The Memecoin shenanigans have just begun

For all the goofiness, memecoin fever has been embraced by some corners of the crypto industry. In search of large returns, a small number of hedge funds have invested in memecoins this year. Other investment firms, such as Pantera Capital, consider memecoins to be a “Trojan horse” probably introduce new people to crypto.

The idea, says Robert Le, a crypto analyst at market data company PitchBook, is that memecoin activity on a particular crypto network translates into a readymade audience for future projects with practical utility built on to the underlying infrastructure itself. “It brings sort of tangential value to other real projects,” says Le.

But others say the memecoin phenomenon is likely to harm crypto by perpetuating the view that the industry is nothing but a haven for gamblers and grifters. “At best, it looks like a risky casino. Or a series of false promises masquerading as a casino,” he wrote Eddy Lazarin, CTO in the crypto division of the venture capital company a16z, in April. “This greatly affects adoption, regulation/laws, and builder behavior. I see the damage every day. You should too.”

The irony is that memecoins have largely escaped the attention of US financial regulators under the Biden administration, while entrepreneurs trying to establish meaningful crypto use cases have remained. intended for investigationsaid Chris Dixon, head of a16z crypto, in an interview with WIRED last year. “The dumbest cryptocurrencies, like Dogecoin, which is completely meaningless and stupid — it’s perfectly legal,” Dixon said.

There is a potential future in which memecoins could be used by entrepreneurs as a vehicle to raise capital for serious crypto projects without giving away equity, Khan says. But for now, they represent financial speculation in its rawest form. “We’ve always been in this place where, as an industry, we’re seen as a decentralized version of Macau or Vegas. This does nothing to help in that way,” he says.

Whether or not memecoins harm the prospects or reputation of the crypto industry, a crackdown of some form is likely, industry observers say, such is the amount of money flying around and the level of risk for traders.

“Memecoins is absolutely a PvP game. For someone to win, someone has to lose. Many of the people who can least afford to lose money will be the ones who lose the most,” says Khan. “There is going to be a crackdown at some point.”

Because memecoins defy easy comparison with traditional investment assets, says Le, they are perhaps better regulated by gaming authorities. “It’s basically unregulated gambling. It will probably come down to the domain of whoever is the regulator of the game in each country,” he says. “Through the grapevine, I’ve already heard some state regulators in the United States talking about doing some regulation.” Pump.Fun declined to comment.

Until then, however, memecoins will continue to do their thing. On December 5, Hailey Welch of “Hawk Tuah” fame flipped a coin, which lost 95 percent of its value in the first hours of trading, leading to an apology. That same day, the merchants drew money PNUTa coin modeled after the a celebrity squirrel euthanized late last year by the New York State Department of Environmental Conservation, currently valued at over $1 billion.

Since launching MOTHER, Azalea has been promoting the coin non-stop to her 7.7 million followers on X, through a flurry of provocative images and the meme posts. Part of his plan to ensure his coin has longevity – a rarity in memeocins – is to establish some sort of utility for it. The coin is now accepted as payment from a telecommunications startup in which Azalea has a stake. “I think I’m here for the long haul. And I will be,” he says.

Eventually, Azalea hopes to leverage memecoin into other business opportunities, including setting up her own venture fund, demonstrating to future partners and investors that she can identify and ride the zeitgeist.

“I’ve always been a big shitposter,” she says. “I like to bait, to troll, to say things that are a little provocative. I like to say things and move in ways that I know can be memeable … It’s about virality, ultimately.”