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Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
Cryptocurrency is this frustrating thing. It has no intrinsic value, no basis, and for the most part no use. It flouts every rule in the financial book and yet, for some, it delivers returns that would put a profitable blue-chip company to shame.
See Bitcoin, up about half in U.S. dollar terms since the start of the year, to around $69,500. Geoff Kendrick of Standard Chartered estimates that this amount will reach $73,000 on Election Day and predicts an additional 10% increase in the following days if Donald Trump wins.
More disconcerting is the resurgence of dogecoin and its fellow memecoins, a stable that makes bitcoin look golden. Dogecoin based on dog memes (slogan: “wow much coin”) has risen by half over the past month, giving it a market capitalization of $23.3 billion, according to CoinMarketCap. His kennel companion, Shiba Inu, is worth $10.2 billion.
In other words, a token created by a few software engineers for larks is valued more than Tyson Foods (slogan: “we feed the world”). Shiba Inu is not far behind Chinese electric vehicle manufacturer Xpeng.
Feline memes are also climbing the performance rankings. Check out Popcat, up by half in the last month. Ditto for amphibious: Pepe, based on a cartoon frog and worth more than American Eagle Outfitters, has increased sevenfold since the start of the year. In total, the market capitalization of memecoins reached $60 billion, up from $23 billion at the start of the year, according to CoinMarketCap.
Bitcoin’s strength helps spread some fairy dust, but much of it is a triumph of sentiment, hype, and wind. Billionaire entrepreneur Elon Musk added its value of two coins in August, post a photo of himself as head of the Department of Government Effectiveness (DOGE) proposed by presidential candidate Donald Trump. Since then, dogecoin has risen by more than half – although still far from the dizzying levels of mid-2021.
Memecoins fanbase claims there is more than hype. Cryptocurrencies have at least one toe in the physical world. Like the dollar and the pound, bitcoin can be accepted for everything from lattes to luxury watches. In El Salvador, it is legal tender.
Production can be controlled. Bitcoin achieves this by halving events. In 2140, there will be no more mined coins. Some memecoins monkey this in less convincing ways, including self-proclaimed deflationary burn events in which token owners can write them off in exchange for tokens or credits in a linked system.
None of this mitigates the lack of fundamentals. Yet, as recent weeks demonstrate, even the frothiest end of the spectrum – pepecoin only goal is to “create a new and fun community” – can find followers.