Cryptocurrency trends and the MEME, ROPE and FEW trilogy
The brief rise and fall of Ethereum's NFT-related airdrop trend paints a picture of today's crypto landscape.
DeFi, in addition to being a truly excellent buzzword, is also on track to being a pivotal development in cryptocurrency.
But in addition to that, we've also seen a series of small trends ripple through the cryptocurrency market, almost always starting on Ethereum and then moving outwards to other blockchains and organisations.
These micro-trends are primarily characterised by large amounts of money, in the hands of relatively few people, sloshing between a series of get rich quick schemes.
The lifecycle of these natural wonders typically follows this pattern:
- Striking gold. Someone strikes gold with a fresh and successful idea, and people on the scene at the time quickly make a lot of money.
- The gold rush. Many honest imitations, scams, Ponzis and jokes copy that idea and more money flows in, creating a quick bubble and luring in hungry speculators.
- Depletion. The fast money gets out and the bubble collapses, trapping the hapless slow money inside and dragging it to an illiquid grave.
So far these microtrends have been extraordinarily profitable for those who are fast and well connected enough to get in front of the gold rush, and disastrous for anyone who buys in too slowly.
This cycle has played out across numerous overlapping micro-trends this year, including rebase coins, yield farming, automated market makers and most recently, non-fungible token (NFT) themed airdrops. That last one soured much faster than most though.
While most of these trends lasted at least a few weeks, the NFT themed airdrops passed through the boom and bust cycle in about 24 hours, making it a nice, compact example for looking at how these trends emerge and unwind.
Flew like a stone
Non-fungible tokens are cryptocurrencies which can be individually identified as unique one-of-a-kind tokens with their own personal provenance and history. NFTs could be important for bringing real-world assets on-chain and structuring data across different blockchains, but currently, they're used mainly for games such as Aavegotchi and Axie Infinity, and digital artworks of dubious value like those on Rarible, Open Sea and others.
1. Someone strikes gold
NFTs as a concept are a few years old now, and have enjoyed a good deal of success and development in their own right. But NFT airdrops as a sub-trend only caught fire this week with the creation of a cryptocurrency by the name of MEME.
The idea is that staking MEME tokens lets you create NFT collectible cards which can then be sold, assuming anyone wants to buy them.
To get MEME tokens, all people had to do was sign up for the distribution list and then wait for the tokens to be dropped into their wallet for free.
Most recipients probably sold their MEME tokens almost immediately, as befits a random token with no clear function and little apparent value. Unfortunately for them, MEME started to gain traction and pretty soon each of those initial free airdrops was worth more than half a million dollars.
That's considerably better value than most mailing lists.
2. The gold rush
Seeing the success of MEME, people in search of a quick buck raced to create imitations that do more or less the same thing, with the same airdrop distribution system. As usual, for any of these micro-trends, the copycats are a mixed bag of genuine attempts, scams and jokes, and almost all are completely worthless.
One of the more successful copycats was named ROPE, in a tasteful insider joke about the bleakness of an existence where people sold their free MEME tokens too soon. It was created as a joke but then got a bit of traction and turned into yet another multi-million dollar digital art collective as people chased quick gains.
At the same time, lots of people started shouting about a cryptocurrency dubbed FEW, which was yet another insider joke referring to yet another meme circulating at the same time. Naturally, the wave of money sloshing around crypto started trying to find its way into whatever this "FEW" token was.
So right on cue, up popped some tokens by the name of FEW in an effort to capitalise on this.
This already-strained micro-trend crashed hard when someone publicised a series of messages from a private Telegram channel showing a handful of people talking about their plans to create their own personal group token, called FEW, with no plans other than to just create a token to see what happens.
Among the messages were jokes about turning the poorly-conceived token project into a pump and dump scheme, similar to what was happening over at MEME and ROPE as people piled in, presumably more in search of fast money than artistic merit.
You can find a more comprehensive timeline of the event here, but the short version is that the group seemed to be trying to have a secret online clubhouse, but then someone in that group opened the door and let a bunch of people in.
Pictures were taken, there was a lot of pushing and shouting and when the dust settled everyone was able to take a good gawk at what seemed to be a small handful of Ethereum fans trying to dump worthless tokens on their followers.
In fairness, the content of the chat logs in proper context suggests that it wasn't really intended to be a pump and dump scheme. Some voices in the group were advocating for a deliberately non-predatory approach.
But also in fairness, everyone there almost certainly knew that it was going to naturally become a pump and dump scheme. That's simply the direction gravity pulls these micro-trends. Wherever there's a gold rush people will rush in to try to carve off a piece, and new entrants will always be at a disadvantage against the cabals and concentric circles of insiders that haunt the space.
As the news broke, MEME and ROPE token prices plunged, the micro-trend came to an abrupt end less than 24 hours after it even really began and all the scammers who went to the trouble of creating dozens of NFT-themed airdrop tokens were probably quite disappointed that they had no hype cycle left to drive business.
By looking at these kinds of events as a series of micro-trends we can make a few observations about the broader cryptocurrency space.
One is that it's quite similar to the ICO boom all over again, in that we have an onslaught of money attracting both innovation and scams. Because these trends are coming by so fast, we can already see that the new innovations remain even after the scams move on to the next trend, and that as each micro-trend passes it leaves genuine value that wasn't there before.
Another is that Ethereum appears to be very far ahead of the game. The striking of gold almost always happens there, while other more centralised chains are always playing catch up, or even missing micro-trends entirely. It's a very tangible example of how true permissionlessness boosts innovation far more than high fees or slow transactions diminish it.
We can also see that the passage of micro-trends is a market barometer of sorts. Each trend came and went faster and faster over the course of the year, chewing up and spitting out speculators quicker each time as their funds dried up over the course of successive misadventures.
This might not bode well for the other chains chasing Ethereum. It means there's less speculative money left for them, while also suggesting that they'll go through their own similar cycles of quick booms and busts, which will likely leave some brand damage on the entities who've put their names on "DeFi" projects.
These degrees of centralisation haven't brought a lot of safety either. If anything, it's only introduced false confidence and new frictions.
Binance, for example, has cordoned its micro-trend projects off in an "innovation zone" section of the market, presumably to help protect its users from becoming fodder for the farmers on the BSC chain. Tron has also experienced centralisation issues after whitelisting what appears to be an exit scam on its chain, and earlier today Huobi launched a direct copy of Uniswap it calls TitanSwap with an attached token sale.
As the DeFi vs CeFi contest heats up, the scoreboard keeps racking up points for genuine 100% permissionless DeFi, complete with all its schemes, scams and other depredations.
Disclosure: The author owns cryptocurrencies including LINK at the time of writing