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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Cryptocurrency is that vexing thing. It has no intrinsic value, no fundamentals and for the most part no utility. It flouts every rule in the financial book and yet, for some, delivers returns that would make a profitable blue-chip blush.
See bitcoin, up by roughly half in US dollar terms year to date at around $69,500. Standard Chartered’s Geoff Kendrick sees it hitting $73,000 on election day, and forecasts another 10 per cent pop in ensuing days if Donald Trump wins.
More bewildering is the resurgence of dogecoin and fellow memecoins, a stable that makes bitcoin look gilt-edged. Canine meme-based dogecoin (slogan: “wow much coin”) is up by a half in the past month, giving it a market capitalisation of $23.3bn, according to CoinMarketCap. Fellow kennel mate, shiba inu weighs in at $10.2bn.
In other words a token created by a couple of software engineers for larks is valued more highly than Tyson Foods (slogan: “we feed the world”). Shiba inu is not far behind Chinese EV maker Xpeng.
Feline memes are clawing their way up the performance league tables too. Check out popcat, up by a half in the past month. Ditto the amphibious: pepe, based on a cartoon frog and worth more than American Eagle Outfitters, is up seven-fold since the start of the year. Overall, the market capitalisation of memecoins has reached $60bn, up from $23bn at the start of the year, according to CoinMarketCap.
Bitcoin’s strength helps spread a little fairy dust, but this is largely the triumph of sentiment, hype and hot air. Billionaire entrepreneur Elon Musk added his two coins’ worth in August, posting a picture of himself as head of presidential hopeful Donald Trump’s proposed Department of Government Efficiency (DOGE). Since then dogecoin has risen by more than a half — albeit still far from the giddy levels of mid 2021.
Memecoins’ vocal fan base argue there is more to this than hype. Cryptocurrencies have at least a toe in the physical world. Like dollars and sterling, bitcoin can be accepted for everything from lattes to luxury watches. In El Salvador, it is legal tender.
Production can be controlled. Bitcoin manages this through halving events. Come 2140 there will be no more coins mined. Some memecoins ape this in less convincing ways, including self-styled deflationary burn events whereby owners of tokens can cancel them in exchange for tokens or credits in a linked system.
None of this mitigates the absence of fundamentals. Still, as recent weeks demonstrate, even the frothiest end of the spectrum — pepecoin’s sole purpose is “to create a new and fun community” — can find followers.
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