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“Take a simple idea and take it seriously.”

— Charlie Munger

Is it time to take memecoins seriously?

The US election was such a seismic event for crypto, it’s been easy to miss a second seismic event occurring at the same time: big exchanges listing memecoins. 

It feels like memecoins are up because the US elected its first crypto president, and that is true, of course.

But it might be more true to attribute the new bull market in memes to a change of heart at the industry’s two biggest crypto exchanges, Binance and Coinbase — as well as the Gen Z broker-dealer of choice, Robinhood. 

Coinbase, for example, sent WIF and PEPE soaring last week by announcing they were being added to the exchange’s “roadmap” and then listing them soon after.

In the case of Pepe, Coinbase’s Chief Legal Officer, Paul Grewal, made the news public by posting on X: “You’ve long wanted the frog. Well, you’ll soon get the frog.”

This about-face on listing memecoins was likely unrelated to the election outcome; memecoins were never thought to be securities, so there shouldn’t have been any legal risk in listing them.

Instead, I’m guessing memecoins had previously failed to get through Coinbase’s vetting process simply because they’re seen as ridiculous.

In a 2021 “guide to listing assets,” for example, Coinbase warned applicants they’d be denied a listing if “the platform associated with the asset lacks a real or supportable use.”

(Yes, “lacks a real or supportable use” is the legal term for “ridiculous.”)

If this is what unofficially stopped Coinbase from listing memecoins, the recent change of heart would imply one of two things: Either Coinbase has a new listings policy or they’ve decided memecoins have a real or supportable use. 

I’d guess the latter because memecoins are increasingly being taken seriously — as a way to express an opinion on current events, give people a sense of community or belonging, or even as a new kind of asset class for more adventurous investors to consider.

These are all legitimate reasons, in my opinion, but the last one is probably most relevant — by listing more memecoins, Coinbase, Binance and Robinhood may simply be trying to give their customers a better chance of buying a crypto that will go up. 

It’s an unfortunate fact that the types of tokens that would have sailed through Coinbase’s 2021 vetting process (ie, those with explicit utility) have not done at all well since then.

That’s partly because the promised utility has usually underwhelmed and partly because utility tokens are typically launched at sky-high valuations with little (if any) revenue to show for it.

Memecoins tend to have no conventional utility, making them infinitely expensive by conventional valuation metrics. That being said, recent history suggests that their risk/reward is often better than utility tokens promising some remote prospect of future cash flows.

For proof, we need look no further than the OG memecoin.

If Bitcoin were a publicly listed company, it would now be the world’s sixth largest (behind Amazon and ahead of Saudi Aramco), despite its complete lack of earnings or any other demand driver beyond the power of its meme. For reference, Amazon and Saudi Aramco did $575 billion of revenue and $121 billion of earnings in 2023, respectively. Bitcoin did $0.

In contrast to high-flying Bitcoin, underperforming DeFi and DePIN tokens remain bogged down by investors’ expectations of future earnings — like cement shoes holding them back, unable to match the pace of memecoins, which are free from such quaint concerns.

(You might even argue that utility assets are burdened by what has been while meme tokens are unburdened by what could be.)

Binance appeared to acknowledge as much in a recent report, which included a graphic sourced from the high priest of memecoins, Murad Mahmudov:

This graphic neatly expresses Murad’s belief that nearly all price movements in crypto can be explained by changes in memetics and speculation — the implication being that memecoins are at least as worthy of investors’ attention as “altcoins” (aka, coins that attempt to do something).

Binance further endorsed this view by making newer, smaller and riskier memecoins available to its customers in recent weeks (like Act, Neiro and Peanut the Squirrel, for example).

I imagine Binance’s researchers would stop a little short of Murad’s view that “altcoins are simply memecoins with extra steps,” but their report makes clear that they are at least taking memecoins more seriously than they previously had.

They cite, for example, the “economic potential of meme-based assets” and refer to memecoins as both “high-risk, high-reward investment vehicles” and an “investment vehicle with high potential for outsized returns.”

“Memecoins,” they sum up, “may offer a brand new type of asset, that is Internet-native, Internet culture-aligned, and wholly untethered from the traditional financial system.”

Sounds pretty good!

Murad would also like you to know that memecoins have real utility — just not in the way we normally think of it:

Memecoin-based communities, he argues, offer an antidote to a growing “crisis of meaning” — a global epidemic of loneliness that he believes is “bullish” for crypto generally, more bullish for memecoins, and most bullish for “cult memecoins.”

I get that because you do feel like you’ve joined a community when you buy a memecoin. 

For me, however, the feeling ends the moment the token stops going up.

But others seem to stick with their community for much longer.

Murad says he prefers not to buy a memecoin until it’s survived enough drawdowns to prove that its community will stay engaged through tough times. 

I will never be one of those people, but Murad’s thesis on memecoins is appealingly simple and it’s probably time to take it seriously. 

Coinbase, Binance and Robinhood seem to think so, too.

— Byron Gilliam

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