NEW YORK (NYTIMES) - Since late November, some of the world's savviest cryptocurrency investors have been hooked on a game that has cartoon sheep, cartoon wolves, a digital currency called US$wool - and the potential to make real money.

Mr Graham Friedman, a self-described crypto evangelist, is among them. Mr Friedman put up more than US$20,000 (S$27,000) of his own money to buy one wolf and one sheep - or, rather, unique digital images of them called non-fungible tokens.

"I'm like, dude, the narrative is so cool," said Mr Friedman, a director at Republic Crypto, a digital asset strategy company. "I'm here for the waltz."

Wolf Game, as it is called, applies some familiar financial principles to a mysterious digital world. Players can buy sheep from the creator of the game, identified only as "the Shepherd", and lend them back to "the barn" - essentially a storehouse - to earn interest. The payments are in $wool, a digital token that can be used as a form of payment anywhere on the Ethereum blockchain, on which the game is built. To get a sheep back from the barn, players must pay a 20 per cent tax in $wool to those who bought digital images of cartoon wolves.

When Wolf Game's creator discovered that the game was vulnerable to hackers and shut it down temporarily to fix its code, freezing everyone's assets, players had little recourse. They simply had to wait and hope that the game would come back online and that they would be able to retrieve their holdings. This spooked some participants, who got out as fast as they could once the game was running again. But others, including Mr Friedman, kept playing.

"Getting in there when it looked sort of damaged and reputationally unsure turned out to be very smart," Mr Friedman said. By essentially buying the dip, he had tripled his investment to US$60,000 as at January.

So it goes in the world of cryptocurrency - a market full of faceless users with nonsensical names who are just as likely to post animated pictures of dogs doing backflips on the moon as they are to buy or sell something of enduring value. There is big money to be made, but a billionaire investor can get swindled just as easily as a newbie buying a tiny sliver of a single bitcoin.

Got an idea? Issue a digital coin to fund it - all you need are believers.

And it is getting wilder.

As stocks were sold off early last week, crypto prices also plunged. Bitcoin dropped nearly 13 per cent before rebounding along with stocks. Ethereum's own coin, Ether, was briefly down 15 per cent. Their price declines have dragged down other digital asset prices too.

Analysts attribute the decline to investors who are pulling their money out of higher-growth, risky assets - including technology stocks - as interest rates are set to rise. This has put a dent in the argument, promoted by crypto boosters, that digital assets offer a hedge against losses in other markets.

Despite their volatile and occasionally inscrutable nature, cryptocurrencies are becoming more widely traded, used and held - El Salvador recently started accepting Bitcoin as legal tender, the Federal Reserve is studying whether to issue its own digital coin, and wealth managers are encouraging clients to explore crypto assets.

So how does a new investor make sense of crypto and its constantly changing landscape?

The short answer: It is impossible.

There are so few reliable measures of value that it is hard to tell whether the excitement around a particular cryptocurrency is justified - or a bubble about to burst. Traditional financial analysis does not apply here. A stock analyst, for instance, determines whether a company's shares are expensive or cheap by assessing its business model, future prospects and leadership. But few, if any, of those metrics translate to cryptocurrency valuation. Belief alone can drive value.

It is hard to even know what counts as a cryptocurrency. Bitcoin and Ether are widely regarded as currencies because, like the dollar or the pound, they are used to buy and sell many goods and services. Another 11,000 or more digital coins and tokens also exist, many of them vying to gain enough acceptance to become the next Bitcoin or Ether.

(Coins operate on their own digital backbones, called blockchains. Tokens rely on other blockchains to get around in cyberspace. Coins, tokens and other assets are stored in wallets, which are comparable to online bank accounts except that their holdings are visible to all.)

By standard measures of value, the prices of Bitcoin and Ether are understandable. They are priced highly - with market capitalisations on Wednesday (Jan 26) last week of nearly US$690 billion and US$290 billion - because they are well established and liquid, with broad user bases. Bitcoin is held in nearly nine million wallets, according to data provider Chainalysis.

But there are many other coins and tokens whose prices are skyrocketing, giving them market caps above US$1 billion even though they have only 100,000 or so users.

For example, there have been US$25.5 billion worth of transactions - representing the volume of trading - in RenBTC, an 18-month-old token designed to connect Bitcoin to the Ethereum blockchain. Its market cap peaked above US$1 billion in October and was around US$765 million last Wednesday, but RenBTC was traded between just 1,732 wallets between Nov 20 and Jan 13, according to Chainalysis.

Bitcoin is used "by people all over the world", which explains its value, said Chainalysis spokesman Maddie Kennedy. But coins with plenty of activity by relatively few users are "dominated by an active insiders' club", she said.

So what is a new investor to do? One way to cut through the thicket is to pick a coin or token that is built to fulfil a certain purpose - as an alternative to traditional money, like Bitcoin, or, say, a way to transfer money to parts of the world where basic banking services are hard to come by. No matter how its value fluctuates, the thinking goes, there will be a reason to use it, which can make it a good investment.

Bitcoin is likely to continue to exist because, as the world's first cryptocurrency, it is owned and used by more than 150 million people - a number greater than the population of France or Japan. Ethereum's purpose includes the fact that its blockchain serves as a backbone for tokens other than Ether - effectively giving users of different tokens a common medium through which to exchange items of value.

Solana and Polygon are other networks with their own coins that could eventually be used to trade anything from carbon credits to digital versions of academic textbooks.

That makes coins like Dogecoin and Shiba Inu, which were started as Internet jokes, or US$wool, a token built for Wolf Game, questionable investments, since they serve no apparent purpose except as tools of speculation. Dogecoin was briefly worth more than the total value of shares of Twitter last year. Shiba Inu had a market value of US$11.5 billion last Wednesday.

"Memecoins turn our idea of 'value' on its head," said Mr George Kaloudis, an analyst for the media outlet CoinDesk. "Shiba Inu should not be worth anything close to 11 figures."