During the last year, several meme-based cryptocurrencies experienced exponential growth and reached their highest values to date, giving 2021 its nickname “the year of meme coins.” As an example, Dogecoin rallied from nearly $0.005 to $0.69 in a span of just 5 months (January to May 2021), demonstrating an astonishing increase of approx. 12,500%. Additionally, at its highest point of $0.69, DOGE exhibited a total market capitalization of a tremendous $46 billion.
So, what factors contribute to the popularity of meme coins and what are they exactly? This article delves into all aspects of these cryptocurrencies.
What are meme coins?
Contrary to standard cryptocurrencies like Bitcoin, meme coins are known for their association with internet jokes and viral memes. They are created solely for entertainment purposes on the basis of funny pictures, videos, or other forms of media, instead of any solid foundation.
Popular as the first-ever meme coin, Dogecoin, was launched in 2013 by two software engineers, Billy Markus and Jackson Palmer, as a parody of the growing trend of initial coin offerings (ICOs) at the time. The coin was inspired by the “Doge” viral meme, which included a Japanese Shiba Inu dog picture with some phrases in Comic Sans font. Initially, DOGE was only intended to be a light-hearted and hilarious take on the cryptocurrency world. But presently, it is the most prominent meme coin which is ranked no. 8 among all cryptocurrencies as per the total market cap, according to the CoinMarketCap data.
That said, other popular meme coins include Shiba Inu, Dogelon Mars, Samoyed Coin, and Akita Inu among many others.
However, not all meme coins are based on “memes”; many of them are just created as a form of internet humor or as a satirical commentary on the seemingly absurd cryptocurrency market. For instance, when Rep. Sherman mockingly mentioned an imaginary Mongoose Coin during a congressional meeting, a cryptocurrency called Mongoose Coin ($MONG) was really created shortly after.
Similarly, another one called Useless Ethereum Token (UET) was created as a touch of sarcasm on the perceived craziness of the ICO, without any real-world value or utility. Even without any link to a meme or internet joke, it is still referred to as a meme coin by some due to its humorous nature.
Here, it is noteworthy that meme coins are considered highly vulnerable and volatile relative to standard cryptocurrencies. It is because their value can easily fluctuate from some viral, circulating ideas or random endorsements from famous personalities.
Moreover, meme coins often have extremely high or unlimited supplies, which means that there are large amounts of these coins in circulation. Examples of meme coins with large or limitless supplies include Shiba Inu, which has a total supply of 1 quadrillion tokens, and Dogecoin, which has no maximum supply while having nearly 132 billion tokens in circulation.
What makes meme coins so popular?
Despite their non-serious origin, meme coins have gained significant popularity within the cryptocurrency communities where people buy them to become a part of the amusing trends. After a meme coin becomes popular and its value increases, retail investors may also decide to invest in it, which can further boost the coin’s value.
Many people are drawn to meme coins because they are something new and unique. They are often associated with internet culture, which can make them appealing to youth and online warriors who are more likely to be active on social media.
Moreover, the hype surrounding meme coins is also linked to celebrity endorsements who sometimes show their support and confidence in these meme-based cryptos. Elon Musk is the most popular in moving the prices of DOGE with his frequent tweets. With a massive following on Twitter, the Tesla CEO’s comments on crypto often spark discussion and impact market movements.
Particularly in 2021 but this year also, he tweeted and made comments about Dogecoin multiple times which sent its price flying. In February 2021, he termed DOGE as people’s crypto while in April 2021, he referred to himself as the “dogefather” in a tweet ahead of his hosting gig on “Saturday Night Live.” This, along with support from billionaire investor Mark Cuban, caused dogecoin prices to surge.
Another reason why retail investors find meme coins attractive is that they typically only cost a few cents or a fraction of a cent. As they are extremely inexpensive, you can even hold millions of meme coins which feels quite different from buying only a fraction of ETH or BTC.
Overall, the popularity of meme coins is driven by a combination of these factors, as well as the overall interest in cryptocurrency and online meme culture.
Are meme coins worth investing in?
Meme coins are notorious for their unpredictability as they are greatly influenced by public sentiment and unforeseen occurrences. Such volatility can cause the prices of these coins to rise exponentially, only to plummet just as quickly when the community craze and hype die down. Unfortunately, some malicious parties also rely on meme coins to scam people and carry out rug-and-pull schemes. Read this article to know how squid game crypto made investors lose around $3.4 million: Squid Game Crypto: Where it Stands After Last Year’s Scam.
However, it does not mean that meme coins are entirely worthless. In light of the historical evidence, while they have inflicted many investors with huge financial losses, they have also proven to be lucrative for others. For once, if you had invested $1,000 in dogecoin at the beginning of 2021, when it was worth less than a cent per coin, your investment would have grown to $121,052 by May 2021’s high of 69 cents. This represents a gain of over 12,000% in less than half a year.
Therefore, similar to all other investments, you should properly research and evaluate the background information of the relevant meme coins before investing in them. Check if the project is audited, coins are reliably distributed, and liquidity pools are secured by burn addresses. In conclusion, due to their low prices, it may be tempting to invest in meme coins, but always remember to never spend more than what you could afford to lose.
