The winning narrative of this crypto cycle so far has undoubtedly been memecoins, especially on resurgent Solana. This post attempts to explain some of what’s going on.

Fair launch and the unintended second order impacts of regulation

Bitcoin is often celebrated for having an immaculate conception; something that folks now say would be impossible. No pre-sale. No VC investment. No whitelist. No team allocations. The only way to get coins to start with? Mining and participation.

Crypto then went through a bunch of phases:

  1. ICOs – basically crowdfunding for new projects starting with Ethereum but mainly including a bunch of scams and nonsense.
  2. VCs – people with money investing in a crypto team/project like any other startup, but buying tokens instead of (or as well as) equity. Still happening but folks are getting tired of being exit liquidity to those who got in much earlier, cheaper and with opaque terms.
  3. Airdrops – projects create liquidity for the team and early investors by giving tokens to early users of the project. This is still a thing and is evolving into points and claimdrops/stakedrops/etc in an attempt to avoid everyone just dumping their airdrop and crashing the token price before the team and investors can get a good exit.
  4. Memecoins – generally based on copy/paste code. Pick a stupid/funny/cute picture and launch a token on the same basis as Bitcoin (i.e. no pre-mine/etc – the ‘dev’ has to buy in the same as everyone else). From here it’s a casino. Will anyone else buy the coin? How high can price go? Will the meme prove durable?

What I didn’t initially appreciate about memecoins is this:

They are at least in part a response to regulation. There is no regulation preventing you from launching a fair launch coin. There’s no company or entity to go after anyway – just the dev. No securities laws invoked (sorry Gary).

Which is (I’d argue) a second order, unintended consequence of the SEC’s current overreach. Projects that have actual teams with actual use cases and value creation models (Metamask, Uniswap, Coinbase, etc) get Wells Notices. So why not just launch a dog coin?

Baby boomers, wealth disparity and generational cycles

We’re living through a huge change in the macroeconomic environment. I don’t love this guy but this illustrates the point.

And then there’s this scarily prescient video.

Anyway. Baby boomers are retiring, getting old and getting expensive because they’re living longer and no longer working. This changes the dynamics of global economies and increases the load on younger generations.

On top of this wealth inequality is growing.

So even whilst the levels of global poverty are declining. The reality of wealth gaps (and the shove-it-in-your-face nature of global media) means that lots of people feel poorer.

Money printing, debt and devaluation of savings & financial nihilism

On top of all this, governments are now so heavily indebted they have no choice but to print money, devalue their currencies and therefore deleverage their balance sheets. More on this in this post from Arthur Hayes for example.

But printing money devalues savings and salaries as well as debt. The generation that is coming into the workforce is faced with working until a higher retirement age with less disposable income than their parents and with little hope of being able to afford their own home without significant help.

It’s not hard to see why this generation might be tempted to reject the money systems they were born into and – given the opportunity – create something new where the odds aren’t stacked against them so heavily.

And what would the internet generation choose as money? The internet’s favourite topics: dogs and cats.

Financialisation of internet culture, Bank of 4Chan

And this is in a very real way what memecoins are. They are memes.

Money works because we’ve created a common, inter-subjective illusion of the value of money that makes society work.

Memes by their very nature are expressions of popular intersubjectivity so they’ve already solved at least part of what makes money works. They’re simple, clear and appeal broadly, so they therefore reproduce quickly and with high fidelity.

As fiat currencies historic mystique and power become unveiled by technology and the ever-wilder policies of governments and central banks, perhaps the obvious lack of an illusion of any real value of memecoins starts to feel in some ways more honest, more valid than pretending that a US Dollar has any intrinsic value.

Gamestop and /wallstreetbets

There’s a great movie: Dumb Money that I think illustrates some of the trends I’m trying to highlight here:

  • An internet influencer uses open source intelligence to identify predatory hedge fund (old money incumbents) behaviour against a company that has appeal to a younger generation.
  • The internet rallies around this company’s stock to defend it against the hedge funds.
  • This rally turns into a very expensive short squeeze.
  • The stock ends up being mispriced in the other direction, based not least on the community agreeing not to sell.
  • All coordinated via Reddit and YouTube.

This is an example of memetic money within the traditional financial system as enabled by new apps like Robinhood that give retail users (the “dumb money”) access to sophisticated financial instruments and social media.

Memecoins are simply another expression of these pressures.

Memecoins are just financialised memes.

What we should watch for is the financialisation of everything else, because it won’t stop at memes.

Thanks to Automattic for being cool with me posting this here as well as internally.

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