Original author: Thejaswini MA

Original translation: Luffy, Foresight News

Exchange-traded funds (ETFs) were born out of a crisis. On "Black Monday" in 1987, the Dow Jones Industrial Average plummeted over 20% in a single day. Regulators and market participants realized they needed more reliable investment tools. Mutual funds could only be traded after the daily close, leaving investors helpless during market panics.

ETFs emerged as a key solution. These “baskets of securities” can be traded like individual stocks, providing instant liquidity during market turmoil.

ETFs simplify index investing, providing broad market exposure at low fees. Designed to be hands-off and highly transparent, they simply track the index rather than attempt to outperform it. The first successful ETF, the S&P 500 Index ETF, launched in 1993, became the world's largest fund on the promise of precisely tracking the S&P 500.

The original ETF was a pure good idea. It was the perfect way to invest in the "whole stock market" without having to research individual stocks or pay hefty management fees to a fund manager.

A turning point in history: The Memecoin ETF debuts

In September 2025, Wall Street crossed a new threshold: packaging Memecoin as a regulated investment product and charging an annual fee of 1.5%.

ETFs have evolved from tools that simplify investing to complex vehicles that can package any strategy. While investment methods like portfolios, hedging, and market timing are endless, the number of companies available for investment is limited.

Today, there are over 4,300 ETFs in the US market, compared to approximately 4,200 publicly listed companies. ETFs have increased their share of all investment vehicles from 9% a decade ago to 25%, marking the first time in market history that there are more funds than stocks.

This raises a fundamental problem: rather than empowering investors, the overabundance of choice paralyzes them. Funds now encompass every conceivable theme, trend, and even political stance, blurring the line between serious long-term investing and recreational speculation. It's almost impossible to distinguish between products designed for wealth accumulation and those designed to capitalize on a trend.

Wait…this anxiety completely misses the point, the Dogecoin ETF is not a distortion of the mission of cryptocurrency.

For 15 years, cryptocurrencies have been criticized as "virtual currencies with no real backing." Traditional finance has called us "speculators obsessed with worthless tokens," asserting that we can never build anything real, lack institutional recognition, and are unworthy of serious regulation.

And now, they are trying to extract value from our "joke-created assets."

The crypto industry has created a new value category that traditional finance cannot ignore, cannot stifle, and ultimately cannot stay out of. The fact that Dogecoin has its own dedicated ETF, ahead of half of the Fortune 500 companies, is the most powerful testament to the dominance of cryptocurrency culture.

Okay, enough celebrating, let’s take a serious look at the nature of this victory.

Why would anyone pay a 1.5% annual fee for something they could “get for free”?

The economic logic of a Memecoin ETF makes no sense to investors, but it makes perfect sense to Wall Street.

You can buy Dogecoin directly on Coinbase in just five minutes, with no ongoing fees. The REX-Osprey Dogecoin ETF, offering the same exposure, charges a 1.5% annual fee. Consider that Bitcoin ETFs charge just 0.25%. Why would anyone pay six times the cost of "digital gold" for Memecoin?

The answer reveals the true target customer for these products. Bitcoin ETFs serve institutional investors and sophisticated wealth managers who need to comply with regulations but understand cryptocurrencies. They compete on fees because their clients have other options and know how to use them.

The Memecoin ETF targets retail investors who see Dogecoin on TikTok but don't know how to buy it directly. They're not paying for market exposure, but for convenience and the assurance of legitimacy. These investors don't compare prices; they simply want to tap "buy" on the Robinhood app and capitalize on the meme craze they're hearing about.

The issuers knew how ridiculous this was, and knew that customers could buy Dogecoin cheaper elsewhere. Their bet was that most people wouldn't discover this or bother with cryptocurrency exchanges and wallets. The 1.5% fee, essentially a tax on financial illiteracy, was packaged as a veneer of institutional legitimacy.

What assets are worthy of ETFs?

The traditional definition of an ETF is: "A regulated investment fund that holds a diversified portfolio of securities and trades on an exchange like stocks, providing broad market exposure while also having professional oversight, custody standards, and transparent reporting."

Classic models, such as ETFs tracking the S&P 500, hold hundreds of stocks across multiple industries. Even sector ETFs (e.g., technology and healthcare) often cover dozens of related stocks. They reduce risk through diversification while capturing market trends.

Let's look at the essence of Dogecoin: In 2013, someone copied the Litecoin code and added a meme-like dog logo, creating a cryptocurrency purely for satire. It has no development team, no business plan, no revenue model, and no technological innovation. Its annual issuance of 5 billion tokens is deliberately designed to create inflationary patterns, mocking Bitcoin's scarcity.

This token has no economic use: applications cannot be developed on it, it cannot be staked to generate interest, and its only function is to exist as an Internet meme, and is occasionally driven up by celebrity tweets.

What regulatory loopholes led to all this?

The path to market for this product reveals the true nature of “financial innovation”: it technically complies with legal provisions but circumvents the spirit of the law through regulatory arbitrage.

The REX-Osprey Dogecoin ETF (ticker: DOJE) wasn't listed under the Securities Act of 1933, which governs commodity ETFs, but rather under the Investment Company Act of 1940. This choice was crucial. Under the 1940 Act, if the SEC raises no objections, the application is automatically approved after 75 days, effectively a regulatory shortcut. However, the problem is that the Act was originally designed for "mutual funds that diversify across multiple assets," not "single-coin speculative vehicles."

To meet diversification requirements, the DOJE cannot directly hold Dogecoin. Instead, it uses derivatives through its Cayman Islands subsidiary to gain exposure, and related holdings cannot exceed 25% of its assets. This leads to an absurd result: a Dogecoin ETF can only have a maximum of 25% of its assets related to Dogecoin.

It fundamentally changes how investors actually purchase Dogecoin. While ETFs that directly hold assets can accurately track prices, using derivatives through offshore subsidiaries introduces tracking error, counterparty risk, and complexity, leading to a disconnect between fund performance and Dogecoin's actual price movements.

This regulatory workaround also brings about transparency issues: retail investors buy Dogecoin ETFs to directly access the meme hot spots on social platforms, but what they actually buy is a "complex derivative portfolio": three-quarters of the investment has nothing to do with Dogecoin price changes, and the returns will be diluted by the remaining 75% of the fund's holdings.

Worse still, this structure completely undermines the original protections of the 1940 Act. Congress enacted diversification rules to mitigate risk through multi-asset allocation; however, Wall Street exploited these rules to package high-risk speculation as regulated products, circumventing the oversight that should have been in place. Far from protecting investors from risk, the regulatory framework masked new risks with the guise of "institutional legitimacy."

Compare this to Bitcoin ETFs. Most Bitcoin ETFs (such as the ProShares BITO or Grayscale Spot Bitcoin ETF) utilize the Securities Act of 1933 or other commodity fund frameworks, allowing for direct Bitcoin exposure (or through futures) without being subject to the 25% holding cap. They typically hold futures contracts directly or seek Bitcoin spot custody (upon approval), enabling more accurate tracking of Bitcoin prices.

The Dogecoin ETF is a perfect storm of regulatory arbitrage. An ETF that's primarily a non-tenderable asset, holding assets that are publicly declared to have no utility, is being listed under a 1940s law designed to prevent such speculation. This is financial engineering at its most cynical, exploiting regulatory loopholes to create a speculative product under the guise of investor protection.

Why the obsession with yield?

Wall Street has stopped pretending to focus on fundamentals and is recklessly chasing returns, regardless of asset quality.

Data from State Street Corp. show that institutional portfolios are overweight stocks to the highest level since 2008. Investors are piling into option income ETFs that promise monthly payments, high-yield junk bonds, and cryptocurrency income products that offer double-digit returns through derivatives.

Money always chases yield first and asks questions later. When interest rates soar, investors decisively shift from safe investment-grade bonds to high-yield corporate bonds. Thematic ETFs centered around AI, cryptocurrencies, and meme assets are being launched at a record pace, catering to speculative demand rather than long-term value.

Risk appetite indicators are all in the red. Despite the uncertain macroeconomic environment, the Volatility Index (VIX) remains low. After the market volatility in early 2025, defensive sectors briefly attracted funds, but the flow quickly returned to high-risk, high-return sectors such as industrials, technology, and energy.

Wall Street has essentially decided that in a world of unlimited liquidity and constant innovation, yield trumps all else. Investors will find a reason to buy anything that offers excess returns, regardless of fundamentals or sustainability.

Are we creating a bubble?

What happens when the number of investment products exceeds the actual investable assets?

We’ve crossed the point where there are more ETFs than stocks, a fundamental change in market structure. We’re essentially creating synthetic markets on top of the real market, with each layer adding fees, complexity, and potential points of failure.

Matt Levine once pointed out: "As ETFs become more popular and technology reduces their implementation costs, more once customized transactions will become standardized ETFs. The number of potential trading strategies is far greater than the number of stocks... In the long run, the potential market space for ETFs is limited by the unlimited number of trading strategies, not the shrinking number of stocks.

The Memecoin ETF phenomenon has accelerated this trend. Rex-Osprey has filed applications for Trump Coin and Bonk Coin ETFs, along with applications for traditional crypto assets like XRP and Solana. The SEC currently has a backlog of 92 cryptocurrency ETF applications. Each successful product launch fuels demand for the next, regardless of whether the underlying asset has practical utility.

This is exactly the same as the subprime mortgage crisis in 2008: Wall Street repackaged derivatives into new derivatives until the financial products were completely disconnected from the underlying assets; now we have simply replaced "mortgages" with "attention and cultural phenomena."

The market appears more liquid than it actually is because multiple products are trading around the same underlying asset. However, when a crisis strikes, these products will move in sync, and the so-called liquidity will evaporate in an instant.

What does a Memecoin ETF mean?

The deeper story is that finance has evolved into a "comprehensive attention capture mechanism" where anything that can cause price fluctuations can be monetized.

ETF listings are self-reinforcing through network effects. A month before DOJE's listing, Dogecoin's price surged 15% due to expectations of institutional capital inflows. This price increase attracted more attention, which in turn spawned more memes and increased cultural influence, which in turn provided legitimacy for more financial products. Success breeds imitation.

Traditional finance monetizes productive assets, such as factories, technology, and cash flow; modern finance can monetize anything that drives prices, such as narratives and memes. ETFs, as a packaging shell, transform cultural speculation into institutional products, extracting fees from the communities that originally created these phenomena.

The more central question is: Is this innovation or plunder? Does the financialization of memes create new value, or does it simply extract value from spontaneous cultural movements by adding institutional costs?

Internet culture has already created enormous economic value: advertising revenue, peripheral sales, platform traffic, creator economy...

I've been thinking about what will propel these companies to billion-dollar valuations by 2025. I even recently ordered matcha from Mitico Coffee Roasters in Bangalore; not because I love the taste of the green powder, but because matcha has become a ritual symbol of "high performance and quiet luxury," a way for me to feel part of some global wellness aesthetic.

This is the current state of internet culture: a series of “participation fees” disguised as lifestyle choices, with monetization opportunities everywhere, ranging from the absurd to the clever and innovative.

Take, for example, the hot topics of 2025. The Coldplay "kissing scene" incident turned an awkward moment between two people into a corporate resignation scandal, with Gwyneth Paltrow inexplicably becoming a "temporary spokesperson." The internet erupted in debate over whether "100 men can defeat a gorilla." The Labubu blind box craze transformed the $30 collectible into a "status symbol" that people scrambled for in stores.

Then there's the language barrier I'll never overcome. Gen Z slang evolves so quickly. Last week, someone called my outfit "bussin," and I didn't know whether to be angry or happy. Apparently, it was a compliment? My nephew tried to explain that "rizz" means "charming," but then he started using words like "skibidi" and "Ohio," and it suddenly hit me how completely out of touch I am. Honestly, I'm trying to keep up, but every time I try to use the words correctly, I feel like a cliché. It's a complete stunt of "millennial overkill," and not my style.

Within minutes of Taylor Swift and Travis Kelsey's engagement breaking, the entire marketing world shifted gears: brands from Walmart to Lego to Starbucks jumped on the bandwagon.

The key point is this: this cultural momentum itself is an economic engine. When Katy Perry's 11-minute spaceflight sparked a week-long internet debate, that attention could be converted into advertising revenue, brand exposure, and cultural capital in dozens of ways. When a couple on TikTok made "pookie" a trending term, an entire ecosystem of "pookie playlists and pookie merchandise" instantly emerged.

Internet culture has created enormous economic value through the creator economy, merchandise sales, platform traffic, and the ability to drive stock prices faster than financial reports. If a single Elon Musk tweet can add billions of dollars to Dogecoin's market capitalization, and if Tesla's valuation is determined more by cultural momentum than fundamentals, then "cultural phenomena" are legitimate economic forces, deserving the same institutional recognition as other asset classes.

ETFs, as a "wrapper," don't extract value from communities. They formalize existing value and allow previously excluded people to participate. Ohio retirees can now access internet culture through their 401(k)s without having to learn a cryptocurrency wallet or browse Discord groups.

But the flip side is this: This retiree could also lose a significant portion of his retirement savings on an "abandoned internet joke." An annual fee of just 1.5% would cost $1,500 per year on a $100,000 investment. Furthermore, due to regulatory requirements, ETFs can only have a maximum of 25% exposure to Dogecoin. This retiree might not even have the cultural exposure he desired.

Financial accessibility without financial education is dangerous. Making speculative assets more accessible doesn't reduce their risk; it simply makes the risk invisible to those who don't understand what they're buying.

But the financialization of memes may strengthen communities rather than exploit them. When cultural movements receive institutional investment, they gain stability and resources.

If internet culture can drive prices, it becomes an asset class; if social momentum can create volatility, it becomes a tradable asset. ETFs are simply a vehicle for transforming cultural energy into institutional products.