Despite all the craziness, memecoin fever has been embraced by some corners of the crypto industry. In search of outsized returns, a small number of hedge funds have invested in memecoins this year. Other investment firms, such as Pantera Capital, view memecoins as a “Trojan horse” likely to introduce new people to crypto.
The idea, says Robert Le, a crypto analyst at market data firm PitchBook, is that memecoin activity on a given crypto network will translate into a ready-made audience for future projects with practical utility built on the same underlying infrastructure. “It does bring a kind of tangential value to other real projects,” says Le.
But others say the memecoin phenomenon is likely to damage crypto by perpetuating the view that the industry is nothing but a haven for gamblers and scammers. “At best it seems like a risky casino. Or a series of false promises masking a casino,” wrote Eddy Lazarin, CTO at the crypto division of venture capital firm a16z, in April. “This has major consequences for acceptance, regulations/laws and the behavior of builders. I see the damage every day. You should do that too.”
The irony is that memecoins have largely escaped the attention of U.S. financial regulators under the Biden administration, while entrepreneurs trying to establish meaningful crypto use cases have been targeted by scrutiny, Chris Dixon, head of a16z crypto, said last years in an interview with WIRED. . “The dumbest crypto stuff, like Dogecoin, which is completely pointless and foolish, is completely legal,” said Dixon.
There is a potential future where memecoins could be used by entrepreneurs as a means 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 have consistently been in a place where as an industry we are seen as a decentralized version of Macau or Vegas. This doesn't help us in this way,” he said.
Whether or not memecoins are damaging to the crypto industry's prospects or reputation, some form of crackdown is likely, industry observers say. Such is the amount of money flying around and the level of risk for traders.
“Memecoins is definitely 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 must be repression at some point.”
Because memecoins defy easy comparison to traditional investment assets, Le says, they may be best regulated by gambling authorities. “It's basically unregulated gambling. It will probably come down to the jurisdiction of whoever is the gambling regulator in each country,” he says. “Through the grapevine, I'm already hearing some state regulators in the US talking about some form of regulation.” Pump.Fun declined to comment.
Until then, memecoins will continue to do their thing. On December 5, Hailey Welch, of 'Hawk Tuah' fame, launched a coin that lost 95 percent of its value in the first hours of trading, sparking outrage. That same day, traders threw money at PNUT, a coin modeled after the famous squirrel that was euthanized by the New York State Department of Environmental Conservation late last year and is currently valued at more than $1 billion.
Since launching MOTHER, Azalea has relentlessly promoted the coin to her 7.7 million followers on X, via a barrage of provocative images and meme posts. Part of her plan to ensure her coin has longevity – a rarity among memecoins – is to create some sort of utility for it. The coin is now accepted as a means of payment by a telecom startup in which Azalea has a stake. “I plan to stay here for the long term. And I will be too,” she says.
Ultimately, Azalea hopes to leverage the memecoin into other business opportunities — including setting up her own venture capital fund — by proving to potential partners and investors that she can identify and follow the zeitgeist.
“I've always been a big shitposter,” she says. “I like to troll, to say things that are a bit provocative. I like to say things and move in ways that I know can be memeable… At the end of the day, it's about virality.”
