The Illusion of Value in Cryptocurrencies
By Owen Miller
On Jan. 17, 2025, three days before Inauguration Day, U.S. President Donald Trump released a cryptocurrency called the Trump meme coin, which trades under the ticker symbol $TRUMP. Within two days, its market capitalization soared to $15 billion, making the coin more valuable than companies such as Dollar Tree, Logitech, and Moderna.
Two days after the successful launch of the $TRUMP coin, the first lady released her own $MELANIA coin. Within a few hours, $MELANIA surpassed a market capitalization of $2 billion.
These “meme coins” demonstrate a fundamental problem within the cryptocurrency market: The price at which a cryptocurrency trades often has little correlation with its intrinsic value or long-term viability as an investment. Unlike traditional investments that generate cash flow and earnings, cryptocurrencies rely solely on perception and speculation.
“Meme coins” are generally defined as cryptocurrencies created primarily for entertainment value, with limited real-world utility. Outside of $TRUMP and $MELANIA, notable examples include Dogecoin, which has a market capitalization of $53 billion*, and Fartcoin, which represents a measly $1.5 billion* market capitalization. While these names seem comical, the reality is that billions of dollars are riding on their success. Somewhere, someone is anxiously watching Fartcoin’s price action, hoping for life-changing returns.
Many investors dismiss meme coins as speculative nonsense while simultaneously viewing more established cryptocurrencies, such as Bitcoin, as legitimate assets. Bitcoin, with an immense valuation of $2.1 trillion*, is widely considered to be a safe investment. It is often referred to as “digital gold.” Major companies, like Tesla, and even governments such as El Salvador, hold Bitcoin reserves.
Bitcoin’s market dominance, however, is built on a paradox. According to popular thought, Bitcoin has real-world utility and is a legitimate store of value. Bitcoin investors claim it is a quick and efficient way to make payments online without a third-party intermediary, such as a bank. Furthermore, since the supply of Bitcoins is capped at 21 million coins, they claim it will act as a natural hedge against inflation.
However, these two arguments directly contradict each other. One cannot have a means of exchange that is used for everyday purchases but is also meant to be an inflation hedge and speculative asset. With a limited supply, Bitcoin is inherently deflationary.
Over time, the demand for Bitcoin will theoretically go up forever as productivity and production increase in the underlying economy. However, since its supply is finite, this continuous increase in demand for the currency will also push the price of Bitcoin upward forever. In this scenario, holders would be discouraged from spending their coins today, as holding onto them promises greater value tomorrow. This deflationary nature undermines Bitcoin’s legitimacy as a practical medium of exchange. Government-backed currencies, by contrast, incorporate inflation precisely to encourage spending and other economic activity. The way Bitcoin is structured makes it highly unlikely to be used as a medium of exchange in the future.
So, with Bitcoin’s value being based largely on perception, how is it any different from $TRUMP, $MELANIA or even $FARTCOIN? Fundamentally, these coins share key characteristics. They are built on blockchain technology, have a fixed supply, and can be transacted while being decentralized. Yet, Bitcoin is seen as a legitimate investment, while meme coins are dismissed as speculation. This distinction is steeped in market perception rather than objective utility. If enough people suddenly decide that $FARTCOIN is as legitimate as Bitcoin, who’s to say it couldn’t surpass Bitcoin’s market cap? Maybe, in the future, we will be paying for gas bills in $FARTCOIN and groceries in Bitcoin.
The reality is that cryptocurrency investing resembles a popularity contest more than a rational market. Bitcoin leads not because of its inherent supremacy but because it has the most credibility with investors. Bitcoin is the modern-day version of tulips, while meme coins are the weeds. Investors flock to the shinier option, reinforcing its dominance, but that dominance lasts only as long as collective perception sustains it.
As $TRUMP and $MELANIA have demonstrated, the underlying nature of the cryptocurrency market is concerning. There is little inherent value in any cryptocurrency, from $TRUMP to $BTC. $TRUMP had just as much of a right to be worth $15 billion at its peak as Bitcoin has in its current valuation of $2.1 trillion. Ignoring the mania around these coins, future use cases of crypto do not look bright. Buyers of cryptocurrencies are not investors, but rather speculators, hoping to offload their holdings to someone willing to pay more in the future. The release of recent meme coins has painfully proven that cryptocurrency prices are not driven by real-world utility, but merely the shininess of their appearance.
*All pricing information is accurate as of Feb. 9, 2025