A few hours from Elon Musk change your handle to “Kekius Maximus” on New Year’s Eve – a reference to a previously obscure cryptocurrency – its value soared 4,800% to a market cap of $380 million.
It was just the latest so-called meme coin – a cryptocurrency based on a meme or cultural event such as Dogecoin, Shiba Inu or Pepe the Frog – that soared and then, seemingly inevitably, crashed (or completely collapsed) in an affair. of hours.
Some skeptical financial gurus have called meme coins a Ponzi scheme, arguing that they have no underlying value and attract people with little financial experience who then lose their money.
However, savvy small investors and investment funds have not been so quick to write them off, they have invested millions in the space and reaped impressive returns for doing so.
The meme coin industry is estimated to have grown from a value of $20 billion in January 2024 to more than $120 billion by the end of 2024, according to market analysts.
Laurent Parmentier, a partner at crypto investment fund Stratos, which gained backing from Andreessen Horowitz, told the Post that a fund they launched in 2023 that invests specifically in meme coins has eclipsed investments more traditional.
“I think we’re only going to see more and more sophisticated investors…crypto is the best performing asset class in the world and meme coins have been the best performing subsection,” Parmentier said.
Referring to one of the best performing traditional stocks of 2024, he added: “Nvidia’s returns pale in comparison to the returns if you’re ahead in some meme coins…we made 300 times our money.” »
Parmentier explains that meme coins are a way to celebrate and bring more attention to cryptocurrency and its culture – and to reward investors for it, provided they choose the right coin.
“If you were wondering, “How can I benefit financially from Peanut?” “(a reference to a coin based on a New York State pet squirrel that made headlines after being forcibly taken from its owners and destroyed), you would have made a lot of money” , added Parmentier.
Aulden Borthwick, an NYU student who invests in meme coins, says the quick returns they generate are particularly appealing to his generation, saying: “People are frustrated with the way they are treated like traditional investors… Large investors can get rid of traditional investors. »
“But with enough time and effort, someone can make a lot of money launching a new coin,” he explains. “It provides real agency to the average investor.”
And there are many mind-boggling stories to illustrate this point: someone who invested just $66 in Kekius Maximus saw their investment balloon to almost $3 million. They sold for $201,000 and kept $2.85 million. according to Cointelegraph.com
The first popular coin, Dogecoin, was created in 2013 and depicts a Shiba Inu dog, a popular meme at the time. Although initially seen as a satire on Bitcoin and other cryptocurrencies, after Musk began posting about it, the coin increased in value. Since then, it has maintained its value and become one of the most stable cryptocurrencies.
with the creation of the Department of Government Effectiveness (DOGE) — a subtle nod to Dogecoin — led by Musk and Vivek Ramaswamythe meme coin has officially entered mainstream society.
And coin watchers say it speaks to the relevance of memes and crypto – and expect the digital currency to rise in the coming months with the election of Donald Trump, who has been the most successful president pro-crypto of all time.
“No one understands how important this becomes in the cultural zeitgeist,” Borthwick adds. “A lot of big investors look at this as, ‘This is stupid and all these retail investors are going to lose all their money,’ but I think it has the ability to inform the culture.
Toe Bautista, cryptocurrency analyst at GSR Research, warns that the overwhelming majority of bets on meme coins are pure speculation – but also sees how engaged and interested people are in crypto culture, which has seen a strong year in 2024, with the values of the most popular crypto. currencies are skyrocketing, including Bitcoin briefly worth over $100,000 per coin.
“When Bitcoin goes up, even lower coins (the chain, with more risk) go up,” adds Bautista. “Investors are thinking about what they think the future will look like…capital is chasing it. »
Of course, there are many more losers than winners when it comes to meme coins.
A now infamous example of a coin disaster is the “$HAWK Token” of the so-called Hawk Tua girl Hailey Welch who rose to fame after a music video of her went viral last summer.
The coin jumped to $490 million on launch day, but within minutes it fell to less than $100 million. Barely a month after its December launch, its market cap is just $39,760, making it virtually worthless.
The team behind the coin is now facing scrutiny from the Securities and Exchange Commission and a class action of angry investors who have lost money and feel cheated.
Other investors say it’s possible that meme coins could be combined with artificial intelligence and become an entirely new type of currency. A recent AI-generated coin, GOAT, reached a market capitalization of $800 million in November just weeks after its launch.
Courtland Leer, founder of Plastic Labs — a company whose technology inspired a viral coin — told the Post that the attention these cryptocurrencies are generating shows the industry is here to stay.
“Capital follows attention,” he explains. “Something sticks and becomes the seed of the next cycle. »
This story is part of NYNext, a new editorial series which highlights New York City’s innovation across all sectors, as well as the individuals who are leading the way.