Cryptocurrencies continue to be unpredictable and their volatility is extreme. But the bitcoin fever of 2024 is not the same as that of 2021, when these devices left specialized circles to assault a world mired in pandemic uncertainty. The new explosion of cryptocurrencies, although breaking records, has a precedent to rely on. And there are trends that are being repeated.
Between 2020 and 2021, when bitcoin went from being worth about 6,000 euros per unit to more than 60,000, it boosted an entire economic ecosystem around it. There were companies dedicated to exploiting it, but also thousands of alternative cryptocurrencies or ‘altcoins’. These proposed improvements to bitcoin to increase the speed of transactions, fees, mining or even its environmental impact.
Altcoins began to receive investment when the price of bitcoin was around what would be its maximum at that stage. It is believed that the first impulse came from the large holders of bitcoin (also called whales and with the ability to influence the entire market), who decided to diversify their profits into side projects. Small investors followed, raising the price of altcoins and making the movement of large investors profitable.
But if bitcoin had been characterized by being able to double the profits of an early investor, altcoins showed even greater volatility, with increases of up to 10 times their value. The solidity of the project behind them did not seem to have much importance within the speculative maelstrom.
However, the crypto market had one more turn in store. When the value of altcoins skyrocketed, another type of cryptocurrency, even more unpredictable, emerged. They were memecoins or joke coins and they were not based on anything. They did not promote any project beyond the troll phenomenon so characteristic of the Internet. The most famous was dogecoin, promoted by Elon Musk and based on a meme that shows a dog listening. It became the fourth most valuable cryptocurrency on the market in 2021.
Memecoins once again blew up the market, skyrocketing their value while the world was stunned by an investment without any reasoned support. However, this entire process, from bitcoin to memecoins to altcoins, is being repeated in 2024. The best proof of this is the ‘pedocurrency’ (fartcoin), which has multiplied its value by 25 in a month and a half.
“The pedocurrency is a currency created to determine your luck. Each day, one of the pedocoin owners will receive 50 more coins from the team. The lucky winner is selected from a list of holders,” its creators say on their website. They assure that in addition to the joke, they assure that it has a technological background and that it wants to create a community around it, allowing the sending of memes, making transactions activated with the sound of flatulence or developing its own artificial intelligence.
The pedocurrency may seem like one more anecdote within a movement full of apparently inexplicable events. But logical or not, it is also proof of the amount of capital that moves in this new crypto fever: its rise this week has made its market capitalization (the total money invested in it) reach 700 million dollars, more than 38% of publicly traded US companies. Companies with workers, products and years of experience that are worth less than a joke cryptocurrency.
Who takes meme coins seriously?
For many, memecoins are simply a deregulated financial instrument that is making a handful of crypto investors even richer. But they are also prompting some experts to study why someone would want to deposit money in something like pedocoin or dogecoin.
One of them is Murad Mahmudov, the founder of one of the crypto funds that collapsed in the crash in 2022. Since then he has become one of the biggest defenders of meme currencies as a reaction to altcoins that, supposedly, do have a project behind. He denounces that the latter usually come to the market with prices inflated by their own founders, by their venture capital investors and by crypto influencers, paid to talk about them with the aim of deceiving retailers.
“I think they deliberately push altcoins to extremely high initial valuations so that later, even after the initial 90% drop, which is inevitable, early investors continue to achieve 1000% returns, while retailers mistakenly think that it is a bargain at a discount,” he explained in a recent conference at Token2049, one of the most important events in the global cryptocurrency and blockchain technology industry.
In that sense, memecoins would be a “counterattack by small investors, believers in the crypto movement but who feel deceived by the industry generated around them. In them, it is venture capital that arrives late to the investment, explains Mahmudov.
Furthermore, he says that their potential as “mini religions” should not be overlooked. “If you leave out the zoomers [miembros de la generación Z] from Twitter, you’ll understand that most retailers don’t really want to gamble and rotate constantly. “They want to buy and hold something they identify with,” he says: “They want to believe in something, and the term ‘meme currency’ is a misnomer. It’s only 30% about the meme itself, and 70% about the people. So what are meme coins really? “They are communities that use the meme as their symbol and their flag.”
They want to buy and hold something they identify with. They are communities that use the meme as their symbol and their flag.
Those who manage to “last,” the crypto guru defends, will become “cults.” “What is a cult? “It’s a group of people who are extremely passionate about a cause.”
Of course, Mahmudov makes it clear that all this will not be applicable for “99.999%” of the majority of memecoins, which will be nothing more than “extreme bets.”
Not cryptocurrencies but “crypto gambling”
If even the most staunch cryptocurrency influencers recognize that the vast majority of cryptocurrencies are gambling, perhaps it is not strange that the proposal has already arrived for them to be called exactly that from the public. This is what Sumar has proposed.
The parliamentary group led by Yolanda Díaz has presented a proposal for public administrations to refer to these artifacts as “crypto bets” as long as their value “depends exclusively on speculation.” Almost all cryptocurrencies would fall into this group, from bitcoin to altcoins and memecoins. Only those from the group known as stable cryptocurrencies or “stablecoins” would be left out, whose value is linked to a legal tender currency.
The value of these “crypto bets” is not tied to any tangible good or underlying asset, making them extremely volatile and susceptible to manipulation.
“Unlike backed assets, the value of these “crypto bets” is not tied to any tangible asset or underlying asset, making them extremely volatile and susceptible to manipulation. Its value depends exclusively on speculation, with a dynamic similar to that of games of chance,” Sumar emphasizes in an amendment to the Law for the creation of the Independent Administrative Authority for the Defense of the Financial Client that will be voted on in January.
The group argues that this name would help investors, especially less experienced ones, to better understand the nature of these financial products and make more informed investment decisions.
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