What are Meme Coins? Key Features and Risks Involved

Meme Coins are a type of cryptocurrency that are often inspired by and related to internet memes and trends, typically of the humourous variety. We used to be serious people in the crypto-verse. We obsessed about codes and distributed systems jargon; we rebelled against legacy finance and technology (I think we still do); we dreamt of a totally decentralized world free of malicious governmental oversight and corruption. But at some point, a less serious side of crypto emerged, and the crypto community felt that we could use a little fun and silliness and that not everything has to be shrouded purely in the gravitas we started with. Enter meme coins.

Meme coins are a quirky and intriguing subset of cryptocurrencies. These coins often start as jokes but can rapidly gain significant market value and attention. This article will explain to you what meme coins are, their key features, the risks involved, and the reasons behind their popularity.

Meme Coin Key Takeaways:

• Typically started as a joke or based on an internet meme.
• Often highly volatile in nature.
• Driven by social media and online communities.
• Usually have low entry barriers for investors.
• Lack inherent utility or real-world applications.
• Prone to speculative trading and pump-and-dump schemes.
• Can experience rapid price movements and market manipulation.

  

Let’s go…

What Are Meme Coins?

Meme coins are a category of cryptocurrencies originating from internet memes or cultural ideas, often created as a joke or to capitalize on a viral trend in pop culture. The most notable example is Dogecoin. Billy Markus and Jackson Palmer launched Dogecoin as a parody of the Bitcoin hype, featuring the Shiba Inu dog from the popular “Doge” meme. Meme coins are largely about entertainment. They lack the technological gravity or unique use cases that other cryptocurrencies offer and are often driven by community enthusiasm, social media influence, and speculative trading rather than any inherent value or utility.

Despite their humorous beginnings, some have gained great clout and even market value, with both casual and high-profile investors supporting them. Consequently, the volatile nature of meme coins causes dramatic price fluctuations. They are easily affected by trends, internet hearsay, and influential figures like Elon Musk and Mark Cuban.

How They Differ from Traditional Cryptocurrencies

Imagine a class of smart geniuses who can tell you the value of Pi to the 150th number; then sitting amongst them are class jesters (who are also smart kids) who prize jokes and shenanigans over mathematical grinding. Exactly. The picture you have in your head is a direct rendering of the difference between meme coins and traditional cryptocurrencies. Cryptocurrencies like Bitcoin and Ethereum were developed with specific technological, programmable, and financial goals, but meme coins often lack a serious foundational purpose. Traditional cryptocurrencies are usually built on robust blockchain technology with the aim of solving real-world problems or providing decentralized financial services.

How Do Meme Coins Work?

What are meme coins without an underlying blockchain as its foundation? Meme coins operate on blockchain technology like other cryptocurrencies, enabling peer-to-peer transactions. But unlike other cryptocurrencies, they typically have no functionality or utility. To get a deeper understanding of the technical aspects of blockchain technology and how it works, feel free to check out our beginner’s guide to blockchains.

Meme coins often have large circulating supplies, are often inflationary, have low individual prices, and are traded on major cryptocurrency exchanges. Their value can skyrocket overnight thanks to a well-timed tweet from a celebrity or a meme that goes viral. A perfect example of this is Elon Musk’s 2021 Dogecoin post on the popular social media X, which surged Doge’s price by 50%.

Alternatively, these digital assets can also drop in value by 90% or more in a short period of time with many never reclaiming their previous value, making these highly speculative and very high-risk investments. Essentially, meme coins work by riding the waves of internet culture, fueled by the collective chuckles and whims of the online community, making their price movements as unpredictable as a cat video going viral!

Why Do People Buy Meme Coins?

People invest in meme coins for several reasons:

1. Entertainment and Community Engagement: Community drives humanity as we can’t exist in silos. Meme coins offer cliques in crypto. Some investors are drawn to the camaraderie and shared cultural references that come with these coins. Being part of a meme coin community often feels like joining an exclusive club where everyone is in on the same joke, making the investment journey more enjoyable and socially rewarding. Many investors who feel disenfranchised by the traditional financial system enjoy the meme coin industry as a way of saying “stick it” to the Fat-Cat Wall Street institutions.
2. Speculative Gains: We all want to be rich, and this has spurred many of us to meme coins. Their extreme volatility can make you rich overnight, making them attractive to risk-tolerant investors who enjoy the adrenaline rush of quick, potentially lucrative trades Many in the crypto community refer to meme coin buying as “playing the meme coin casino” relating meme coin investing to gambling. We have all romanticized the idea of turning into millionaires overnight. This is highlighted in a recent report by AMBCrypto that states that 53% of crypto investors prefer meme coins to Bitcoin.
3. Perceived Low Entry Barriers: While established cryptocurrencies like Bitcoin can be purchased with little investments, meme coins often emphasize their extremely low prices, sometimes fractions of a cent, to appear more accessible. It’s a marketing strategy that uses the psychology of perceived value to make investors feel wealthier by owning large quantities of these coins, such as 5,000 Pepe Coin instead of fractional amounts of Bitcoin, despite the latter being worth more in dollar terms. This gimmicky low-price tactic can attract new investors who might not fully understand market cap and the fundamental value of the project. Shiba Inu, for example, uses low entry barriers and perceived value to draw in investors. The coin’s low price gives the illusion of affordability and high return potential, which can make owning large amounts look appealing. But in reality, they can’t attain certain price levels. For example, Shiba Inu’s initial massive supply of one quadrillion tokens makes high price targets like $1 nearly impossible without significant token burns and increased utility. Understanding tokenomics and market cap constraints is essential for effective expectations in meme coin investments. You can read more on why Shiba Inu will not make the $1 price mark in this Shiba Inu Price Prediction Article.
4. Celebrity Influence: In the social media age, endorsements from celebrities and influencers can dramatically influence market trends. When a well-known figure tweets or talks about a meme coin, its popularity can skyrocket almost instantly. This endorsement acts as a seal of approval for many fans and followers. Celebrities possess star power. Not only will I prostrate to Messi when I meet him, I may kiss his feet. Now imagine what I’d do if he starts or promotes a crypto project.

Are Meme Coins Safe?

The safety of meme coins is a dicey and controversial issue. We will check some of the problems that dog the space:

Lack of Regulation: The meme coin market is the wild west of the crypto-verse, where anything goes. The lack of stringent oversight makes meme coins particularly susceptible to fraud and market manipulation. Without regulatory bodies to enforce transparency and protect investors, bad actors can easily create and promote fraudulent meme coins, with unsuspecting investors falling prey to the promises of quick riches.

Also, the absence of regulation means there’s no official recourse if things go wrong. If a meme coin turns out to be a scam or if its value plummets due to market manipulation, you have little to no legal protection or chances of recovery. Pump-and-dump schemes are also more common in this unregulated space, where influencers or groups can artificially inflate a coin’s value before selling off their holdings, leaving others with significant losses.

High Volatility: Meme coin prices are highly volatile. Their value can surge or plummet within short periods, in response to any aforementioned stimuli. This unpredictability can lead to damning financial losses for you who is caught on the wrong side of a price swing. The risk of sudden, significant losses dwarfs the thrill of potential gains.

Scams and Pump-and-Dump Schemes: They are a prime target for scams and market manipulation because of their speculative nature and low market caps. Bad actors can easily inflate a coin’s price through misleading hype and then sell off their holdings at the peak, leaving other investors with worthless assets. The lack of oversight and accountability in the meme coin market means that you must be constantly vigilant.

Lack of Fundamental Value: Unlike established cryptocurrencies that often have underlying technologies or use cases driving their value, many meme coins lack any real-world applications or intrinsic worth. They are dependent on community sentiment, memes, and internet culture, which can be highly unpredictable. This reliance on hype rather than substance makes them inherently unstable, and their worth can evaporate as quickly as it was created.

Dogecoin: The First Meme Coin

Dogecoin (DOGE) is an open-source, peer-to-peer cryptocurrency that debuted in December 2013, featuring the Shiba Inu dog as its mascot. It was developed by Jackson Palmer and Billy Markus as a lighthearted take on the growing cryptocurrency frenzy, utilizing Litecoin’s technology and the Scrypt algorithm. Dogecoin gained traction quickly due to its low price and unlimited supply, becoming especially popular for tipping and donations on social media, along with a slew of Dogecoin Casinos. Despite its origins as a joke, Dogecoin has amassed a dedicated community and achieved a market capitalization of nearly $24.39 billion by May 2024.

Dogecoin’s journey is characterized by a swift increase in value and development driven by its community. Initially, block mining rewards were randomized, but they were standardized in 2014. Though criticized for lacking inherent utility, proponents highlight its role as a practical payment method and store of value, with many online retailers accepting it. Unlike Bitcoin, Dogecoin is inflationary with an unlimited supply, making it more suitable for everyday transactions. It is available for trading on major exchanges like Coinbase, Binance, and Kraken and is accepted by companies such as SpaceX and the Dallas Mavericks. While predicting its future value is challenging, Dogecoin’s strong community and ongoing development indicate it will continue to be a significant presence in the cryptocurrency landscape.

Popular Meme Coins in 2024

In 2024, several meme coins have gained attention and significant trading volume. Here are some of the most popular meme coins in 2024, along with their market capitalization and trading volume:

These coins & tokens have gained significant popularity because of celebrity endorsements, active online communities (causing social media buzz), and unique features within their respective ecosystems. You must conduct thorough research and consider the risks associated before investing.

Pros & Cons of Meme Coins

Identifying Red Flags Before Buying

You should be cautious of projects with:

• Anonymous or unknown developers.
• Lack of clear use cases or roadmap.
• Overly aggressive marketing tactics.
• Sudden, unexplained price surges.
• Meme coin investments carry high risk due to their speculative nature and lack of regulatory oversight. You should be prepared for the possibility of losing your entire investment.

Best Practices for Risk Management In Crypto

• Diversify Investments: Avoid putting all your funds into a single coin.
• Do Your Research: Thoroughly investigate the coin, its developers, and its community.
• Set Clear Goals: Determine your investment goals and risk tolerance before investing.
• Monitor the Market: Keep an eye on market trends and be ready to act if necessary.
• Be sure to take your coins off of exchanges and practice self-custody. Check out our Best Crypto Wallets article for our top picks.

How to Buy Meme Coins

To buy meme coins, follow these steps:

1. Choose a Reputable Exchange: Select a cryptocurrency exchange that lists the meme coin you want to buy. We recommend OKX, eToro, Margex, MEXC, Bybit or BingX.
2. Create an Account: Register and complete the necessary verification processes.
3. Deposit Funds: Deposit fiat currency or other cryptocurrencies into your account.
4. Buy Meme Coins: Navigate to the trading section and purchase the desired coins & tokens
5. Secure Your Investment: Transfer your meme coins to a secure wallet for safekeeping. Our recommended wallets are Best Wallet, Zengo, and the ELLIPAL Titan Hardware wallet.

Warning: You should approach these digital assets with caution, conduct thorough research, and be aware of the speculative nature of these assets.

Frequently Asked Questions

What Makes a Memecoin Successful?

Success is often driven by strong community support, viral marketing, and endorsements from influencers or celebrities.

How Do I Start Investing in Meme Coins?

To start investing, choose a reputable cryptocurrency exchange, create an account, deposit funds, and purchase the meme coins of your choice. Be sure to do your research on the teams behind the project and keep an eye on the influencers who are promoting the project.

Why do People Invest in Meme Coins?

People invest in meme coins for fat gains, community engagement, and the excitement generated by social media trends.

Are Meme Coins a Good Investment?

They can be profitable but are highly volatile and risky. You should carefully consider their risk tolerance and investment goals. It is a commonly held belief that buying meme coins is more akin to gambling, not investing. Feel free to check out our article on the Best Meme Coin ICOs if you want to learn more about early opportunities.

What are the Best Meme Coins to Buy?

Popular meme coins include Dogecoin, Shiba Inu, Pepe, Bonk, and Floki Inu. However, the best investment depends on current market conditions and individual research. If you are interested in further analysis, you may find our following articles interesting:

• Next Cryptos to 1000x
• Top Solana Meme Coins
• Best New Cryptos to Invest In

References: MEMECOINS 2024: MARKET, TRENDS AND OPPORTUNITIES (BDC Consulting)

Price of dogecoin rises by 50% following Elon Musk tweet (The Guardian)

Will Shiba Inu Coin Reach $1 in 2024 or in The Future? (Cryptonews)