Crypto is in the middle of a serious identity crisis. The mainstream is asking for fundamentals and many of the coins can’t seem to measure up. There is now a scramble to focus on revenue which, to justify current valuations, seems like an impossible task. The problem is that we are using tradfi’s yardstick. ETH is getting put through the ringer trying to justify its valuation, while memecoins still defy gravity.
Memecoins have been the darling of this cycle, making up a majority of activity. Even with billions of dollars flowing through them, they still break all concepts of value and fundamentals. The lazy take is that memecoins are exclusively a criminal enterprise. The truth is that there are emergent qualities of memecoins that we have yet to grasp. Social media companies are valued differently than automakers are valued differently than commodities. In each case the emergent fundamentals took a long time to quantify.
Bitcoin began as a memecoin. After almost a decade it has established fundamentals that allow it to stand on its own. But in the beginning it was “magic internet money”. In the first year of bitcoin’s life there was no financial model that would justify the purchase of bitcoin. It didn’t matter. There were some emergent qualities that people bought into, that allowed it to become the quality asset it is today.
The sin of finance is that it puts people into a box of rationality. Bitcoin, GME, and Fartcoin show that people will buy things because they want the number to go up. This is typically hand waved as the greater fool theory. But what if the intrinsic motivation is not to make money, what if the intrinsic motivation is to send a message to the state, wall street or even social media. Maybe the reason that people keep losing money on memecoins isn’t some kind of gambler’s fallacy, maybe there is an emergent value that isn’t clear.
We shouldn’t be moving away from the parts of crypto that are hard to value, we should be moving toward them. If our motivation is simply to have wallstreet buy our bags, that we will leave behind the very qualities of crypto that make it unique. The most interesting problem in crypto is capturing the essences of why memecoins are valuable and putting that to work to solve real problems. It's ok to reject fundamentals, because there is something at play that is much more important.
