In this week’s Global Macro analysis (sponsored by Capital.com), we look at the surge of new meme-coin ETFs, unpack why DOGE and XRP funds slumped straight after launch, and ask if these products signal a late-cycle warning.
More Crypto ETFs Arriving!
Every bull market spawns new financial instruments. With leverage, these new products often become ‘ground zero’ of the subsequent bear market. Portfolio insurance was all the rage before the 1987 market crash. And who can forget those complicated, octane-charged “CDO-Squared” which, in 2007/8, imploded unsuspecting banks around the world?
Continuing this line of thinking, the next market meltdown, I suspect, will probably have some tangential links to a sector that is either: a) new or, b) containing some novel technologies (eg, gen-AI). Novel sectors that seriously capture the imagination of many investors. What fits the bill these days? One immediately springs to mind: Crypto.
This asset class only emerged in 2009, so it is very young and dynamic. Gold, in comparison, is a 3,000-year-old asset. And since the online publication of Satoshi’s 9-page paper, the crypto market has been expanding rapidly. Billions poured into the sector, especially outside winter months. With the ascension of Trump 2.0, the most crypto-friendly US president, we are certainly amidst a red-hot bull cycle now. Bitcoin (BTC) alone fetches a market cap of $2.2 trillion.
These days, crypto’s real-world presence is being felt keenly. Tether, the stablecoin issuer, is now the 18th largest holder of US Treasuries, ahead of South Korea. The crypto company is even recycling its vast profits back into gold and gold miners. The line that separates digital-only crypto firms and real-world companies is increasingly blurred.
Just last week, some new fancy crypto ETFs have arrived: DOGE and XRP ETFs.
Until 2024, a crypto asset was usually traded through specialised crypto exchanges (eg Coinbase, ticker: COIN) or investment funds. As the popularity of crypto grows, Wall Street certainly wants a cut of the lucrative crypto trading. So financial firms wrap crypto coins in ETFs to facilitate trading among investors who did not have dedicated crypto accounts but still want a slice of the exciting crypto action.
The first crypto ETF that became widely available was the Bitcoin ETF (ticker: IBIT).
Its assets swelled to become one of the largest ETFs in the world, with $89 billion in AUM, after a short 18-month listing. In other words, IBIT attracts an average $4.5 billion of money flow per month. Envy spurs action. Doge (8th largest token, mcap $36bln) and XRP (4th largest, mcap $170bln) are following suit.
In fact, there are many more crypto ETFs waiting to list, from Avalanche to leveraged ETFs.
Latest Memecoins ETFs: DOJE and XRPR
Dogecoin ETF (ticker: DOJE), sponsored by Rex Osprey, listed last week on the CBOE Exchange.
However, after its listing DOJE prices immediately headed south.
The 1-minute price chart (due to short pricing history) shows three consecutive days of downward jumps. The southward-sloping chart is like a waterfall. In just three trading sessions, DOJE lost 17 percent of its value. Volatile stuff!
Mind you, XRP ETF (ticker:XRPR) did not fare that much better. The ETF slumped 10 percent since its listing. Its price action mirrors that of DOJE’s – three down sessions in a row.
What’s going on?
Why are these new alt-coin ETFs performing so poorly when BTC is still trading above $110K?
One reason could be the dip in a few crypto tokens. Bitcoin did pullback from $117K to $112K in recent days. A minor slippage by crypto standard. But bear in mind alt-coins are high beta. This means they tend to underperform BTC when things are a little shaky.
For example, as Bitcoin slipped 2 percent, Dogecoin corrected from $0.3 to $0.23 – a fall of 23 percent. This naturally pulled DOJE down severely.
More importantly, the construction of these new crypto ETFs are slightly different to that of iShares Bitcoin.
On DOJE’s factsheet, this risk warning sits prominently, in bold, atop the document: “Investing in the fund is not equal to investing directly in DOGE.”
According to DOJE’s prospectus, the Fund will “invest at least 40% of its assets directly in shares of other exchange-traded funds (“ETFs”) and exchange-traded products (“ETPs”), including non-U .S . exchange-traded products (“non-US ETPs”), which invest directly in, provide exposure to, replicate the performance of, or have trading and/or price performance characteristics similar to the Reference Asset (DOGE).“
In other words, holders of DOJE are actually carrying other ETFs/ETPs. DOJE becomes a derivative of some sorts, a synthetic crypto ETF.
What is more, DOGE is one of the meme-coins which, according to DOJE’s prospectus (p.24-5), is a highly speculative industry:
A “meme coin” is a type of cryptocurrency inspired by internet memes, public figures, current events, or trends, often created to attract an enthusiastic online community for trading and social interaction . These coins are usually bought not for their functional utility, but for entertainment, cultural engagement, and speculative investment—similar to digital collectibles. Meme coins typically offer limited or no real-world functionality and are known for their high volatility due to their value being driven primarily by market sentiment and online hype.
The risk is seemingly immense:
These coins are subject to extreme volatility driven largely by social media trends, speculative trading, and public sentiment, rather than underlying fundamentals or utility. Most meme coins lack intrinsic value and do not offer meaningful technological or economic use cases. As such, their prices are highly susceptible to rapid declines once speculative interest wanes. …..Meme coins are also particularly vulnerable to market manipulation, including “pump and dump” schemes.
That’s probably a good risk summary of a Meme-coin. As for DOGE, this is what the prospectus has to say about it (p.24, underlined words mine):
Dogecoin is one of the earliest meme coins, originally launched in December 2013. Dogecoin was developed by software engineers Billy Markus and Jackson Palmer, using the codebase of Litecoin, and it operates on its own blockchain. Dogecoin has an unlimited, inflationary supply where a fixed 10,000 DOGE are minted every minute as a block reward for miners, resulting in a perpetual increase in the total supply .
In other words, DOJE is a financial ETF product containing a Reference Asset which has:
- no meaningful economic use (so lack intrinsic value)
- very speculative pricing
- unlimited quantity
Moreover, the ETF invests half its assets in other financial products. At this point, do you see any parallels with the CDOs/CPDOs of the past?
No wonder Bryan Armour, a director of Morningstar, observed in Financial Times (£) that DOJE “normalises collectibles…..like beanie babies or baseball cards.”
“ETFs,” he further commented wryly, “typically serve capital markets, not collectibles. I just don’t know where it stops. Should we expect a Labubu ETF next?”
Good question. More crypto ETFs are coming. Given their immediate price drops, I wonder if DOJE/XRPR listings are the near-the-market-top market anecdotes that we all read in classic financial books. We will know this very soon.
Jackson is a core part of the editorial team at GoodMoneyGuide.com.
With over 15 years of industry experience as a financial analyst, he brings a wealth of knowledge and expertise to our content and readers.
Previously, Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Jackson brings a huge amount of expertise in areas as diverse as global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
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