Main take:
Memecoins are cryptocurrencies that pay tribute to an internet meme, trend or viral moment. Memecoins are extremely volatile, making them a risky investment. They also lack intrinsic value and obvious benefit. While meme currencies bear some similarities to traditional cryptocurrencies, there are several vital differences that make them a no-go for savvy investors.
Everyone loves a good joke… especially on the Internet. This love of humor and community has given rise to a particular form of fun in the cryptocurrency space: the phenomenon called “memecoins.”
In this guide, we’ll cover our approach to meme coins: what they are, why they’re popular, and how some meme coins are making waves for investors.
What are meme currencies?
Memecoins are a type of cryptocurrency inspired by internet memes and trends. They are usually supported by online communities that view them as fun and interesting. However, they have also become a get-rich-quick scheme for some.
Unlike Ethereum, Bitcoin, and other cryptocurrencies, memecoins have no actual benefit or purpose beyond their cultural value – and in most cases, they are only used for speculation or “gambling.” Naturally, this makes it volatile and full of risks.
The rise of Memecoins
The birth of meme coins can be directly linked to DOGE.
Dogecoin (DOGE), the first widely recognized memecoin, was launched in 2013 by two software engineers as a joke inspired by the doge meme (a viral meme of a Shiba Inu often paired with related captions).
However, despite its humorous roots, Dogecoin quickly became a cultural phenomenon, in part due to Elon Musk promoting the currency on Twitter in 2019. In 2021, the coin rose 800% in 24 hours due to interest from Reddit users and Elon Musk’s encouragement via Twitter.
Now, Dogecoin is the largest memecoin in the world, with a market capitalization of over $22 billion. For comparison, this is larger than the market capitalization of Michael Saylor’s Microstrategy stock.
Other memcoins were launched shortly after Dogecoin’s birth, with mixed success. The second largest Memocoin by market cap, Shiba Inu Coin (SHIB), was created in 2020 by an anonymous group/person under the pseudonym “Ryoshi”.
Today, there are half a million meme coins, thanks to platforms that allow users to issue new coins with just a few clicks of a button. Of course, the vast majority are only worth a fraction of a penny.
How do meme coins work?
Humor and internet culture play a large role in shaping the narrative around meme coins. Memecoins tap into the collective consciousness of online communities, leveraging the humor and relatability of memes to enhance value and adoption.
Accordingly, the more buzz an online community can create around a meme and its associated memecoin, the more likely the memecoin will be successful. Often times, memecoin followers will leverage platforms like Instagram, Reddit, TikTok, and Twitter to generate the buzz necessary to achieve success.
Dogecoin is the prime example of this phenomenon. The accompanying memes became so popular that they were sold as an NFT for a record $4 million. Additionally, the currency has received celebrity endorsements from Snoop Dogg, Gene Simmons, and Mark Cuban, who have made Dogecoin a viable means of payment for Dallas Mavericks game tickets and merchandise.
Memecoins are gambling
Even if you’re interested in investing a little money in memecoins, in jest, it’s important to understand how volatile they are before diving in. Investing in memecoin is a huge financial gamble, as the success or failure of memecoin is completely unpredictable. .
While Dogecoin and Shiba Inu are success stories among meme currencies, neither currency has been able to stabilize for long. Additionally, most memcoins fade into oblivion after the initial hype wears off (if they get any hype at all).
Despite their volatility, many people are still drawn to meme currencies due to the psychological appeal of high-risk, high-return investments and FOMO (fear of missing out).
This is especially true when memecoin experiences a price rise, as this often results in people asking to purchase the coin to get in on the action. But because the price is so volatile, investors should never buy more than they can risk losing, because the price could easily fall the next day.
What are some notable meme currencies?
Shiba Inu: Launched in 2020, the Shiba Inu is the second largest meme by market cap. The currency gained popularity thanks to the support of Elon Musk and Vitalik Buterin on Twitter. The coin saw its biggest price rise in October 2021, when its price rose by more than 300%. However, as shown in the chart above, this price rise did not last for long, with the value continuing to decline over the next two years. As of May 2024, analysts believe that the price of the coin may rise again, as the coin mostly moves in tandem with Bitcoin, which is also expected to rise. However, given the currency’s high volatility, there is no guarantee that such a rise will occur.
Pepe: Launched in April 2023, Pepe is named after the popular “Pepe the Frog” meme within the cryptocurrency community. Initial excitement for the coin’s launch sent prices soaring in May 2023. However, shortly after the excitement faded, a developer update, which the community mistook for a security breach, led to many investors quickly selling their coins, causing the price to rapidly decline.
BOOK OF MEME: Launched in March 2024, BOOK OF MEME was created as a Web 3-focused experimental project to combine memes, decentralized storage, digen trading, and gambling. The BOOK OF MEME experience aims to encapsulate the ever-evolving meme culture within a digital feed. The project seeks to ensure that every piece is immortalized on the blockchain. After an initial rise to just over $0.02, the token fell by 50% but has held its value since then.
Dogwifhat: Launched in November 2023, Dogwifhat is a memecoin running on the Solana network based on the popular meme of a Shiba Inu wearing a pink hat. Memecoin has strong community support and has received many celebrity endorsements via Twitter. However, despite its current high, there is no guarantee that the price will continue to rise, and it may decline after the initial excitement subsides.
Memecoin Risks and Rewards
While meme coins may offer the allure of a quick profit, the chances of success are very low.
In general, the people who do the best with memes are the creators. If they can get enough interest early on, they will be able to sell their massive allocations for a profit, leaving others holding the bag. But even creating memcoins is not a good path to wealth: although they are easy to create, they are difficult to promote and spread, given all the competition for memcoins.
The memecoin market is vulnerable to scams, such as pump and dump schemes. In these schemes, groups or individuals artificially inflate the price of a currency through online marketing and hype, only to sell off their investments at the peak, leaving everyone to suffer significant losses.
Also common are rug withdrawals, a type of scam in which creators suddenly abandon their memecoin project and take investors’ money with them.
There are also cases where scammers use social media to lure investors into purchasing a token that does not exist. One such scam occurred in March 2024, when a scammer posing as a cryptocurrency influencer tricked people into purchasing a non-existent BULL token.
Memecoin investment strategies
Due to their high risk and low reward potential, we do not recommend investing in memcoins. However, if you are willing to take a big gamble or simply want to buy memecoin to learn about it, please be very careful before investing.
Plan to do thorough research on the memecoin you choose, looking at its price history, who is behind the coin, whether it appears legitimate, the online community surrounding it, and if the coin crashed, what led to it. (Use our Blockchain Investor Scorecard to do your research.)
Although you may be interested in joining online community forums for discussion, take it with a grain of salt. Although you will see many people in these forums with a lot of passion and enthusiasm for MemCoin, their predictions for the coin’s success are often just wishful thinking.
Investor takeaways
While memcoins are mostly fun and games, people have lost large amounts of money while gambling with them. While some meme coins have made amazing gains, and some have stood the test of time, the vast majority (over 99%) are still largely worthless.
If you are thinking about entering a memecoin casino and placing some bets, never invest more money than you are willing to lose. The hype and excitement around memecoins can be very tempting, and it can be very easy to fall victim to a bad investment, or worse, a scam.
If you want to take a safer approach of dollar-cost averaging in high-quality crypto assets over the long term, check out our Blockchain Believers Portfolio.
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