Updated: May 24
Author: Samaneh Solgi
Date of Publication: 15/05/2023
A meme coin is a type of cryptocurrency that is created based on a popular internet meme or concept. These coins typically don’t have any underlying technology or utility like many other cryptocurrencies. Instead, they rely on the hype and community interest generated by the meme to gain attention and value.
Meme coin characteristics
Meme coins often have unique names and symbols that reference the meme they are based on. They are typically created as a joke or as a lighthearted project, and their primary purpose is often to entertain or engage with a specific community. What’s more, it's relatively easy to create them. This is because many meme coins rely on existing blockchain platforms that allow for the creation of new tokens.
Examples of Meme Coin
One of the most well-known examples of a meme coin is Dogecoin (DOGE), which appeared in 2013 as a parody of Bitcoin. Dogecoin features the Shiba Inu dog from the "Doge" meme as its logo and quickly gained a significant following. Despite its origins as a joke, Dogecoin has achieved a notable market capitalization. In fact, it has become a popular cryptocurrency in its own right.
Meme coins and investments
It's important to note that meme coins are highly speculative and volatile investments. In particular, social media trends, celebrity endorsements, or online communities' enthusiasm affect their value. Isn’t it surprising that fundamental factors don’t influence them? As a result, investing in meme coins carries significant risks, and their prices can experience rapid and substantial fluctuations.
Since meme coins frequently have a big quantity and their popularity is heavily influenced by pop culture, they are typically very unpredictable.Although there are many more meme coins, Dogecoin and Shiba Inu are the most popular ones. Therefore, a complete knowledge of a meme currency needs verification that liquidity pools are connected to burn addresses.
Moreover, it’s important to know that the project has undergone third-party audits, and that no entity holds more than 5% of the total supply. Therefore, with the emergence of utility meme coins, meme coins' reputation is changing as having no obvious use case or benefits.
Do Meme Coins Make Sense to Invest In?
There are numerous other meme coins that have severely underperformed for retail investors for every Dogecoin. Specifically, Meme currencies frequently have a high or limitless quantity, unlike Bitcoin, which has a limit of 21 million coins.
A successful miner receives about 10,000 DOGE, or about $660, per minute. In fact, there are more than 135.5 billion DOGE in circulation. Comparing that to Bitcoin, where 6.25 BTC, or around $143,000, is mined every 10 minutes, the difference in issuance volume is startling. So, the amount of coins in circulation keeps increasing since meme coins often lack procedures like "burns" that take coins out of circulation.
Among meme coins, Shiba Inu and Dogecoin are regarded as success stories. The majority of meme coins do, in fact, eventually disappear.
How safe are meme coins?
Although memes are advertised as amusing and humorous, there may be a negative aspect to the Bitcoin versions. Not only are prices very erratic, However, there have been numerous allegations of wrongdoing and malice leveled against the producers. In particular, many meme currencies have fallen by as much as 99% or even to zero in the current bear market.
When founders "create new coins, control 100% of the supply right then focus on creating buzz," Zeppettini cites a number of instances.
Issues of meme coins?
"Buyers of these tokens can be unaware retail participants who may not fully understand the underlying dynamics of the token in question. Although, he sees paid celebrity endorsements on social media or bot-driven activity that makes the asset "trending,"" he claims.
There are other issues as well. A small number of people with significant concentrations frequently have a high number of meme coins. Seven cryptocurrency wallets are in possession of 48% of DOGE, according to statistics from IntotheBlock. So, for SHIB, where 69% of ownership is concentrated around 15 wallets, the figure is even more startling.
A large investor might use their position to manipulate the market with such a high concentration. Another possibility is that they could sell their shares and cause a sharp decline in the coin's price.
Overall, it's theoretically possible to make money using meme coins, but it's not a given. The value of a meme coin can drop dramatically overnight. This is because these cryptocurrencies are more vulnerable to volatile variables than popular cryptocurrencies like Bitcoin and Ethereum.