Have you ever heard of Dogecoin or Shiba Inu? You might even know that they are called meme coins. But what are meme coins, how do they work, and why have they become so popular recently? Let’s explore this term in detail in the content of the article below.
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What are meme coins?
Mentioning memes refers to something humorous that spreads quickly over the internet, like interesting images, funny clips, or even viral phrases or satirical comments…
Meme coin is a cryptocurrency inspired by these humorous internet elements. Meme coins are often created as a joke and usually lack any functional utility.
However, meme coins are still popular because they bring joy to those who own them, and above all, they offer the chance to become “millionaires” when they can increase in value by hundreds or thousands of times in a short period.
How are meme coins different from other cryptocurrencies?
What are meme coins? It’s a type of cryptocurrency, but there’s a big difference compared to currencies like Bitcoin and Ethereum.
Mainstream cryptocurrencies like Bitcoin and some Altcoins are developed to address real-world issues. The goal is ultimately widespread acceptance by merchants, creating a new form of decentralized currency and revolutionizing many industries. Additionally, they possess technologies and features that have real-world applicability.
In contrast, most meme coins do not have a practical use; they are mostly created for quick money-making.
Are memecoins shitcoins?
The vast majority of meme coins fall under the category of ‘shitcoins,’ characterized by their lack of practical use and high volatility. Often, when their prices surge, investors quickly sell them off for fast profits and then shift their focus to another cryptocurrency. This pattern makes it challenging for these meme coins to rebound, often leading to their near extinction.
Nevertheless, some meme coins have successfully transcended this negative stereotype. Dogecoin, for instance, has built a substantial and supportive community, bolstered by Elon Musk’s endorsement. Similarly, Shiba Inu, beyond having a strong community backing, is actively working on projects like Shibaswap and the Shiba Inu Game. These two represent the most notable meme coins currently in the market.
Why have meme coins attracted so much attention?
– It all started with the “meme stock” stories of GameStop (GME) and AMC Entertainment (AMC) at the end of 2020, when the Reddit community collectively drove up these stocks by 100 times in just a few months.
– In January 2021, a Reddit group joked about pumping the price of DOGE to create a cryptocurrency similar to GME stocks.
– This trend was further ignited by tweets from Tesla CEO Elon Musk, which led to a rise in DOGE’s price. Dogecoin reached a peak of $0.73 USD, an increase of over 2,000% in five days, sparking the ongoing trend of hot meme coins.
Why are meme coins HOT and attract many investors? Perhaps for several reasons:
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Retail investors are driven by FOMO into meme coins, hoping to become millionaires overnight, which further drives up the price and popularity of memes.
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Another reason small investors find meme coins appealing is that they are usually very cheap. Technically, the low price isn’t an issue since these currencies have a huge supply. However, holding millions of a certain meme coin feels quite different than holding a small fraction of ETH or BTC.
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Besides the potential profits, the explosive growth of meme coins is also due to the affection of the community that loves the meme theme. That is, buying meme coins is a show of support for the community that appreciates this theme.
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Another factor driving the fame of meme coins is their promotion by celebrities and influencers. This is the main reason why these currencies tend to have explosive growth even though they inherently lack value.
Should you invest in meme coins?
Although money can be made by investing in meme coins, this type of investment is extremely risky and more akin to gambling than real investing. If you buy and sell at the right time, you can make a profit. However, it is more likely that you will lose all or most of your investment.
Meme coins have a high community aspect, and speculative nature is also significantly higher than other types of cryptocurrencies. This volatility constantly leads to unexpected pump and dump situations. The life cycle of meme coins is generally quite short. Their price can increase by thousands of times thanks to celebrity endorsements or FOMO psychology, but can also drop suddenly when the community decides to switch to a new meme coin.
As the meme coin market continues to be HOT and new coins are released that may attract your attention, you must be vigilant as there may be many projects exploiting the hype to scam and then disappear quickly.
For example: Squid Game (SQUID), a meme coin inspired by the famous Netflix series of the same name, increased in value by over 86,000% within a week. However, the development team suddenly pulled the plug, causing the price to drop by 99%. Worse, holders were not allowed to sell their SQUID tokens. Therefore, you must always be careful and do your research before trading or investing in meme coins.
However, I do not mean to generalize all, as some meme coins have truly changed the perception of the meme category. Therefore, if you want to invest long-term, then look for some reputable cryptocurrencies with a bit of technology, to ensure the longevity of your investment.
Whatever you choose, always remember that meme coins are many times riskier than regular cryptocurrencies, so you should only invest a very small portion, not more than 5% of your total investment capital.
Criteria for choosing good meme coins to invest in
Even experienced investors find it difficult to anticipate the risks posed by meme coins. There are thousands of meme coins to choose from, but most of them are akin to gambling and scams.
However, if you carefully select meme coins according to the following criteria, you can minimize some of the risks encountered:
- Community Support: The strength and activity of a meme coin’s community are crucial. A passionate, large, and active community can drive demand and increase the coin’s visibility.
- Social Media Presence: Successful meme coins often have a strong social media presence. Look for coins that are being talked about on platforms like Twitter, Reddit, and Telegram.
- Market Momentum: Pay attention to trading volumes and price action. A meme coin gaining traction with increased volumes might indicate a growing interest.
- Liquidity: Ensure the coin has sufficient liquidity, which allows for easier entry and exit from positions.
- Developer Activity: While not all meme coins have a serious development team behind them, those that do might offer more long-term potential.
- Utility and Roadmap: Some meme coins are attempting to build real utility or have a roadmap for future development. Assess any plans for future growth or utility that might sustain the coin beyond the initial hype.
- Tokenomics: Look at the supply mechanics – total supply, circulation, and any mechanism for burning or distributing tokens, which can affect the price.
- Celebrity Endorsements: High-profile endorsements can influence a meme coin’s popularity. However, be cautious as these can be fleeting and not based on the coin’s fundamentals.
- Historical Performance: Although past performance is not indicative of future results, understanding how the coin has reacted to market movements can be useful.
- Regulatory Environment: Be aware of the regulatory landscape, as drastic changes can impact the viability of meme coins, especially those that may fall under scrutiny.
With a clear understanding of the criteria mentioned above, you can easily select potential meme coins to invest in and mitigate some of the risks.
Note: Choosing the right time to buy meme coins is also very important. Only buy coins that have the potential to recover after a price drop, or meme coins that have not yet increased in price but have upward momentum. Do not rush into FOMO and buy at the peak; you might pay a steep price.
- Meme coins are coins inspired by humorous content that spreads quickly on the internet.
- Meme coins typically have no practical application, and their price is extremely cheap.
- Meme coins can bring astonishing profits in a short time but often crash in value and may not recover.
- Investing in meme coins is highly risky, so consider carefully.
- There are some famous meme coins that are community-supported and could be long-term investments: Dogecoin, Shiba Inu…
- Suggestion for some of the top meme coins currently:
Dogecoin
Shiba Inu
Dogelon Mars
CumRocket
Samoyedcoin
Pepe
ArbDoge AI
Turbo
Wojak
Memecoin
Milady Meme Coin
Dogs Of Elon
Baby Doge Coin
FLOKIThere are many new meme coins joining the market every day, and it’s hard to choose. Therefore, we hope that through this article, you have understood what are meme coins, as well as the criteria to select potential meme coins. But anyway, remember that meme coins are very risky, so only invest a moderate amount of capital. We wish you wise and successful investments.
Read more: What is PEPE Coin? Why Is PEPE Coin Captivating Investors?
