How much is a joke worth? Apparently billions.
Sometimes clever, at other times completely random, memes will bring out a laugh in all of us. And in the world of cryptocurrency, meme coins can have a lot of potential value beyond a simple joke. Billions of dollars in meme coins are traded daily.
But why is something with no obvious value attracting so much attention in the market? Keep reading to discover more about the world of meme coins, and discover why some investors see the hidden potential within these oft humorous assets.
What are Meme Coins?
Meme coins are cryptocurrencies inspired by the social currency of the internet: memes. They could be directly inspired by a meme, like Dogecoin (DOGE), dog-themed, or centred around a community interest, like garlic bread.
Anyone with an internet connection can make and distribute a meme. And with the right technical knowledge, anyone can create and distribute a meme coin. Every so often you’ll find celebrity-inspired coins in the market, like this Will Smith-themed coin. Unlike their meme counterparts though, meme coins inspired by real people can be the subject of lawsuits.
Meme coins typically have a massive or unlimited supply, which accounts for their unusually low price.
Why are they so Popular?
What are memes? It all starts with a cultural idea that evolves through sharing across the web. Like the dancing baby animation from the mid-90s, memes grow on us. They strike a universal chord in the human psyche, leading to their eventual virality. A community forms around this one idea, keeping it alive through continued iterations and applied localisations.
A meme coin is no different. Meme coins leverage the existing popularity of a meme or attempt to become a meme on their own through the use of humour and an idea with viral potential. The average whitepaper for a meme coin is equal parts informative and amusing. This fun approach to cryptocurrency can be attractive to some casual investors. Especially in a market where everything can feel overly technical.
Meme coins tend to have a lower per-unit price, making it easier for an investor to own multiples of a coin versus a fraction of a higher-priced coin. This low per-unit price doesn’t always have a direct correlation to the perceived value of a coin. DOGE and Shiba Inu (SHIB) consistently rank among the top 20 cryptocurrencies by market cap.
When an investor recognises the meme attached to the coin, that “I get it” moment sets in. This, coupled with a typically low per-unit price, makes it easy for a casual investor to acquire a stack of their chosen meme coin.
Why do People Invest in Meme Coins?
Though outside of cryptocurrency, memes are considered to be the “social currency of the internet”. They are a way for the world to share and exchange ideas quickly, in return for a good laugh or a new perspective on a subject. Those who “get it” form a virtual community around the meme, helping it grow and spread across the internet.
If memes are the currency of the internet, then one might start to see why meme coins could have financial value. Memes are easy to understand, especially when stacked up against coins with a variety of complex use cases. Like every great joke, once you understand it, you become a part of an unspoken community of others who also get it. It’s so much easier to form a community around a simple idea.
And that’s the staying power of a meme. Leveraging community dynamics, meme coins continue to grow and maintain popularity. Investors of meme coins are actual fans of the coins they hold and will go out of their way to spread the word about how awesome they think the coin is.
So while they lack any value beyond the idea, investors get the feeling that they're involved in something greater and have a greater sense of connection to the story behind the meme coin. This is one of the reasons why many invest in meme coins.
The Elon Effect
Outside feeling involved in a community, there is another reason why people invest in meme coins: Elon Musk.
Actions that Elon Musk takes both online and in the real world, always have the potential to affect the meme coin market. Musk’s Twitter takeover offer saw DOGE prices spike overnight. His acceptance of Bitcoin as a payment option for Tesla saw the coin’s value rise in the following weeks. And although short-lived, This tweet sent CumRocket’s price soaring.
Following Musk’s cryptocurrency interests is not a fool-proof way to invest. Ultimately, it’s hard to tell how the market will respond to his actions. Nevertheless, his influence on the market—whether negative or positive—has driven some investors to purchase certain meme coins.
The Risks Associated With Meme Coins
When assessing risk in cryptocurrency, meme coins are considered to be riskier than most investments. Volatility is inherent in crypto, but with seemingly limited use cases, meme coins are completely reliant on sustaining popularity through growing their existing communities. If the trend dies off, the coin may become useless.
Over the years rug pulls have occurred, causing investors to lose millions. Lack of regulation means that it’s even more important for investors to vet a meme coin project before putting money into it.
3 Meme Coins to Look Out For in 2022
(Prices correct as at 2 November, 2022)
Dogecoin [DOGE] ($17.1B)
Dubbed the original meme coin, DOGE started out as a satirical commentary on the idea of cryptocurrency by former Adobe product manager, Jackson Palmer in 2013. Eventually, the idea grew in popularity, and Palmer teamed up with software developer, Billy Markus, to make DOGE into an actual cryptocurrency.
It experienced brief record growth during the 2017/18 crypto bubble before falling in value. After an endorsement by Elon Musk in 2021, the coin rose once again. Its price rose once more after Musk’s takeover offer of Twitter in 2022. Although Dogecoin’s price has fluctuated many other times outside of these major shifts, it is currently one of the top cryptocurrencies by market cap.
Shiba Inu [SHIB] ($6.6B)
Shiba Inu is an Ethereum-based coin created in 2020 by the anonymous Ryoshi. The creator sees the coin as an “experiment in decentralised spontaneous community building”. And grow a community they did. The 500,000+ group of investors are known as the SHIBArmy and refer to SHIB as the “dogecoin killer”
While SHIB did not see much action in its first year, a tweet from Elon Musk of his pet Shiba Inu saw the market cap of SHIB quickly soar to $41 billion. Although Musk has not openly endorsed the coin, its value is still influenced by the Elon Effect, leading some investors to believe in its potential.
Dogelon Mars [ELON] ($260M)
If you haven’t noticed yet, the top meme coins in the market have some link to Shiba Inus, Elon Musk, or both. ELON capitalises on both of these trends, including a reference back to the crypto term, “moon”. By including a trifecta of memes inside its name and image, ELON hopes to piggyback off the popularity of previous meme coins with a similar theme (mainly DOGE and SHIB).
ELON is fairly new in the meme coin space, but it has quickly amassed a following and is now one of the top 3 meme coins by market cap. The Elon Effect still has some influence on this coin, but it is yet to be seen how volatile (or beneficial) that influence could be.
Your Meme Coin Questions Answered
Where can I buy meme coins?
Through an exchange (centralised or decentralised), or through a broker, like us.
Why do most meme coins have such a low unit price?
Many meme coins often have an unlimited supply or an excessively large limit on the number of units that can be created. For this reason, their unit price largely depends on perception or the current hype surrounding a particular coin.
What was the first meme coin created?
Created in 2013, Dogecoin is considered to be the first meme coin ever created.
Why are so many of these coins dog-themed?
Just like original internet memes undergo iterations and remixes by the wider community, so do meme coins. The popularity of Dogecoin, combined with Elon Musk’s support of the coin has prompted the crypto community to create a whole slew of dog-themed meme coins. Dogs in general are beloved by many. Crypto creators are hoping to capitalise on the success of DOGE through coins that are dog-inspired, Elon-inspired, or both.
How can I avoid being a victim of a rug pull?
Check that the developers of the coin (meme or otherwise) have a track record of success. Check to see if the project has completed a security audit. Consider projects in which the token allocation between developers and investors is reasonably fair.
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