The popularity of memecoins after the election is yet another sign of retail investors’ reluctance to bid on tokens backed by venture capital firms.
Memecoins initially started as cryptocurrencies based on internet jokes without any utility, and yet they have attracted substantial mindshare and capital from onlookers.
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Posted November 13, 2024 at 5:41 pm EST.
Memecoins are skyrocketing, having jumped 87% in the last seven days, following president-elect Donald Trump’s victory.
Dogecoin has climbed nearly 100% in the last seven days to trade under 40 cents, a level not seen since the summer of 2021, in light of president-elect Donald Trump stating late Tuesday that Tesla CEO Elon Musk and former Republican presidential candidate Vivek Ramaswamy will head the Department of Government Efficiency, D.O.G.E in short.
Less than 24 hours later, Ethereum-native memecoin pepe leaped to an all-time high at a market cap of $8 billion, while Solana-based token dogwifhat was trading just under $4.20, approaching its peak of $4.83 set in March.
Pepe and dogwifhat jumped more than 34% in the last 24 hours amidst Coinbase announcing the inclusion of both tokens onto its listings roadmap. Trading application Robinhood also added support for trading pepe, the frog-themed memecoin that has roots on image-based bulletin board 4chan.
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Meanwhile, the cryptocurrency based on Peanut the Squirrel, a domesticated pet that was euthanized in the state of New York, climbed to an all-time high on Wednesday as well, after launching on memecoin factory Pump.Fun less than two weeks ago.
Peanut the Squirrel became an internet sensation, attracting massive attention from a number of people, such as Tesla’s CEO. Not only did Musk use PNUT in an X post to motivate people to vote on Election Day, but the CEO of Space X also said on Tuesday that “America was saved by a squirrel and a meme coin.”
The entire meme category of cryptocurrencies has risen amost 10% in the last 24 hours, giving the category a total market cap of $120.4 million, data from CoinGecko shows.
Retail Wary of Venture Capital-Backed Tokens
One element of memecoins’ climb this past year is retail investors’ wariness of cryptocurrencies backed by venture capital firms, according to Keyu Liu, an investor at crypto prop investment firm Primitive Ventures.
“[Retail investors] are tired of playing cards on VC’s table and want a fairer table that they themselves create,” Liu wrote to Unchained over Telegram. Even though there’s no easy way to determine the performance of VC coins, memecoins are the best-performing sector in the past year, surging 342% in the period, per blockchain analytics firm Artemis.
“At the end of the day, most VC coins [are] basically memes, they are trying to build a narrative and community around it,” Liu said from a zoomed out perspective. “Retails started to realize that and instead of getting into these ‘VC meme coins’ at 10x higher [valuation] than VC in the private round, they might just bid meme [because] they could get in early.”
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As evidence in the short-term, Liu said, “Just look at PNUT vs EIGEN.” PNUT has grown 258% in the last 24 hours attaining a market cap above $1.6 billion. In the same time, EIGEN, the native token for Ethereum restaking protocol EigenLayer, has dropped 11.2% to a market cap of $469 million, less than 29% of PNUT’s market cap.
EigenLayer received funding from a16z Crypto, Blockchain Capital and twelve other investment firms, per Crunchbase.
While PNUT is a memecoin, EIGEN functions as a “universal intersubjective work token,” according to EigenLayer’s whitepaper on its cryptocurrency.
The substantial and fast upside in investing in memecoins compared to other tokens is an additional factor for their popularity. “Memecoin supercycle is a sign that people want to get rich quick. There’s a lot more FOMO to losing out on a 1000x gain on a memecoin than a 10x gain on a real project,” startup investor Tina Dai told Unchained. “There is probably some truth that there is information asymmetry with a VC coin, so the upside is handicapped.”
How Trump’s D.O.G.E. Impacts Memecoins
As to how Trump’s D.O.G.E. impacts memecoins, Toe Bautista, research analyst at crypto market maker GSR, is hesitant to correlate the new department with sustained memecoin success since it likely only benefits DOGE.
Referring to Musk’s May 2021 appearance on Saturday Night Live during which he talked about Dogecoin, Bautista wrote via Telegram, “While this could create a more dynamic storyline for DOGE, as Trump’s Department of Government Efficiency may get more airtime over time, this feels reminiscent of Elon’s SNL Doge moment and is likely the most substantial catalyst DOGE could leverage in the near term.”
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Self-proclaimed memecoin philosopher @Virotechnics agrees with GSR’s Bautista that the new government department mostly benefits DOGE, but added that “it signals something very important to memecoin speculators, namely, that they were right about where attention will focus in a bull run: memecoins.”
Trump’s D.O.G.E. led by memecoin enthusiast Elon Musk and Vivek Ramaswamy “certainly raises the ceiling for large & mid-cap memes, and most importantly it strengthens the longterm memecoin thesis,” @Virotechnics said in a Telegram message to Unchained. “You can see this in Coinbase’s immediate listing of two major memecoins following the DOGE attention. DOGE is more of a batsignal for memecoins than it is an endgame.”
