As the meme coin craze subsides, the market is starting to shift its focus towards projects with fundamentals. In a recent report, analysts from Wall Street bank Bernstein, including Gautam Chhugani, analyzed the rise and fall of meme coins and predicted a change in the flow of funds.
The meme coin craze is driven by regulatory avoidance and celebrity effect
The report states that the recent increase in meme coin activity is due to the former U.S. Securities and Exchange Commission (SEC) chairman Gary Gensler's strict regulation of utility tokens and NFT projects, forcing the market to turn to "useless" meme coins to avoid regulatory risks. Furthermore, the hype around meme coins by celebrities and politicians has been dampened by the controversy surrounding the Libra token launched by Argentine President Javier Milei, as the report mentions:
The blockchain ecosystem has recently been driven by the hype around meme coins issued by politicians and celebrities, with the latest controversial event being the launch of the Libra token by Argentine President Javier Milei, which sparked a political storm due to allegations of insider trading. However, this incident has led to a necessary cooling of the Solana meme coin frenzy.
At the same time, the regulatory environment is also undergoing a shift. The report points out that the nomination of former SEC commissioner Paul Atkins, who supports cryptocurrencies, to lead the SEC (pending Senate confirmation), as well as the establishment of a new cryptocurrency task force at the SEC under the leadership of Republican commissioner Hester Peirce, indicate a change in the regulatory attitude. The analysts note that this shift is already evident, including the SEC's agreement to withdraw its securities law violation charges against Coinbase, and the conclusion of its investigation into the NFT trading platform OpenSea last week.
Funds will shift towards DeFi, GameFi and NFT
As the meme coin hype cools down, Bernstein predicts that market liquidity will start to flow into the DeFi, GameFi, and NFT sectors, with funds returning to blockchain applications with practical value.
Furthermore, the analysts emphasize that another major driver of the crypto market is stablecoins and the tokenization of real-world assets (RWA), and they write in the report:
As regulatory policies are gradually implemented, stablecoins will have a direct impact on cross-border B2B payments, interbank settlements, and remittances. And as the regulation of digital asset securities becomes clearer, the tokenization of stocks and debt will open up new avenues for corporate financing, further driving the demand for stablecoins as the primary settlement currency.
The analysts further predict that the widespread adoption of stablecoins will expand the market size of crypto exchanges and brokers, particularly the listing of tokenized stocks, which could drive trading volume growth and increase the revenue of trading platforms. They specifically point to Robinhood as one of the potential beneficiaries, as it is actively integrating the Bitstamp exchange and planning to launch new products such as staking, stablecoins, and derivatives.
Bitcoin to surge to $200,000 by year-end
Regarding the outlook for Bitcoin, Bernstein analysts believe that with the Trump administration's strategic Bitcoin reserves being seen as a core part of its crypto currency policy, combined with the influx of ETF funds and the corporate financial acquisition frenzy, the price of Bitcoin will continue to rise, and they reiterate their target of $200,000 by the end of the year.
Further Reading: Wall Street Bank Bernstein: Bitcoin to Hit $200,000 This Year, Crypto Bull Run to Continue Until 2026
Note: Gautam Chhugani holds a variety of cryptocurrencies. Bernstein and its affiliates may receive compensation for providing investment banking services to Strategy. Additionally, Bernstein's affiliates are involved in market making and liquidity provision for Robinhood's stock.
