Yes, It’s Called Fartcoin. Yes, It’s Useless. And Yes, It’s Worth $700 Million.
The era of “memecoin” madness has returned, riding a broader wave of investment in bitcoin that was itself spurred by Donald Trump’s election. Memecoins are a mix of coins that exist solely for the purpose of being bought and sold based on internet memes, and, well, they’re useless. But, somehow, Fartcoin, a memecoin named for its, ahem, gassy origins, has tripled in value over the past week, reaching a market capitalization of over $700 million.
The carnage-casino era of cryptocurrencies is back with a vengeance, minting millionaires while potentially harming others. Yet, everyone, even the losers, seem to be in on the joke. Fartcoin’s surge is part of a broader wave of investment in bitcoin, which has seen its price increase by 130% this year, with 50% of that gain occurring since Trump’s election.
Top traders like fast-growing GSR, a decentralized finance group, say memecoin buyers are often aware that their trading activity is a form of high-stakes gambling. “A lot of it is people thinking, ‘I can get some sort of edge by having a better chance at a lottery ticket,'” says Toe Bautista, research analyst for GSR.
The greatest risk in trading memecoins, such as Fartcoin, is the meme itself fading away from the cultural zeitgeist. And indeed, the gains from a given news cycle for a very select few can be substantial. At least one holder of a coin created in the wake of the Peanut the Squirrel incident last month is sitting on nearly half a billion dollars.
However, there are operational risks to memecoins, as illustrated by the rise and rapid fall of “Hawk” coin, released by a Tennessee woman who has parlayed a viral lewd street interview into a successful podcast. Over the course of 24 hours, Hawk’s market cap peaked at $500 million before collapsing to $28 million, prompting complaints about dramatic losses in funds.
The memecoin space is also riding a wave of algorithmic trading, which has long been part of mainstream trading on Wall Street. GSR estimates that of the top-20 traded coins in crypto, half are memecoins whose trades are almost entirely driven by bots designed to spot and respond to price movements.
Is it legal? Some believe memecoins are permitted because the Securities and Exchange Commission has never formally categorized bitcoin as a security. Yet, the agency has taken actions against exchanges that have permitted trading of other tokens. And, crucially, many memecoins, including Fartcoin, do not appear able to be legally purchased from U.S. soil on most of the crypto exchanges offering them.
