentum trading on steroids.
So if these meme coins have no use, no function and no product-market fit, why does the price keep rising? Why are these meme coins worth so much money?
It’s because none of these coins prices is based on any fundamentals. It’s pure guesswork, and how they’re set out their supply and token issuance rate, that’s it. The token values is based on financial engineering, and I’ve yet to see a blockchain with a use case and business model that makes any sense or reason why you would want to hold their token.
They are meme’s with better marketing, in my opinion, sort of like Linkedin memes; they are memes for people who want to pretend to be tech entrepreneurs or finance entrepreneurs, nothing more.
If market cap is the measurement of success for projects that will probably not be around in a few years, then judging the crypto market today, anything under the top 10 is a complete waste of time, regardless of their functionality.
Since these networks functionality is tied to how much value it can capture, if a meme coin can do it without many functions, then by definition it renders the entire space rather use. All these coins rely on hype and momentum trading to pump up their prices and valuations, meme coins simply found an easier way to do it.
No need to hold AMA’s and pretend to be working on software, release white papers or upload code on github for review meme coins are free of all that fluff work and can focus all it’s efforts on marketing to get in new suckers. In fact meme coins seem to be far better at using their treasury to pump up their then some of these “serious” projects.
How are Meme coins different from mainstream cryptocurrencies?
Mainstream cryptocurrencies claim to have some niche they focus on or a utility that is unique to their project. They pretend to have been created with specific technology to boost trading and transaction in the crypto market, but really they are all meme-like in nature.
I would say altcoins can be divided into the following
- Unfinished products
- Products with zero product-market fit
- Products built by naive founders
- Meme coins
- Pump and dumps
Either way, you dress it up; it’s all the same in the end, a vehicle to pull more capital from the public markets into the hands of a group of insiders, be it an anonymous dev or powerful private interest groups and institutions.
The only difference is meme coins cut out all the marketing bullshit and get straight to the point, which in fact, I can appreciate that level of honesty.
Meme coins have not been created with a specific use or inherent value; they are there for the “LULZ bro”. The meme coins are devoid of fundamentals. They are more of a community-driven phenomenon, a form of expression of sorts for millennials and the Gen Z generation discontent for the financial system.
The idea behind meme coins is that the game is rigged, and an asset doesn’t need to have any fundamental value for it to be worth a certain amount of money. A powerful statement I completely agree with, but I also think that shows that all the other altcoins also have no value and are based on the same principles.
Exchanges are also complicit in the growth of meme coins, as their business model relies on fees. If they see a coin with heavy retail interest, they know these traders won’t consider the fees they need to pay to access these markets. Exchanges actively list these coins to bait in more users or drive up trading activity on their platforms.
It has all the bells and whistles of reckless gambling if you will, but I don’t see any difference between meme coins and altcoins other than the marketing terms.
Just like memes, meme coins have no staying power.
Memes have a lifespan; they burn brightly for a few weeks or months and then fade into nothingness. They are tossed on the pile with the rest of the trends that have become socially irrelevant. If you look at the memes you enjoyed five years ago; they are probably not the same ones you enjoy today. As is the case for memes, so too will it be the case for meme coins; eventually, the joke gets old; eventually, the holders want to take profits; eventually, the shoddy monetary policy dilutes holders to a point where it needs more capital to increase the nominal price.
Once that happens, the meme coin will hit its ouroboros phase. First, the meme coins will start to consolidate into one, perhaps the one with the longest track record or the best relative monetary and currency issuance policy.
Then once that consolidation phase is done, it will feed on itself and continue to dilute what value it can retain by a larger and larger amount of coins. Then as fickle as the traders who jumped into that coin bid it up without any price sensitivity, they will do the same in bidding it down, and the token will slowly fade into total obscurity.
If you want to trade meme coins, by all means go ahead don’t let me stop you. If you don’t need the money and want to gamble, have fun, but If you’re actively trying to invest in these meme tokens, you’re sadly NGMI.