Meme coins or digital gold? Blockchain analyst weighs in on where crypto markets are headed

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The cryptocurrency space could branch out into three different markets — and people may even stop talking about crypto as a single entity one year on, predicted Paul Brody, global blockchain leader at EY. Bitcoin and ether have had a wild ride in recent weeks, with billions of dollars wiped off their market value, according to Coinmarketcap.com. Bitcoin, the largest digital currency by market cap, at one point plunged by 30% to hover near the $30,000 level. It has since bounced back partially to current levels of about $38,090, according to Coin Metrics. There are currently three “very different” stories going on in the cryptocurrency space, Brody told CNBC’s “Street Signs Asia” on Tuesday.

The first category is what Brody termed “meme coins” such as dogecoin, a digital token that originally started as a joke. Its meteoric rise in price, however, has been no laughing matter. Since the start of the year, dogecoin has risen more than 7,000%, according to data from Coinbase.

This segment of cryptocurrencies “could be categorized as investing as entertainment,” Brody said. “It’s hard for me to predict where they’re going to go, but I don’t see them as having a very big future in the ecosystem,” he added.

Bitcoin as ‘digital gold’

The next part of the ecosystem revolves around bitcoin, Brody said. The digital token has often been cited as a potential competitor to gold as a hedge against inflation and safe-haven asset. Still, bitcoin’s price volatility tends to be much higher as compared with gold. According to Brody, however, bitcoin is “better than gold” in some ways. “When the price of gold goes up people mine more, but you can’t really do that with bitcoin,” he said.

The cryptocurrency is limited and a maximum of 21 million bitcoins can be “mined” — there are currently more than 18 million already in circulation. New bitcoin is created by computer users who solve complicated mathematical puzzles, and they take up a lot of energy. “Bitcoin is gonna go up if everybody buys into this idea that you should have some percentage of your … portfolio in bitcoin — that will drive a lot of participation,” Brody said. Questions remain around bitcoin’s exact place in an investment portfolio, with analysts from Societe Generale saying that it’s still “highly contested.”

The Ethereum ecosystem

Tales from the fringe of the crypto craze

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Hackney was there for that whole GameStop craziness back in February, when the Redditors briefly humbled the hedge-fund pros. He says he was up and then, in a blink, he wasn’t. He says he later made a bundle on Dogecoin, created in 2013 as a joke, until – pffft! Gone too.

And yet he ploughs onward, along with countless others who’ve been brought to this moment by confluence of forces including but not limited to SARS-CoV-2, iPhones, the pandemic economy, boredom, the Fed, YOLO, “stimmies,” FOMO, TikTok, zero-commission trading, Elon Musk, greed, “stonks,” Saturday Night Live, Twitter and more.

Pablo Heman, a virtual currency promoter who goes by a pseudonym, in Sydney. Bloomberg Businessweek

Joining The Buyer up there beyond the footlights has been The Creator – someone like this guy sitting in Thailand who just minted another digital will-’o-the-wisp, SuperDoge. Call him Fab. Like many in this game, from the creator of Bitcoin on down, Fab prefers to remain anonymous.

A Canadian from Vancouver, Fab lives in Jomtien Beach, Thailand, south of Bangkok. There he’s been dreaming of building SuperDoge – with a cartoon Shiba-Inu-as-Superman mascot – into a global brand akin to Marvel Comics.

Finally, a third player: The Promoter. Someone like the former investment bank trader who goes by the TikTok nom de guerre Pablo Heman. In his selfie-style, animated videos, Heman explains how to turn $US1000 into $US1 million in a year trading cryptocurrencies.

The people who mint coins – The Creator – pay guys like Heman anywhere from $US5,000 to $US10,000 to plug their crypto. Shameless promotion is a hallmark of the Shit Coin hype cycle: Mint and promote, get in and get out – preferably ahead of all the people who just ran for the hills. At times this might seem like a good, old-fashioned pump-and-dump in penny stocks. In the crypto trade, the manoeuvre is known as a “rug pull.”

It’s more aggressive capitalism than we’ve ever seen. It’s global. It’s 24/7. And it’s completely unregulated. — Nic Carter, co-founder of researcher Coin Metrics

Together, these actors, The Buyer, The Creator, The Promoter, have strut and fret their hours. Some are out there even now, waiting for that next meme – another Doge Shiba Inu, another cryptic tweet from Musk – to revive the animal spirits and maybe, just maybe, hand them that big win.

Go ahead, laugh. Even accounting for last week’s wild swings in crypto prices, one DeFi token, Meme, has soared in value more than 30 times since August. Another, PooCoin, has doubled in a month. SafeMoon, which was recently endorsed by Barstool Sports’ Dave Portnoy, is up more than 56,000 per cent since launching in early March.

“It’s more aggressive capitalism than we’ve ever seen,” Nic Carter, co-founder of researcher Coin Metrics and general partner at Castle Island Ventures, says of the flood of new coins. At last count, almost 10,000 new ones were minted this year alone, Dune Analytics data show.

“It’s global. It’s 24/7. And it’s completely unregulated,” Carter said.

The ah-ha moment

Here’s how Eric Hackney remembers his epiphany – the ah-ha moment in his long, tortured journey from the bar to GameStop to ASS Coin.

It was late January, somewhere around the time Molly Ringwald, The Princess, had just handed that diamond stud to Judd Nelson, The Criminal, and – cue Simple Minds – the credits to The Breakfast Club were set to roll. At home in Tampa, Florida, Hackney was slipping into a finger or three of bourbon as the film was finishing. He and his wife lost their jobs last year when the bars and restaurants closed. He’s seen help-wanted ads but, really, $US9 an hour? Lately, he’s been trying his luck on Robinhood instead.

Ramy Bekhiet at his home office in Brooklyn, New York. Bloomberg Businessweek

That night, Hackney was hunting for hot new things on the app. That’s when he noticed Dogecoin. It was up, big time – and climbing. He texted his friend, John.

“Why is this happening?” John replied. “I don’t know what this is!”

Hackney didn’t really know either. Hackney says he bought some Dogecoin anyway, at US4¢. In a blink, the price shot to US8¢. He’d doubled his money.

Oh my God, he thought.

He texted John.

“Get on this!”

More than three months later, Hackney glanced at Robinhood again. He had long sold his Dogecoin because he hated the wild swings in its price. But seeing its surge to US70¢ in early May stung. He felt he’d missed the boat again. He turned on Coldplay and stewed in the dark. He vowed: never again.

His wife tried to talk him down.

“Don’t you get it?” she asked.

“Get what?” Hackney replied.

“People nowadays like stupid shit. They don’t’ care. They follow the crowd.”

“And I had an epiphany,” Hackney recalls. “I realised the money was, in fact, in the garbage late-night coins you would never consider hooking up with unless you were half in the bag.”

He was talking about crypto like Papa Shiba, OMG, SafeMoon, Baby Shiba, SpaceCorgi, TacoCat – Shit Coins that makes Bitcoin and even Dogecoin look like good old-fashion dollars.

“It’s insane,” Hackney kept thinking, “but it’s reality.”

‘It’s DeFi … It’s BSC …. It’s SUPERDOGE.’

Beneath the homepage stands SuperDoge – self-styled crypto-superhero. In Superman blue, red cape furling behind him, he has the chiselled body of your favourite Kryptonian and the head of a leering, wolfish canine. On his chest, framed in yellow, is a big red “D.”

Who clicks fastest, gets it

This is the cartoon-inflected world of Fab the Creator, who made the SuperDoge token. He used to be a part owner of 29 bars and restaurants in Phuket, Thailand. That number has gone down to 23 since the pandemic lockdowns, he says. Trading crypto, he insists, brought him back – and then some.

“I got a few 10x going and – Boom! I was back in the game,” Fab says.

After trading other people’s coins, Fab figured he’d create his own. It’s easy enough – someone this week made a new crypto coin inspired by Bloomberg’s Joe Weisenthal within an hour.

SuperDoge launched with a limited amount of coins available in a presale, pitched as a chance for early buyers to get in before anyone else. Whoever clicked on the buy button faster would get it.

Fab and his team make money by earning 5 per cent of the total token supply over a six-month period. The other way to make money is to invest in your own coin early. So far, Fab has invested more than $US150,000 in his own coin.

A lot of these new coins have been whizzing back and forth on unregulated, automated interfaces like UniSwap or PancakeSwap, which match buyers and sellers without a centralised custodian. On those platforms, users can create a market and generate a coin with few hurdles and little effort.

“People are doing it because there’s an opportunity to make a lot of money very, very quickly,” says Carter of Castle Island Ventures, a blockchain venture capital firm. “It’s the promise of fantastic, multithousand percent returns.″⁣

“Of course, are any of these coins going to stick around and exist in three years’ time? Definitely not.”

If Fab gets his way, SuperDoge will be an exception, last week’s meltdown aside. He’s says he’s thinking big – like, global brand big. Comic books, an animated Web series, action figures, maybe a movie: this man has dreams. “We want to become the Marvel of the cryptocurrency world,” Fab says.

The key ingredient

Birthing all these new coins doesn’t take a lot of money, especially by Wall Street standards. But there’s a key ingredient the savvy Creator tends to splash out on: hype.

Fab says he spent $US150,000 over 20 days on influencers, marketing and advertisements to promote SuperDoge in the weeks after he created it. It also cost about $US25,000 to list the coin on an exchange.

The goal is to create that wonderful, aching fear-of-missing-out and generate as much hype as possible. It’s been a recipe for quick profits and now quick losses, as well as what everyone agrees can be some unscrupulous behaviour.

Fab says SuperDoge is legit and donates 2 per cent of every transaction to partner charities. It has its own website, and several accounts on social media. Even before launch, the coin was promoted through advertisements on Facebook and 4chan, and efforts were made to reach investor groups on Telegram. Fab hired TikTok and YouTube influencers, paid for tweet promotions, and partnered with news outlets.

After shooting higher following its launch in late April, SuperDoge has now fallen back to Earth.

Enter The Promoter: Heman, 38, who has amassed over 370,000 followers on TikTok.

“So, what is happening with Doge, Akita Inu and Shiba Inuuuuuuuuuuu,” Heman tells his followers while howling in a video, a trend among owners of the doggy coin across social media. He cuts to a shot of him jokingly wiping tears away, as he explains what Ethereum founder Vitalik Buterin’s donation of more than 50 trillion in the joke coin Shiba Inu means for the crypto world.

Heman charges anywhere from $US5000 to $US10,000 to promote content on his account.

Just how much they are willing to pay promoters like Heman provides one indication as to which coins are more real than others, if “real” is an operative word for Shit Coins.

Big back-up behind this coin

In the unregulated world of DeFi, money buys influencers, who drive news cycles, which help pique interest, which drives up prices and trading volume.

“If someone is paying good money for 10 influencers to go on YouTube, Instagram and Twitter to be pumping this thing, then that means there’s a real big back-up behind this coin,” Heman says. “It’s like the tip of the iceberg. What you don’t see is the 90 per cent underneath.”

Until recently, Heman held a portfolio of traditional investments in stocks and real estate. He started his TikTok in January, and the hunger out there for cryptocurrency analysis prompted him to get into the game.

He started gambling – his word – a couple of hundred dollars a go, mostly in obscure coins. He says his portfolio has climbed 1063 per cent since February, and about 70 per cent in the past 30 days alone, at least until the rout arrived.

“Basically, I thought, why not put 100 or 50 bucks on one of those, they might just take off,” Heman said.

“You can only say so many times to your audience that this is pure gambling. They come back and say ’I’m up 500x or I turned $US3000 into $US100,000, it’s a very common story.”

In DeFi, all the old barriers to entry have collapsed into nothing. Ten years ago, creating a viable token meant persuading a centralised exchange like Coinbase or Binance to list your coin. But DeFi is, as the term suggests, decentralised. And you thought no one was in charge of Bitcoin.

All of which raises the possibility that outright scamsters can and have moved in from time to time. The classic manoeuvre is the rug pull: launch a coin, pay people to promote it, and once the crowd piles in and the price jumps, get out as fast as you can.

Dumb money

Fab and others say one red flag is coins for which liquidity isn’t “locked,” a setup that makes it impossible for The Creator to cut and run. SuperDoge is locked.

Not so long ago, pros would have laughed you off Wall Street if you told them that ordinary people would soon be staking real money on WallStreetBets-inspired meme stocks, SPACs plugged by YouTubers, TikTok-enthused Shit Coins and the rest. Last week, the sceptics looked smart. The punters? Not so much.

Then again, the events of the past year have turned small-time investors – often dismissed by the pros as the “dumb money” – into a powerful force. For better and worse, Robinhood, DeFi and all the rest just might have changed things for good.

“We are sick of the traditional financial system,” says Ramy Bekhiet, 27, and an engineer by training. He used to watch TV and play video games after work.

Now, he works from 7am to about 3pm, and then starts his second shift: trading from 4pm to 11pm.

Since 2017, he’s built a portfolio of Bitcoin, Ethereum and XRP that did well enough to help him buy a house 90 kilometres southwest of Manhattan in New Jersey – with five bedrooms, two-and-a-half bathrooms, two living rooms, a sunroom and a basement.

He’s also poured money into Dogecoin, Shiba Inu and Elongate. Market swings like the one on Wednesday are an opportunity to buy more crypto at a discount, Bekhiet says.

In his home, two open laptops and 80-centimetre monitor glow atop his dining room table, as well as a ring light to shoot videos for his TikTok account.

Off to the side, across from the kitchen, by the thick, drawn curtains, an ironing board is tucked into the corner. Welcome to the 21st Century trading floor.

— Bloomberg Businessweek

PayPal Will Let Customers Withdraw Crypto, Exec Says

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Global payments giant PayPal plans to let users withdraw cryptocurrency to third-party wallets, its blockchain lead said.

Speaking Wednesday at CoinDesk’s Consensus 2021 conference, Jose Fernandez da Ponte told moderator Jeff John Roberts that a withdrawal function is in the works. At present, PayPal does not let users move cryptocurrency holdings off-platform, though it has let customers buy bitcoin and other cryptocurrencies since October 2020.

“We want to make it as open as possible, and we want to give choice to our consumers, something that will let them pay in any way they want to pay,” da Ponte said. “They want to bring their crypto to us so they can use it in commerce, and we want them to be able to take the crypto they acquired with us and take it to the destination of their choice.”

The company ships new developments every two months on average, he said, though it’s unclear when the withdrawal functionality is coming.

PayPalCoin?

On a rumor that PayPal plans to launch its own stablecoin, da Ponte was more downbeat. “This is way too early,” he said.

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Roberts, executive editor of news site Decrypt, probed da Ponte about central bank digital currencies (CBDCs), since the PayPal vice president said he has met with central bankers around the world.

“It absolutely makes sense that central banks will issue their own tokens,” he said. But he did not accept the common view that only one out of stablecoins or CBDCs would become dominant.

“Sometimes we position the debate as CBDCs versus stablecoins, but it’s a bit of a fake debate. There is no trade-off. We think they will co-exist.”

In da Ponte’s experience, central bankers have two priorities: financial stability and universal access. He could see plenty of ways to achieve stability with digital currencies, not only by backing a stablecoin with fiat currency but potentially by backing one with a CBDC.

And digital currencies could help expand access to the financial system, he said. He pointed out that one county in California, near where he lives, is a “banking desert”: there are no physical branches. That might not matter in a world where CBDCs have been rolled out across the country, he suggested.

But da Ponte was clear that there is a lot more work to be done. “On the subject of CBDCs, there are a lot of Powerpoints written, but not a lot of code written.”

Check’s in the mail

He said he sees financial institutions like PayPal as the natural way to distribute CBDCs to the public when the time comes. The potential difficulty of this challenge was shown during the pandemic, when some people had to receive stimulus checks in the mail, requiring them to travel to a physical bank to cash them. “I think we can do better than that,” said da Ponte.

Digital currencies are not quite ready to offer serious payment cost reductions to people all over the world, in da Ponte’s view. His estimate of global adoption at 2% is simply not high enough. “But 10% adoption is where it gets really interesting, when it gets beyond the early adopters.”

PayPal opened trading on select cryptocurrencies to U.S. customers in November and began allowing users to pay for goods and services with crypto in March.

The company reported better-than-expected results for the first quarter, with adjusted earnings of $1.22 billion, beating the average estimate from analysts of $1.01 billion. It was the second set of results to include PayPal’s crypto buying and selling service. The company has said customers who purchased crypto through the platform have been logging into PayPal twice as often as they were before they could buy crypto.

UPDATE (May 26, 18:45 UTC): Updated with additional comments from da Ponte.

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