The 90s TV show Seinfeld — which is widely considered one of the greatest comedies of all time — was famously “a show about nothing.” Unlike most other sitcoms of that era, there was no overarching story across 9 seasons. It wasn’t about friendship or love or family, and the characters never grew or changed. This was such a core part of the show that it became one of the few continuous plotlines as a show within the show.
Being about nothing was a great setup to highlight the absurdities of daily life and an effective way of questioning social mores. This is also why it’s one of the most quotable shows of all time.
Memecoins, to me, are “an asset class about nothing.” Unlike Bitcoin, which is a powerful form of money insurance, or the native coins of PoS chains, which secure a smart contract platform, or DePIN utility coins, which empower a useful service, or DeFi governance coins, which underwrite a financial product, memecoins have no purpose other than being a thing to buy and sell.
They are speculation for speculation’s sake.
Speculation is also part of the appeal of every other kind of cryptocoin, not to mention stocks, bonds, land, and countless other financial products. But speculation in those assets has a point: it enables price discovery and capital formation in the hope of someday achieving utility. If a chain like Ethereum hopes to one day become the global settlement layer — which I think it can — then we need speculation in ETH. The more valuable ETH becomes, the more secure the underlying platform, so the more activity it can attract, speculative and otherwise.
Speculation in every other kind of asset has a north star. There are still scams, booms and busts, and asset-specific controversies, but the market will ultimately reward the people who ignore the shenanigans — as opposed to the ones who embrace them. The people who bought Bitcoin a decade ago and simply held know this. As do the ones who bought Nvidia and didn’t get shaken out by the Covid crash, or anyone who bought a house in Austin in 2009.
Memecoins have no north star. Their supporters talk about “tokenizing attention” and “a new way to monetize content” but this is nonsense. Attention is by definition fleeting, particularly on the internet, and specifically for memes. Remember Peanut the Squirrel? Its memecoin is down 90% from peak.
The content claim is also comical, because the unit economics of content has always been low — your Instagram feed is borderline worthless. Memecoins have almost no content, they are often just a name and a picture. People create all sorts of content to manipulate the price higher, but content that exists to pump a coin is very different from content that is in and of itself useful. It’s self-referential bullshit whose entertainment value is tied to the value of a coin that will likely end up worthless.
Like Seinfeld, part of the appeal of memecoins is as a form of satire. Memecoins are effective at highlighting the rest of crypto’s tendency to overpromise and underdeliver. They are a nice contrast to the vapid seriousness of the hard-money-Bitcoin-will-cure-cancer crowd (not to mention most of Wall Street, which has its own hypocrisies). Memecoins are often funny, and in my essay attempting to steelman them I covered how comedy is society’s way of preparing itself for change. (Seinfeld was really good at this).
So it would be one thing if memecoins were just random assets that went benignly up and down, with some people making money while others lost. Then they’d just be like a casino, or fantasy football. Part gambling, part community, part fun. I think I wrote a blog post somewhere many years ago explaining Dogecoin as just that. But there is a sinister side to memecoins.
Due to the openness and censorship-resistance of public blockchains, creating new memecoins is trivially easy and cheap. Not surprisingly, people create memecoins for no other reason than to extract a few hundred bucks from unsuspecting noobs before it goes to zero. They create websites and social media profiles to pretend like they are launching a new meme, one they’ll work to promote and “grow the community around”, but they have no intention of doing any of that. They’ll take the money and run.
When you have an asset class about nothing, it’s impossible to tell the difference between these disingenuous coins and the real ones — whatever that even means. I’m confident this type of industrial extraction is now the majority of meme activity. I’ve met people who do it for a living and VCs have shared tales of being pitched this as a business.
Next, new memecoins are prime targets for what crypto people call “sandwich attacks” and Wall Street calls front-running. This is a criminal activity that is easier to do on public blockchains, because everyone is pseudonymous, and best directed at memecoins, because they have no point. If I’m trying to buy land or a stock — or ETH — then I’m going to care where I buy it and how much I have to pay. Having a point means there’s a ceiling above which any asset is not worth owning.
But memecoins are pointless, so you could justify buying one that’s already doubled because you think it’ll quadruple. This helps explain why some can gain astronomical valuations in the short term. But that “I’ll pay anything” attitude makes memecoin traders more vulnerable to front-running.
Lastly, there are groups of people who routinely coordinate to execute pump and dump schemes on specific memecoins. They time their buys and sells, “paint” and “bang” the tape, and bribe influencers to promote their coin. Everyone in crypto knows people who do this (but shamefully look the other way).
This is criminal activity, and what I mean when I refer to the organized crime syndicates who really drive memecoin prices. If you don’t believe me, just listen to this interview where a key participant openly admits to it, or read up on how Dave Portnoy (a famous non-crypto person with 3.7m Twitter followers) routinely participated. There’s clear data of lone individuals making crazy profits from clearly disingenuous behavior.
This kind of illicit behavior is possible for any asset. People front-run stock trades and collusion to manipulate land prices is as old as time. But neither activity mattered to the long-term owners of Nvidia stock or Austin real estate because those investments had a point. Memecoins don’t, so they attract the worst kind of market participants. Tellingly, it’s often hard to tell the difference between the crooks and the idiots.
What, pray tell, does a good memecoin trader look like?
About the only thing that wasn’t universally beloved about Seinfeld was the ending. Spoiler alert, but the show ends with the protagonists being sent to jail for being bad people. Putting them literally on trial was mostly a device to bring back old characters and revisit previous hijinx, but it fell flat, possibly because it tried to give a moral ending to a show intended to not have any.
Memecoins receded to the background after the back-to-back embarrassments of the Trump coins and the Libra disaster but are now back in focus because Pump.fun, the most popular memecoin launch and trading platform, is about to issue its own token. Why? To cash out, drive more activity, and let others profit from the grift.
To me, this is a bit like the mob going public with a chain of fronts that cover up its illegal casino games. It’s bad form and — like the Seinfeld ending — contrary to what this whole movement was meant to present.
