Cryptocurrencies are digital or virtual coins that use cryptography to secure or validate transactions. Cryptocurrencies are bought, sold and traded on decentralized exchanges (DeFi exchanges) as well as being used to purchase goods and services.
Meme coins are a type of cryptocurrency that are created to commemorate or parody well-known memes. For example, the Dogecoin cryptocurrency was created in 2013 in honor of the Doge meme. Meme coins are often traded on decentralized exchanges and can also sometimes be used to purchase goods and services. They have grown in popularity in recent years for a number of reasons.
What Is a Meme Coin?
The first step to understanding whether meme coins are worth investing in, is to answer the question, "what are meme coins?" A meme coin is a type of altcoin that is created through a process of crowdfunding or minting by its users. Meme coins are often created as a joke or to parody other coins or memes, and their value is often based on their novelty rather than their underlying technology or utility.
Meme coins are not designed to be used in the same way as utility tokens such as staking coins or using the coins to make purchases. Instead, meme coins are primarily traded on exchanges.
There are almost 200 meme coins currently in circulation. You can buy meme coins, sell and trade them much like with any other cryptocurrency.
And you can find popular meme coins on platforms like Crypto.com where they can be purchased with cryptocurrency such as Bitcoin or Ethereum.
Why Are Meme Coins Popular?
Meme coins are popular among retail investors because they parody current events. With so many serious things going on in the world, meme coins also offer a means to lighten the mood.
But one of the main reasons meme coins tend to be so popular among retail investors is because their value per unit is very low. This makes it easy for people to purchase large volumes of the coins without having to worry about breaking the bank.
Some consider meme coins' rise in popularity to be due in part to the pandemic. People spent more time online and memes in themselves grew in popularity, so creating a cryptocurrency coin around this concept was a clever idea.
Meme coins' success and popularity are driven by community buzz. As such, buying a certain meme coin can be a way of demonstrating your solidarity or membership of a community.
A number of businesses have begun accepting meme coins as payment. Tesla was amongst the first to accept Dogecoin for the purchase of certain items. Nordstrom and GameStop followed suit by accepting meme coins as payment. AMC announced they too will accept meme coins down the line.
How Did Meme Coins Get Started?
Meme coins are coins that are created in response to a particular event or trend. They are often created as a joke, and may not have any real value. Meme coins typically have a very small circulating supply, and may not be listed on any exchange at all.
The first meme coin was created in November 2013, when Dogecoin was launched. Dogecoin was created by Billy Markus, who wanted to create a fun cryptocurrency that could reach a broader audience than Bitcoin.
Dogecoin became popular on social media sites such as Reddit and 4chan, where users shared images of Doge, a Shiba Inu dog, with humorous captions. As Dogecoin became more popular, its value increased, and it started being listed on several online exchanges.
Other meme coins, such as Pepecoin and Potcoin, were created in response to the success of Dogecoin. These coins are intended to be used as a means of exchange, and their values are based on the popularity of the memes that they feature.
Is It Worth Investing In Meme Coins?
Despite their reputation for being highly volatile, meme coins may still be worth investing in for short-term profits. Many of these coins have seen significant price increases in recent months, and it is likely that the trend will continue as long as the coins remain popular. For example, investors could purchase Shiba Inu for $1 in March 2021 with their value skyrocketing to almost $8000 per coin months later. If you'd bought in March and sold later, you could have made an impressive profit.
Here's the secret to making money with meme coins. You've got to keep your finger on the pulse and anticipate which memes are on the brink of going viral so you can jump onto new coins as they become available. You can join online forums and groups to keep track of what is going on in the meme coins community to strike when the iron is hot.
Yes, it is no secret that meme coins are not a stable investment. But with great risk comes great reward. If you get the timing right, you could be in the running to make some good money.
Common Characteristics of Meme Coins
Unlimited Supply:
Meme coins often have a very high or even unlimited supply. This means there can be billions of meme coins in circulation with no mechanism in place to remove them from circulation down the line. As a result of this, their value is often low and they're cheap to buy.
Volatile:
Meme coins are notoriously volatile, largely due to them not having a true purpose other than being traded. Their fluctuations can be quite dramatic because of their unlimited supply so there is no way to cap the number of meme coins in circulation. The value of a meme coin can also be heavily influenced by the sentiment of the community around it. If a meme coin goes viral, its value will skyrocket. However, when a new meme coin comes along, it's value can be displaced. They can fall just as quickly as they rise.
Some other common characteristics of meme coins are:
- They are not designed to be used in the same way as a utility token but rather to be traded
- Most meme coins have an unlimited supply
- Their value is influenced by community sentiment
- Low worth per coin
Risks of Investing in Meme Coins
There are a few risks associated with investing in meme coins, much like with any other investment.
Volatility:
One is that the meme may lose popularity and the coin will lose value. As we mentioned before, meme coins are highly volatile so their value can fall just as quickly as it rises.
Technology:
Another risk is that the developers of the coin may not be reputable or may not be able to continue developing the coin. Meme coins are rarely backed by the same technology as mainstream cryptocurrencies so tend to be more fragile.
Security:
There is also a risk that the coin may be hacked or that there may be a problem with the underlying blockchain technology.
Scams:
There have been incidences of scammers creating viral cryptocurrencies to swindle people out of money. For example, the Squid Game meme coin was selling at over $2000 a coin when suddenly the creators took the coins out of circulation and disappeared with users' money. Yikes!
Lifecycle:
Because their value is based on short-term hype, the likelihood of them retaining any value years down the line is low. They have very short life cycles. Meme coins are best to be viewed as short-term investments to buy and sell while they're still popular.
Many people ask whether meme coins are safe? While not every risk can be mitigated, looking out for the following features can help you avoid a scam:
Lack of transparency: If the team behind the coin is not transparent about their goals, plans, and how the coin works, it is likely a scam.
Fake team members: If the team members are not real, or if they are not who they say they are, it is likely a scam. Developers of a meme coin are often linked to other projects and known within the community. If the team is shady or can't demonstrate their track record of work in the community, it is best to avoid investing.
Pump and dump schemes: If the coin is being marketed to investors with the promise of high returns, and then the value of the coin is suddenly dropped, it is likely a scam.
No real-world use case: If the coin does not have a real-world use case, it is likely a scam. Keep in mind most meme coins are used primarily for trading and not for staking etc.
No blockchain: If the coin is not based on blockchain technology, it is likely a scam. Although there are exceptions to this where DAG technology is concerned.
Burn Addresses: It is important to verify whether the liquidity pools are held by burn addresses. This way you protect yourself from investing in a project that disappears with your money.
Auditing: Verify whether the project has been audited by a third-party firm.
Holdings: As a rule of thumb, no developer should hold more than 5% of the total number of tokens in circulation. If they do, consider this a serious red flag.
Famous Meme Coins
There are a number of meme coins currently in circulation, some more popular than others.
Shiba Inu
The Shiba Inu meme coin was created to rival the popular DOGE. Its name was derived from the Japanese dog breed, Shiba Inu. The SHIB was created anonymously in August 2020 and is not associated with any project or company.
The SHIB ecosystem has several features which make it unique:
- Only 1 quadrillion coins will ever be issued, ensuring long-term value and scarcity.
- Over 50% of the coins are either burnt (removed from circulation) or donated to charity, making it one of the most deflationary cryptocurrencies in the world.
- The Shiba Inu coin is the first meme coin to be released, and has spawned dozens of copycats.
- The Shiba Inu coin has a very active and engaged community, which has created a wide range of memes, artwork, and other content.
- The Shiba Inu coin is traded on a number of exchanges, and has a growing user base.
Dogecoin
Billy Markus to make fun of Bitcoin and "mainstream" cryptocurrencies. Jackson Palmer, stated that he was "flattered" by the coin's popularity but the Dogecoin was a "joke" and not intended to be taken seriously. Built off the Litecoin blockchain, DOGE has a proof of work mechanism and unlimited supply. Some features of the Dogecoin include:
-Fast transaction times -Low transaction fees -Unlimited supply -Decentralized
Dogecoin took off when it was backed by celebrities and Tesla billionaire, Elon Musk. Musk appeared on an episode of Saturday Night Live declaring himself as the "Dogefather," skyrocketing the DOGE's value.
Dogelon Mars
The Dogelon Mars (ELON) is another dog-themed meme coin named after the Tesla mogul, Elon Musk. ELON is associated with the Dogecoin and has over 557 trillion coins in circulation already. The ELON coin was created as a fun way to promote Dogecoin, and to give people another way to use their Dogecoins. The coin is not intended to be used as a serious cryptocurrency, but as a fun way to promote Dogecoin and to attract newbies to experimenting with crypto through relatable meme coins.
Floki Inu
The Floki Inu is a crypto project that uses a dog meme as its mascot. The project aims to create a decentralized online marketplace through using popular memes to make cryptocurrency more mainstream and attract more investors. The project also plans to use a decentralized system to manage payments and dispute resolutions.
FLOKI is a multi-utility token that can be used as a currency, a payment gateway and a platform to issue and manage digital assets. FLOKI is based on the ERC20 standard of the Ethereum blockchain.
SafeMoon
SafeMoon is a meme coin that was launched on the BNB Smart Chain in 2021. What sets it apart from other alt coins is that SafeMoon charges an exit tax of 10% when users sell the meme coins. This is distributed among existing token holders as a way to reward them and incentivise them to hold the meme coins long-term. Holding tokens can help stabilize a coin's value. SafeMoon currently has an ROI of 8%.
Banano
Banano (BAN) is a a fee-less coin created as a fork of Nano. While some meme tokens can be poorly designed, Banano stands out by offering instant and free transactions. This is useful for smaller transactions like giving somebody on a crypto forum a tip. Banano offers users ways of earning free tokens through play-to-earn games on its platform.
Unlike other meme coins, Banano uses DAG technology which means it has no blocks and no miners. Transactions are confirmed by network nodes through a process of finding a common history or chain of events. As a security measure, Banano uses proof of stake mechanisms to validate transactions.
Pepe Cash
Pepe Cash is a cryptocurrency created as a tribute to the popular internet meme, Pepe the Frog. The currency was launched in early 2017, and is based on the Bitcoin protocol.
Users can earn, trade, and spend Pepe Cash on digital assets related to the Pepe the Frog meme via the Pepe Cash platform. The currency is also used to tip content creators on platforms like YouTube and Twitch. While its price has increased significantly since its inception its goal remains the same - Pepe Cash is for fun and entertainment purposes at its core.
Conclusion
Now that we have answered the question as to "what are meme coins?" the only thing to do is analyze the investment potential of meme coins. Because of the extraordinary success of the Dogecoin and Shibu Inu, there are creators trying to capitalize on their popularity every day. Many meme coins are continually flooding the market so when deciding to invest in a specific coin, as with any investment, do your due diligence first.
It is also important to keep in mind, a meme coin is generally a short-term investment. Often a coin will experience a surge in popularity and when the hype peaks, that's the time to sell and make a profit, right before its value comes crashing back down.
