I’m not a guy who got involved in the whole GameStop, meme stock mania.
I think meme stocks are more about having fun and gambling, rather than trading or investing in a more serious way.
It’s just not my thing.
I do find the phenomenon to be interesting, though. I wrote a post the other day about how I think meme assets are becoming a normal part of our financial markets.
The fact that we’re still talking about meme stocks over three years after the first GameStop mania is proof of that.
Anyway, after I posted that piece, another thought came to mind. It’s this idea that meme stocks are fundamentally flawed, and that meme coins are superior.
Now, if you’re not familiar with these terms, meme stocks are essentially stocks that go viral on social media. People buy them to gamble or to have fun; fundamental factors like profits don’t matter.
Meanwhile, meme coins are cryptocurrencies that are usually named after internet memes. People buy meme coins for the same reasons they buy meme stocks—to gamble and to have fun.
The reason I think that meme stocks are inferior to meme coins is because they’re stocks, and stocks are tied to companies that run businesses for profit.
And as we’ve seen with AMC and GameStop, those companies will use spikes in their share prices to raise capital to fund their operations.
In fact, just this past week, GameStop said that it would sell up to 45 million shares of stock to take advantage of the spike in its shares, while AMC already sold $250 million worth of its shares to raise money.
So, this puts meme stock investors and the companies at odds with each other. Meme stock investors don’t care about the underlying businesses; they just want to see their stock go up.
While the companies have other priorities. If they think the stock is overvalued, they will sell shares, which depresses the price of the stock.
On the other hand, meme coins don’t have that problem. In fact, they can be programmed to have scarcity.
In the same way that bitcoin is hard coded to have a limited supply of 21 million coins, the meme coin Pepe has a supply cap of 420.69 trillion coins.
Dogecoin—the most popular meme coin—also has a limit: only around 5 billion new Dogecoin can be created each year.
So, with meme coins, there often isn’t the worry that one day your stake will be watered down because a bunch of new supply hits the market.
Another advantage that meme coins have over meme stocks is the fact that they’re almost always named after popular internet memes.
This arguably makes them more fun and it helps to sustain the demand for the coins.
With meme coins, there are no illusions that they are something that they’re not. They’re not investments; they’re entertainment.
In fact, if you go to the website for the Pepe coin, it says “$PEPE is a meme coin with no intrinsic value or expectation of financial return. There is no formal team or roadmap. The coin is completely useless and for entertainment purposes only.”
Ironically, I think this makes PEPE and other meme coins better and purer meme assets than meme stocks.
Don’t get me wrong, most meme coins still won’t have lasting value—they’re going to be boom and bust type of assets— but some might.
Today, Dogecoin has a $20 billion market cap and its market cap has been $8 billion or more for three years straight. That’s pretty impressive and suggests that it’s no longer just a vehicle for gambling; people think its value can be sustained.
So, we’ll see what happens. Personally, I’m not going to be buying meme coins or meme stocks anytime soon. But I will be watching on the sidelines.