The Twisted World of ‘Shitcoins’ & ‘Moon Shots’: Meet The Crazier Side of Crypto
It all started with a tweet.
Elon Musk’s ability to influence the cryptocurrency markets is well known. And when Musk tweeted a meme of a dog “going to the moon” on 24 February, few were surprised when the value of the meme-based cryptocurrency dogecoin (DOGE) shot up.
But the really weird stuff was just getting started.
In the following days, more meme coins were launched, piggybacking off the spike in DOGE.
Thousands of coins like Steamed Hams (the name a reference to an absurdist Simpson’s skit) were created, shot up in value and then crashed to nothing over a period of several weeks. Other notable entries in this saga included the Grumpy Cat coin ($GRUMPY). On 17 March (24 hours after launch) it had an estimated total value of over $18 million. Less than a month later that figure had fallen to $13,405.
It’s important to realise that creating new coins is not particularly hard to do.
Owing to the open-source nature of the blockchain code, most of these coins were lightly tweaked or even wholesale copies of existing crypto-currencies.
The Rise of the ‘Shitcoins’
Like the GameStop (GME) spike that caught headlines earlier this year, the phenomenon was driven by online communities, most notably the /r/CryptoMoon shots subreddit, alongside dedicated Discord and Telegram chatrooms.
A typical promotional post on the subreddit makes for strange reading. The promise of high returns, coupled with an absurd, attention-grabbing pitch is typical of other posts on the site.
Early investors stand to reap huge benefits in what are effectively “pump and dump” Ponzi schemes, cynically promoted by early backers at the expense of later investors chasing the same sky-high returns.
The twist is that everyone knows that’s how it works.
Colloquially known as “shitcoins”, the aim of investing is not to find real value, but instead to back rare “moon shots” as they spike in value and then pull out before an inevitable crash.
The moderators of /r/CryptoMoonShots run a paid discord server that describes the target asset in pretty clear terms: “no fundamentals, no actual meaning and no real value – but sometimes they moon anyway”.
“It is a powerful, powerful meme name”
Making money in this strange world is a particular skill.
For this story, we interviewed George who made several thousand dollars through ‘shitcoin’ trading. George is 24 and although he works as a programmer at the BBC, he admits that he knows “almost nothing about blockchains or cryptocurrency”.
He took our call in the middle of a trading session and it’s worth quoting his first sentence:
“I am on a moon mission right now. The coin is called fairsafe, a powerful name.”
You don’t really need to understand it. I don’t understand it. It’s all about the meme.
I asked him what he meant by “powerful”. His answer gives some insight into the factors that drive successful shitcoins:
“Safemoon was one of the first meme coins to do really well. That was followed by copies safestar and safemars which did really well. Followed by safegalaxy which did really well. “Safe” is a powerful, powerful meme name. And now there is this new powerful meme name, “fair”, because a coin called fairmoon mooned. You don’t really need to understand it. I don’t understand it. It’s all about the meme.”
In this case, George was right.
Fairsafe almost doubled in value over the first 24 hours, rising to a total volume of over $10 million on 1 April, before crashing to slightly under $1.5 million by 11 April.
And it wasn’t even particularly volatile.
George explained that he very rarely holds onto a coin for more than 30 minutes and almost never goes to sleep with “shitcoins in his wallet”. The excitement of what (he admits) is essentially gambling is keeping him engaged.
Like many in the community, he is well aware that the coins themselves have almost no underlying value: “Most people are losing money. That’s just how it works.“
When the music stops…
Though new shitcoins are still being created, the frenzy that followed the DOGE spike has largely receded, though Elon Musk is currently in and out of the papers for influencing the price of dogecoin with his comments on Twitter.
Investors we approached for this story explained that the height of the frenzy only lasted for around two weeks.
In the aftermath, one fact sticks out. Most of the investors who participated in these schemes seem to have known there was no real underlying value.
Thousands of people all across the world bought shitcoins, knowing they were shitcoins.
As online communities and cryptocurrencies continue to play an ever-greater role in the market, we should be wary of how far the memes might take us.