A MARTÍNEZ, HOST:
What do Moo Deng, the pygmy hippo, Haliey Welch, aka the Hawk Tuah girl, and first lady Melania Trump all have in common? Well, they inspired highly valuable, highly volatile types of crypto currency over the past year - meme coins. So how should we think about this current moment in the crypto markets? Here's Alexi Horowitz-Ghazi from our Planet Money podcast.
ALEXI HOROWITZ-GHAZI, BYLINE: It's generally accepted that the first meme coin was launched back in 2013 by an Australian tech worker named Jackson Palmer. We talked to him in 2018 about how he came up with the idea for Dogecoin.
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JACKSON PALMER: I had one browser tab open with this article about Doge. And right next to it, I had CoinMarketCap, so my tab names kind of almost spelled it out for me.
HOROWITZ-GHAZI: Doge, you may remember, was a popular meme featuring a quizzical Shiba Inu paired with grammatically challenged captions like, such wow.
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PALMER: And I just thought, Dogecoin. That's hilarious.
HOROWITZ-GHAZI: Doge was supposed to be a joke about how absurdly speculative crypto was becoming. But instead of rethinking their investments, the good people of the crypto world leaned in. The value of Dogecoin took off, and a bunch of other meme coins followed. For a while, the number of new coins was limited because creating a new one required some technical expertise. But recently, that has changed because of a platform called pump.fun.
Launched in early 2024 by a group of London-based entrepreneurs, pump.fun is a way to allow basically anyone to create their own crypto. We reached out to them, but they didn't get back to us. Over the past year, more than 5 million new meme coins have been listed on the platform by everyone from literal children to C-list celebrities to presidents. As Bloomberg investigative reporter Zeke Faux explains, not all of these meme coin launches are successful.
ZEKE FAUX: Something like 99% of coins are dead on arrival.
HOROWITZ-GHAZI: Which means they basically have zero buyers.
FAUX: Right. Like, I bet you a lot of them never sell a single token.
HOROWITZ-GHAZI: He said some fortunes are made on meme coins, but he's also seen countless pump-and-dump schemes and enormous losses for investors, not unlike a casino. It's essentially a new form of gambling where the coins' creators are at a huge advantage.
FAUX: By the time that you or I hear about any coin, you know, the insiders have probably accumulated a big supply at a low price. And they're just waiting for losers like us to hear about it and buy some so that they can sell theirs and get real money.
HOROWITZ-GHAZI: Zeke says some traders have made millions of dollars off of meme coins, which has helped fuel the frenzy over new ones. But Dune Analytics found that just 3% of traders have ever made more than a thousand dollars. And keep in mind - meme coin trading is a zero-sum game. Every dollar someone makes on a meme coin mathematically has to come at the expense of someone else buying it, which means that this tiny minority of winners - that 3% of traders - they're making their fortunes off the vast majority of meme coin investors.
FAUX: No, I think that most of the people who buy this, like, they're not being fooled by the coins. They just think that, hey, I am not the last person who's going to buy this coin. Someone else will come along later and buy this coin for more.
HOROWITZ-GHAZI: Has anyone made a Greater Fool coin?
FAUX: I guarantee that they have.
HOROWITZ-GHAZI: And when we checked the pump.fun registry, there turned out to be no less than 12 competing Greater Fool meme coins, half of them with the ticker sign FOOL.
Alexi Horowitz-Ghazi, NPR News.
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