Most people are familiar with Bitcoin, but it isn’t the only cryptocurrency around. Meme-based currencies like Dogecoin have gained a massive following over the years, prompting a slew of copycats, including Dogecoin-derivatives Shiba Inu, Dogelon Mars, Samoyedcoin, and Doge Dash, among others.
Though they are often created as jokes, these coins can go mainstream. Dogecoin, for example, had a huge spike in value in May 2021 before leveling off, and is currently ranked eleventh in market capitalization, according to CoinMarketCap. Still, their individual value is never very high—Dogecoin is currently worth about $0.15 per coin.
So, should meme coins be taken seriously? Here’s what you need to know before investing.
What Is a Meme Coin?
Meme coins with the highest market capitalization (Source: CoinMarketCap)
In a nutshell, meme coins are cryptocurrencies inspired by memes and internet jokes. Dogecoin, for example, was inspired by the Doge meme created from a viral photo of a Shiba Inu. These cryptocurrencies often aren’t meant to be taken seriously but can still gain momentum when members of the community buy into the newest one in order to be in on the joke.
Once it gets popular and spikes in value, retail investors sometimes jump on board and further boost the coin. Prominent online figures and celebrities also drive up the popularity of certain meme coins. Elon Musk is probably the person most famous for it, and there’s even a fork of Dogecoin called Floki Inu based on Musk’s actual pet dog.
Some meme coins are just created as a snub. In December 2021, Mongoose Coin was created after a member of Congress made the name up during a hearing on digital currency.
Meme coins have been around for a few years now, but some trace the origins of the current boom back to the meme stock war of late 2020, when the Reddit community WallStreetBets vastly inflated the value of GameStop’s stock. Following that, another group of Redditors joked about pumping up the value of Dogecoin in a similar way, and the trend caught on.
Another Reddit community called SatoshiStreetBets started a similar stock war against mainstream cryptocurrencies like Bitcoin and Ethereum in 2021. Internet celebrities like Musk also hopped aboard the meme coin train, and the ensuing popularity drove more people to create similar cryptocurrencies.
Some meme coins are more than just jokes. The makers of the Floki Inu meme coin, for example, partnered with the Million Gardens Movement, a charity co-founded by Musk’s brother Kimbal.
Common Meme Coin Characteristics
The valuation of individual units of meme coins are relatively low. (Source: CoinMarketCap)
Meme coins often have a very high or unlimited supply. Unlike Bitcoin, which was programmed to have a finite number of units available to mine, meme coins will often have billions of units in circulation. Meme coins also don’t typically have a mechanism that “burns” coins, or removes them from circulation permanently, so the numbers just keep rising.
Because of that, their worth per unit is usually very low. One dollar could get you about six Dogecoin at the time of this writing, and other meme coins like SafeMoon are worth even less—currently $0.0000014 USD. That low price is one contributor to how popular meme coins can be, since anyone can buy a large amount of them quickly.
It’s also possible for just about anyone to make meme coins now, thanks to software that does most of the heavy lifting for you. The minimal effort lends itself to the meme-like quality of these coins, as they can be turned out quickly to suit whatever topic is trending.
Risks of Investing in Meme Coins
The Squid Game scam saw a sudden rise and fall in valuation. (Source: CoinMarketCap)
Since they are largely dependent on community sentiment and arbitrary outside influences like celebrity tweets, meme coin pricing is incredibly volatile. While this means the value of a certain meme coin could drastically increase, as it did with Dogecoin, it could also crash very quickly if and when the community loses interest and moves on.
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Some people have also created viral cryptocurrencies in order to scam people out of money. Taking advantage of the viral popularity of Netflix drama Squid Game, a Squid Game-based coin increased millions of percentage points in value to a peak of over $2,000 USD per coin before the creators sold off their units and disappeared with everyone’s money.
Many meme coins also aren’t backed by the same technology as established cryptocurrencies like Bitcoin, nor do they have any established ecosystem to support them. Of the meme coins that are currently popular, only two use tested blockchains: Dogecoin’s protocol is based on Litecoin, and Shiba Inu was built on the Ethereum blockchain.
Most of them are also largely valueless outside the cryptocurrency world; no one accepts SafeMoon as a form of payment for goods and services, for example (though Newegg now accepts Dogecoin). Because of their topical nature, it’s unlikely that most of the meme coins being created will still be around in a couple of years. Even if they are, their value will probably be next to zero.
Take Them With a Grain of Salt
(Image: Surassawadee / Shutterstock)
While it is possible to make money investing in meme coins, it’s never a sure thing. These cryptocurrencies are even more volatile than their mainstream counterparts and can plummet in value overnight.
Just as you would any other financial investment, do your research before purchasing meme coins. If the coin has no background and information on it is hard to find, beware. Even the most hyped currency could end up being a scam in the end. Lack of a whitepaper or established ecosystem can be a warning sign, as can a whitepaper riddled with typos and vague claims.
That said, given how inexpensive they tend to be, you can still buy a fair amount with a very modest investment. Just understand that you can probably only expect a return on investment of a few bucks. Whatever you decide to do, never spend more than you can afford to lose.
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