In the mid-1990s, a toy company in Illinois started selling small, under-stuffed animals for $5 each. They were called Beanie Babies, and they were nice enough, but the company worked out something clever. It began “retiring” particular characters after a short run, announcing that a given bear, lobster or platypus would never be made again.
The toys weren’t actually scarce, the factories were still turning out millions of them, but they felt scarce, and that was enough. Retired Beanie Babies started changing hands for three or four times their price, then for hundreds of dollars, and a handful of rare ones for as much as $13,000.
People didn’t just collect them. They invested in them. One father spent more than $100,000 on around 20,000 Beanie Babies, intending them to pay for his five children’s university fees. A woman in New York put her life savings of $12,000 into the toys.
Then, in 1999, the company announced another round of retirements, and nothing happened. There wasn’t the usual rush to buy, the mania. Within a few years, most Beanie Babies were worth around 1% of what people had paid.
The toys hadn’t changed, the only thing that had changed was that the next buyer stopped buying.
Economists have a name for this: the greater fool theory. You can make money buying something at a silly price, as long as you can find someone even sillier to buy it from you at a sillier one. It works brilliantly, right up until you’re the last fool in the queue, the greater (greatest) fool.
Which brings us, inevitably, to meme coins.
A meme coin is a crypto token that exists, at best, as a joke, a piece of internet culture. Unlike a share, it isn’t a slice of a business that earns profits. Unlike a bond, it pays no interest. It produces nothing at all. Its entire value is whatever the next person is willing to pay, which makes it the purest greater-fool asset ever invented, and arguably the most efficient Beanie Baby factory in history, because anyone can now create one in minutes for almost nothing. At worst, meme coins are a pure scam.
The results are what you’d expect. A 2025 study by the blockchain analysts Solidus Labs looked at one of the most popular launch platforms, Pump.fun, and found that 98.6% of the tokens launched there showed the hallmarks of a rug pull or a pump-and-dump. Of more than seven million tokens, only about 97,000 kept even $1,000 of trading liquidity. The platform disputes the findings, arguing that most meme coins simply have little long-term value, which, as rebuttals go, doesn’t rebut anything.
The mechanics of a pump-and-dump are simple and very old. The people who create a token, or get in first, buy cheaply. They then generate excitement through social media posts, influencers, a story about the coin going “to the moon”. New buyers pile in, the price rises, and the early holders sell to them at the top. The price collapses. The early holders keep the money, and the late arrivals keep the token.
It’s the same trick that sold shares in worthless mining companies a century ago. It, like most things in modern life, just moves faster now.
Last week, we wrote about a fraudster using our name and a fake picture of our office to sell high-risk investments. Meme coins are a cousin of that story rather than the same thing, plenty are launched as genuine jokes rather than deliberate frauds, but both are about creating a crowd to draw you in.
There’s a simple question that separates investing from this sort of thing. What does it produce? A share produces a stream of profits. A bond produces interest. A property produces rent. You can argue about what those streams are worth, and the price can still fall a long way, but there’s something there to argue about. A meme coin produces nothing, so its value rests entirely on the queue of people behind you.
The father with 20,000 Beanie Babies wasn’t stupid. He was doing what everyone around him seemed to be doing, and for a while it worked. That’s what makes greater-fool assets dangerous, they reward the early, they recruit the late, and they always, eventually, run out of fools.
We help people in Hook and across Hampshire, Surrey, Berkshire, Sussex and Kent invest in things that produce something, and steer well clear of the crowd.
Altor Wealth Management LLP is authorised and regulated by the Financial Conduct Authority (FCA number 769033). Registered office: Landmark House, Station Road, Hook, Hampshire RG27 9HA. This article is general information, not personal advice. Cryptoassets are high risk and largely unregulated in the UK; you are unlikely to be protected if something goes wrong and should be prepared to lose all the money you invest. The value of any investment can fall as well as rise. Study figures are from Solidus Labs (2025), as reported by CoinDesk; Pump.fun disputes them.