The Fartcoin Stage of the Market Cycle

In his latest Q4 2024 Letter, David Einhorn discusses the rise of Fartcoin, a cryptocurrency that surged in value despite lacking intrinsic utility.

David Einhorn's latest Q4 2024 letter discusses the rise of Fartcoin, a cryptocurrency that surged in value despite lacking any intrinsic utility. He compares this phenomenon to the past rise of Dogecoin, another cryptocurrency that gained value largely through hype and trading interest.

Einhorn argues that cryptocurrencies closely resemble collectibles like art or baseball cards, which are valuable only because people agree that they are. While he acknowledges the appeal of speculating on such assets, he personally prefers tangible assets like art over crypto.

Finally, he suggests that while cryptocurrencies may hold some market value, they lack any fundamental backing and can be easily replicated, making their long-term viability questionable.

Here's an excerpt from the letter:

We have reached the Fartcoin stage of the market cycle. For those unfamiliar, Fartcoin is a cryptocurrency that was created late last year and 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.

Lest you think it’s likely to go to zero (it could be the Pets.com of the cycle), Fartcoin is only the latest memecoin.

There have been other memecoins before. Something called Dogecoin, with a Shiba Inu dog logo, was created for the same reason (to mock cryptocurrencies and for speculative trading) more than a decade ago, and it is currently worth about $55 billion.

Were it a stock, it would rank around #180 in the S&P 500, about the size of Travelers and Johnson Controls.

We have thought quite a bit about cryptocurrencies. For the most part, they resemble collectibles. Items such as art, postage stamps, rare coins, and baseball cards are valuable because people like to collect them.

The intrinsic value of a Jackson Pollock is very low (paint plus canvas), but enough people agree that Pollock’s technique of pouring the paint on the canvas was innovative, rare, and valuable enough that his works are worth millions.

Similarly, Fartcoin is worth whatever the market says it is. It isn’t backed by anything and has no intrinsic value. It doesn’t appear to be difficult to create new types of memecoins.

We have no problem with people taking a punt in crypto, Aaron Judge rookie cards, or roulette for that matter. If people find it fun and think they can make money trading it, the more power to them.

We’d rather have a Pollock than a Fartcoin, but that’s just us.

You can read the full letter here:

David Einhorn – Q4 2024 Greenlight Capital Letter

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