The Fartcoin stage of the market
The lunatic fringe of the U.S. financial system seems to be experiencing a speculative mania involving cryptocurrencies and crypto-related stocks. It’s 2021 all over again, with extreme overvaluation, bizarre price moves, and surging retail trading in crypto and in crypto/meme/fad/cult stocks.
David Einhorn wrote last week that:[1]
We have reached the Fartcoin stage of the market cycle. For those unfamiliar, Fartcoin is a cryptocurrency created late last year that appreciated from a nominal value to over a billion dollars. Like other cryptocurrencies, it is tradable 24 hours a day, 7 days a week. Other than trading and speculation, it serves no other obvious purpose and fulfills no need that is not served elsewhere.
I can’t agree that Fartcoin serves no purpose. Its purpose is to enrage and demoralize those of us who spent decades studying financial markets, believing we were engaged in serious and useful work.
What exactly is “the Fartcoin stage of the market?” Well, the field of Cryptoflatulent Economics remains nascent, but in my view this stage involves:
- Nihilism. I’ve previously bemoaned the rise of market nihilism, where the stock market seems to make obvious errors and “facts and logic don’t matter.” Fartcoin transcends these petty concerns. There are no facts. There is no logic. There is only Fartcoin.
- Attention-grabbing. The name Fartcoin immediately evokes various emotions. Fartcoin succeeds in getting noticed and talked about, including by luminaries such as Einhorn, Cliff Asness of AQR,[2] and the indispensable Matt Levine of Bloomberg.[3] That’s the definition of a meme: it spreads like a virus. I’m spreading it right this minute. As you read these words, the idea of Fartcoin is burrowing deeper into your mind. If Fartcoin seems like something designed by a malevolent artificial intelligence to exploit the weaknesses of the human brain, that’s because it was; specifically, the idea came from the Truth Terminal chatbot. Our future is The Terminator, except humans will be hunted by relentlessly efficient Ponzi schemes.
- Stupidity. Let’s face it. Fartcoin is stupid. It’s not Einsteincoin or Mozartcoin, it’s Fartcoin.
On this last point, one characteristic of speculative bubbles is smart money selling to dumb money at the peak. I mean that literally. For example, differences in cognitive abilities played an important role in the tech stock bubble of 1999/2000. I’ve previously discussed the performance of low-I.Q. vs. high-I.Q. investors in Finland. Grinblatt, Keloharju, and Linnainmaa (2012) showed that as the bubble peaked in 2000, high-I.Q. investors exited the stock market, while low-I.Q. investors entered.
I can’t believe I’m saying this, but the current meme coin mania makes the bubble of 2021 seem like a relatively sober exercise in rational valuation. At least back then, Roaring Kitty talked about earnings, and crypto enthusiasts rhapsodized about use cases. They might have been delusional, but at least they were delusional about the right things.
Karl Marx said that history repeats, first as tragedy, second as farce. He was too optimistic. The truth is that history repeats, first as tragedy, second as farts.
Endnotes
[1] “David Einhorn says we have reached the ‘Fartcoin’ stage of the market cycle,” CNBC, January 21, 2025.
[2] “2035: An Allocator Looks Back Over the Last 10 Years,” AQR, January 2, 2025.
[3] “Crypto Perpetual Motion Machines,” Bloomberg, January 23, 2025.
References
Grinblatt, Mark, Matti Keloharju, and Juhani T. Linnainmaa. "IQ, trading behavior, and performance." Journal of Financial Economics 104, no. 2 (2012): 339-362.
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