My first Covid-19 vaccine shot came with a dose of cryptocurrency advice. The guy administering my jab in the back room of a small clinic on Coney Island told me he was buying dogecoin, the canine-inspired meme coin whose price swings wildly in part because of Elon Musk’s tweets. He suggested I buy some, too. We are in the age of investing by meme. Some people are tossing tons of money into a stock or a coin not because they believe there’s something significantly different about the underlying value of the asset but because it got popular on the internet, and they think it’s funny, cool, or just something to do. They buy into the hype generated on platforms like Reddit and TikTok and join in. Crypto is the epitome of all of this — as well as all the disarray and confusion that entails. “Some things are clearly legitimate and some things are clearly bullshit, and there’s also this long tail of things that are a little bit confusing,” said Sam Bankman-Fried, the head of Alameda Research and the FTX cryptocurrency derivatives exchange. “In this financial environment, sometimes just a token with a meme or a stock with a meme or an asset with a meme is enough to get a $20 billion valuation.”
Bankman-Fried is a crypto billionaire. For those hoping to strike digital gold with their crypto investments, it’s important to note that his crypto success is very much the exception, not the rule. You might be familiar with the GameStop saga earlier this year, when an army of traders on r/WallStreetBets helped drive a spectacular rise in the retailer’s stock price seemingly out of nowhere. They managed to rankle some big names on Wall Street. There are some investors who will say they were into the GameStop trade because they believe in the value of the fledgling company, but a lot of them were there for GameStop as a meme. And a powerful one at that. But crypto has been operating like this practically from the beginning. The meme aspect of it has always been part of the appeal.
Bitcoin and dogecoin and ethereum are as much a cultural and internet phenomenon as they are a technological or financial one. And as crypto goes more mainstream, so do the memes, especially as people are getting into day trading without much of an investment plan. Though cryptocurrencies have been around for more than a decade, they are capturing more headlines recently. (Recode’s Rebecca Heilweil has an explainer.) The price of bitcoin, the original cryptocurrency, has gone from $5,000 to $6,000 a year ago to surpassing $60,000 for some time this spring. Both institutional and ordinary investors have been along for the ride. But crypto is also incredibly volatile, as evidenced in the wild fluctuations seen this May. A sudden selloff on May 19 sent the price of bitcoin down 30 percent, and hundreds of thousands of traders were completely liquidated. Some other “altcoins” (meaning anything that’s not bitcoin) tanked, too.