Despite all the awkwardness, memecoin fever has been embraced by some sectors of the crypto industry. In search of outsized returns, a small number of hedge funds have invested in memecoins this year. Other investment firms, like 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 particular crypto network will result in a ready-made audience for future projects with practical utility built on the same underlying infrastructure. “It brings a kind of tangential value to other real projects,” Le says.
But others say the memecoin phenomenon is likely to harm crypto by perpetuating the idea that the industry is nothing more than a haven for gamblers and scammers. “At best, it looks like a risky casino. Or a series of false promises masking a casino. wrote Eddy Lazarin, CTO of the crypto division of venture capital firm a16z, in April. “This profoundly affects adoption, regulation/laws and manufacturer behavior. I see the damage every day. You should too.
The irony is that memecoins have largely escaped the attention of US financial regulators under the Biden administration, while entrepreneurs attempting to establish meaningful crypto use cases have been subject to investigationsaid Chris Dixon, head of a16z crypto, in an interview with WIRED last year. “The stupidest crypto things, like Dogecoin, that make no sense and are stupid, are perfectly legal,” Dixon said.
There is a potential future in which memecoins could be used by entrepreneurs as a way to raise capital for serious crypto projects without giving up any equity, says Khan. But for now, they represent financial speculation in its rawest form. “We’ve always been in this situation where, as an industry, we’re seen as a decentralized version of Macau or Vegas. This doesn’t help us at all,” he says.
Whether or not memecoins harm the prospects or reputation of the crypto industry, a crackdown in one form or another is likely, industry observers say, such is the amount of money circulating and the level of risk for traders.
“Memecoins is absolutely a PvP game. For someone to win, someone has to lose. Most of the people who can least afford to lose money will be the ones who lose the most,” says Khan. “There will have to be a crackdown at some point.”
Because memecoins defy comparison with traditional investment assets, Le says, they are perhaps better regulated by gambling authorities. “This is essentially unregulated gambling. This will probably depend on the gambling regulator in each country,” he says. “Through the grapevine, I’m already hearing some state regulators in the United States talking about putting some sort of regulation in place.” Pump.Fun declined to comment.
In the meantime, however, memecoins will continue to do their job. On December 5, Hailey Welch of Hawk Tuah fame flipped a coin that lost 95 percent of its value from the first hours of trading, causing an outcry. On the same day, traders threw money at PNUTa piece modeled on the Famous squirrel euthanized late last year by the New York State Department of Environmental Conservation, currently valued at over $1 billion.
Since the launch of MOTHER, Azalea has tirelessly promoted the piece to her 7.7 million followers on X, through a wave of provocative images And meme messages. Part of his plan to ensure the longevity of his coin – a rarity in memecoins – is to establish some sort of utility for it. The room is now accepted as payment by a telecom startup in which Azalea holds a stake. “I plan to be here for the long term. And I will be,” she said.
Ultimately, Azalea hopes to turn memecoin into other business opportunities, including creating its own venture capital fund, proving to potential partners and investors that it can identify and keep up with the times.
“I’ve always been a big poster for shit,” she says. “I like to bait, to troll, to say things that are a little provocative. I like to say things and move in a way that I know can be memorable… It’s about virality, at the end of the day.