Meme coins: what are they, and should you too invest in one?
by Alyona Shepilova
Jun 16, 2023
What's a meme coin?
Yes, we're being serious.
The original meme coin
The first ever meme coin was DOGE, created in 2013.
The cryptocurrency market was still in its youth but already flooded with dubious assets, now long gone. Then two developers met and decided to poke fun at it.
They took a picture of Doge – an infamous Shiba Inu meme dog – and the Litecoin blockchain* and launched their own coin. And it went viral. If you're into brand management, take notes.
*Technically, DOGE is a fork of Luckycoin, which is a fork of Litecoin, which is a fork of Bitcoin, but who cares.
Dogecoin was born as a joke, a 'that's-so-ridiculous-let's-make-it-happen-affair' and a satire on cryptocurrency hype, if you will.
But people seemed to love the good boy and formed a tightly-knit community around it. So what if the coin wasn't worth much? The Doggo gave good vibes. And then, in 2021, the crypto universe experienced the Big Bang.
Cryptocurrencies don't follow the same regulation rules as traditional financial instruments, so influencing the market via public endorsement is not actually illegal (yet). However, one of the Dogecoin co-founders was still not impressed.
Musk really only misstepped once when he called the coin a hustle in a comedy sketch on SNL. The irony was lost, and DOGE fell as much as 29.5%.
Born as a prank, you'd be wrong to assume that DOGE is a funny, cute underdog. In reality, it's in the top 10 largest cryptocurrencies by market capitalisation, losing only to bitcoin, ether and a few stablecoins.
How did meme coins rise to power?
FOMO is probably the one to blame. The pandemic devastated the global economy, but it was a big time for cryptocurrency. Dogecoin got successful, and it only had a picture of an adorable dog going on for it. If you're a savvy person, launching your own cryptocurrency is not even that much of an effort as you can simply copy and paste data from an already existing blockchain (or fork it), like Dogecoin did with Litecoin. It was just too good an opportunity to miss on.
So, many more meme coins were bred. According to CoinMarketCap, we now have more than 300. Many of them have a dog ticker and were dubbed 'dog coins' – a new type of meme coin. Sadly, they don't seem to include memes*.
*The search result for meme coins memes is dry 🥲
Are meme coins risky or safe?
So, you're thinking about investing in a meme coin. What should you know beforehand?
First, meme coins don't have any clear objective or solid tokenomics. They are basic currencies that don't usually have a maximum supply or burning mechanism, meaning that they rise in quantity without increasing in value, which should only make them cheaper as time goes by.
DOGE has no max supply, with 130+ billion coins already in circulation. The 'DOGE killer' Shiba Inu has a circulating supply of almost 6 quadrillions (that's fifteen digits, four commas).
The use cases of meme coins are few. You can trade them, and that's pretty much all you can do.
If you are a creator of the next meme coin, what you want to do is to hype it on social media, create a cosy community around it and drive up the price.
If you're a potential investor in a new meme coin, be aware that an enthusiastic community may well turn out to be a few individuals luring you in to drive up the price and recover what they spent on the asset. Likewise, celebrity endorsements may be paid, and the hype – created by bots.
Whichever side of the barricade you're on, affections are often fickle. Meme coins have a short(er) life expectancy compared to other altcoins and are even more volatile, as their price almost exclusively depends on hype. Once it dries out, the coin is done.
According to CoinMarketCap, there are currently more than 300 meme coins available. Dogecoin and Shiba Inu (9th and 14th places by market capitalisation) are honorary rags to riches. The rest are mainly defunct or dying.
Should you invest in meme coins?
But you might have heard stories about people getting rich on meme coins. Was it all a lie?
Essentially, meme coins are a gamble. You can stumble across a rising star, buy cheap and sell out when it's at its peak of popularity. But you may not get so lucky.
What's the next meme coin that will be a big hit?
Wish we knew.
To sum it up
Meme coins are definitely something.
- Goldmine. If you're in and out at the right time
- A bit of fun
- Cheap, so a good way to start with crypto
- Prestige points. You can buy a million for just a tenner.
Feral volatility* – you can lose everything you've got even faster than with other crypto assets.
*Which might be a consequence of 1) No clear objective, 2) Mostly bad tokenomics, 3) From time to time, being a scam (create, hype, sell and abandon, leaving the investors behind).