For the past few years, the crypto industry has been trying to establish itself as a genuine asset class for investors, improving blockchain speed and costs, building utility, and getting crypto ETFs listed for investors. But that progress didn't matter this week as the memes of crypto took over the market.
Not only was Dogecoin (DOGE -0.93%) up 85% to a $53.3 billion market cap over the past week, but many smaller meme coins followed suit. Pepe (PEPE 0.54%) was up 106.8% as of Saturday at 9:00 a.m. ET and now has a $9.3 billion market cap, dogwifhat (WIF 0.49%) was up 62% to a $3.8 billion market cap, and Shiba Inu (SHIB -2.32%) jumped 28.9% to a $14.7 billion market cap. Can the meme theme last?
Memes are a very real part of crypto
It sounds wild if you're not in crypto, but these meme coins are a big part of the industry. They indicate the fun and rebellious nature of crypto and have played a big role in the industry's recovery over the past year.
Vibes can drive the meme trade, as indicated by so many tokens being named after dogs in one form or another. And with speculation running rampant in all kinds of high-risk assets over the past month, it's no surprise that the meme tokens have benefited greatly.
Vibes versus disruption
What memes don't bring is disruption to the financial system. You can't pay with Pepe tokens for a cup of coffee or buy a hat with dogwifhat. That utility is primarily taking place with stablecoins, which have the advantage of being on the blockchain and the stability of being backed by U.S. dollars.
This is a natural tension in the trading today because it's clear stablecoins are what will help the blockchain be a truly disruptive technology. According to Visa, 426 million stablecoin transactions have happened in the last 30 days with $2.3 trillion in value.
Those are big numbers and growing as payment companies like Stripe invest more in making blockchain rails a reality.
The vibe trade is fading
As positive as this week was for meme coins, the momentum may already be fading. The election bounce in the S&P 500, which was magnified in crypto, has already started to fade.
What will be more critical is the appointments and policy changes that affect the crypto industry in the long term. I don't doubt there are big changes ahead, but that may not help meme coin values. Utility is likely to be a focus of policy changes and that utility may not extend to meme coins.
When speculation runs rampant, meme coins tend to benefit along with high-growth stocks, but the speculative phase doesn't last forever, and if there's no fundamental value underneath the trade will fade.
I think the better way to play the growth in crypto is companies like Coinbase and Robinhood, who can make money off trading but will benefit from the long-term utility being built. They have durable value, unlike meme coins.