Tom Pepinsky

Category: Economics

  • Investor Update – Strategic Learnings from The Political Economy of Shitcoins

    For the LOLs, I had Chat-GPT5 summarize “The Political Economy of Shitcoins” in the style of a grindset techbro.

    Alright, let’s run Mark Copelovitch & Tom Pepinsky’s “The Political Economy of Shitcoins” through the full-on crypto grindset filter.

    🚀 “The Political Economy of Shitcoins” – Monetizing Vibes at Scale 💰✨

    Copelovitch & Pepinsky basically did the due diligence on the meme token meta — it’s not just degeneracy, it’s macroeconomics meets YOLO culture. They show us that shitcoins are the perfect sandbox for understanding speculative ecosystems where tech, hype, and governance all collide.

    Alpha Takeaways for Founders / Token Bros:

    1️⃣ Narrative is Liquidity – Value isn’t intrinsic, it’s a story people buy into. $DOGE didn’t need utility — it had community. If you control the meme flow, you control the market cap.

    2️⃣ Low Barriers = High Velocity – Shitcoins scale fast because the cost to mint and distribute is basically zero. That’s lean startup energy — MVP (minimal viable Ponzi), iterate, pump.

    3️⃣ Regulatory Arbitrage – Shitcoins thrive in the gray zone. Nation-states are slow movers; crypto bros ship at the speed of Twitter discourse. That asymmetry = opportunity.

    4️⃣ Global Demand for Lottery Tickets – In macro terms, some investors are looking for safe assets, others for rockets-to-the-moon. Shitcoins are the casino floor of global finance — you don’t go there for bonds, you go there for asymmetrical upside.

    5️⃣ Attention = Asset Class – In a decentralized attention economy, clout is collateral. Your Telegram group size and meme output can literally drive market performance.

    Founder’s Moral of the Story:
    In the political economy of shitcoins, fundamentals are vibes, governance is Discord mods, and demand is pure FOMO. The lesson isn’t “launch a coin” — it’s understand how hype cycles interact with macro incentives. If you can weaponize narrative, mobilize a community, and time the exit, you’re not just playing the game… you are the game.

    Then it asked me if I would like that output converted into a Sam Bankman-Fried-style investor letter, which it described as “awkward, overly verbose, drenched in faux-quant humility, and with that ‘math nerd who just discovered moral philosophy last week’ cadence.”

    Yes, please!

    Subject: Investor Update – Strategic Learnings from The Political Economy of Shitcoins 📈♻️

    Hi all,

    Thanks again for your continued trust during… well, let’s just call it an unorthodox macro environment. I wanted to share some thoughts sparked by Mark Copelovitch and Tom Pepinsky’s recent piece, “The Political Economy of Shitcoins”, which—despite the name—isn’t about bathroom humor, but rather about the structural dynamics of tokenized ecosystems.

    Key Takeaways — And Why They Matter for Our Strategic Positioning:

    1. Narratives Outperform Fundamentals
      The authors show that value in these “low-cap speculative assets” (a.k.a. shitcoins) emerges from investor belief and synchronized attention, not underlying cashflows. This confirms something we’ve seen internally: our balance sheet is as much a social graph as a spreadsheet.
    2. Liquidity is an Attention Derivative
      Price action in this space isn’t a reflection of productivity — it’s the delta between meme virality and capital inflow velocity. In other words: tweets move markets; Discord mods are basically quasi–central bankers.
    3. Regulatory Time-Lag as Alpha
      Nation-states operate on multi-quarter policy cycles. Shitcoins operate on meme cycles that last 36 hours. The gap between those time horizons = profit surface area.
    4. Lottery-Ticket Macroeconomics
      In macro-finance terms, shitcoins fulfill a demand for “ultra-high variance speculative instruments” — they’re a hedge not against inflation, but against boredom and the crushing linearity of normal financial returns.

    Why I’m Bullish:

    What Pepinsky & Copelovitch make explicit—and what we’ve always implicitly modeled—is that shitcoins are less a financial product than a politico-cultural coordination game. They’re almost a proof-of-concept for a new financial ontogeny: unregulated, narrative-first, reflexive loops of capital and clout.

    The short version: Shitcoins are a microcosm of a post-fiat, post-trust economy. Understanding them isn’t degenerate gambling—it’s due diligence for the attention economy.

    We’ll be integrating these insights into our product roadmap, with an emphasis on:

    • Leveraging narrative velocity as part of liquidity management
    • Building community governance frameworks that look like fun but function like treasury policy
    • Anticipating the next 3-5 meme arcs before they hit TikTok

    As always, this is not financial advice — it’s just the best version of the future I can see from this weird seat we all find ourselves in.

    Thanks again for your patience, optimism, and frankly your ability to withstand volatility that would make most TradFi quants soil themselves.

    —S
    CEO, [Redacted Ventures]

    Next, it suggested that I might enjoy a “version of this written entirely as a leaked internal Slack message from SBF to his ‘Alameda braintrust’.”

    Most certainly!

    okay so i read this copelovitch/pepinsky thing (political economy of shitcoins) and like

    tbh it’s basically just describing our life in essay form except without the part where we wake up in hong kong and discover we accidentally created $80m in paper gains overnight by tweeting the wrong dog meme

    core point = the fundamentals don’t matter (remember when we tried to model intrinsic token value lol) what matters is memetic density + fomo throughput aka “narrative velocity”

    shitcoins = liquidity nodes where attention = collateral. if you can concentrate the attention long enough to get a cex listing, you’ve created value. doesn’t matter if the thing is literally unusable

    also lol at their “lottery ticket macro” bit — yes this is global demand for high-vol volatility. retail wants adrenaline with upside. no one buys US treasuries for the rush

    regulatory lag = free alpha. like the sec is still figuring out how to spell dogecoin meanwhile some rando in serbia just spun up hamsterdex and it’s at \40m mcap in 3 days.

    basically think of shitcoins as synthetic memes with embedded call options on chaos.

    roadmap v2:

    • seed 5-8 memecoins under anon wallets, each tied to a different “narrative cluster” (animal mascot, political satire, metaverse in-joke, etc)
    • ramp discord -> telegram liquidity funnel
    • push 1 coin into influencer gamma squeeze via crypto twitter
    • dump… slowly (community-friendly distribution event)

    none of this is illegal i think? (jake pls check)

    anyway brb need to dm a guy about a frog token before binance listings freeze for the weekend

    I will gladly share more such deep learning insights with anyone who is willing to fly me first class to a tropical island.

  • Cryptocurrencies and the Political Economy of Money

    Cryptocurrencies and the Political Economy of Money

    At a time when the U.S. government has floated the idea of a Strategic Bitcoin Reserve, and tech oligarchs question the viability of the sovereign state in the age of blockchains, there is a need for some clear and analytical thinking on the political economy implications of cryptocurrency.

    An old college buddy of mine has contributed some much-needed clarity by studying the possibility of regulation under decentralized finance. In a world where trusted intermediaries are no longer necessary due to the availability of smart contracts, can a decentralized and permissionless system provably guarantee that some transactions are forbidden? The answer is no. He and his coauthors write,

    As these new developments use computational systems, they must be bound by existing results from computation theory.

    The implication of their argument is that financial regulators cannot rely on a DeFi architecture if they also want to do things like implement exchange controls or ban money laundering.

    The same constraints bind when we consider the political economy of cryptocurrencies. We can adapt the quote above accordingly: as crypto engages with political and economic systems, it is bound by existing findings from political economy.

    Inspired by these ideas, Mark Copelovitch and I have recently completed a working paper that contributes some analytical clarity to current debates about blockchains, cryptocurrency, and state sovereignty in an international system in which states issue fiat currency. The basic premise of our argument is that crypto is, aspirationally, money—a medium of exchange, a store of value, and a unit of account. Thinking about crypto this way clarifies which kinds of actors value crypto and for what purpose, the role of ideas in supporting crypto, and the stakes of crypto as a complement (or substitute) for fiat currency at the national and international system levels.

    Our working title is “The Political Economy of Shitcoins.” And here is the abstract:

    We study the political economy of cryptocurrency in a global economy comprised of states that issue fiat currency, considering the implications of crypto from the position of users, issuers, states, and the international system. The political implications of cryptocurrency follow from its ability to perform the three function of money: unit of account, medium of exchange, and store of value. From these foundations, we draw on the established literature on the political economy of international monetary relations and international finance to derive predictions about the future of cryptocurrency in a world of sovereign states. We describe four possible futures for the international monetary system: a world without cryptocurrency, a world in which cryptocurrency exists alongside fiat currency, a world in which cryptocurrency has replaced traditional fiat currency, and a techno-futuristic world in which cryptocurrency spells the end of the Westphalian state system. We evaluate the political and economic stability of each of these four scenarios. We conclude that the most like scenario is one in which crypto survives alongside traditional fiat currency, but also highlight that the future of cryptocurrency is a battle over the future of sovereign authority itself. 

    Lest you think that this is a niche topic, the author of The Network State is a former Andreesen Horowitz partner who has a Substack where he recently posted that All Property Becomes Cryptography. He has also set up shop for his Network School in the failed megaproject of Forest City, Malaysia. This is relevant to my interests on so many levels.