Meme coins have been a big hit over the past few years for many reasons. Due to the incredible rise in prices and the prospect of owning something that makes you part of an interesting community, many people have jumped on the bandwagon. But what exactly are meme coins, and what are the various reasons they have become so popular in the past few years?
What Is A Meme Coin?
Similar to memes, a meme coin is a cryptocurrency created as a joke. Dogecoin, a cryptocurrency based on the Doge meme, is perhaps the most well-known cryptocurrency, usually referred to as a meme coin. There are, however, a slew of others, including:
- Shiba Inu (SHIB)
- Dogelon Mars (ELON)
- Squid (SQUID also a massive scam)
- Samoyedcoin (SAMO)
- SafeMoon Inu (SMI)
It’s often used disparagingly to refer to more mainstream cryptocurrencies, implying that the cryptocurrency will be short-lived or lose value after its initial activity. While this is often the case, some can provide value, and others have even made millionaires!
While it may be difficult to pin down specific causes for the rise of the crypto market, some claim that regular investors sought to protect themselves from inflation during the COVID-19 epidemic. Meme coins also became more popular following this boom, both in terms of market value and diversity. Moreover, stories of people becoming millionaires overnight certainly helped to spur on the craze.
There is an interesting story about a crypto whale buying up hundreds of millions of SHIB for $3,400 (as you can see, the price per token was minimal) and becoming a billionaire when the asset suddenly became popular and increased in value by an insane 94,278,239.8%. Additionally, many people made a lot of money when Elon Musk commented about a particular currency (with his preference seemingly being Dogecoin). While these are rare occurrences, it goes to show that with a lot of luck and a small investment, you could potentially make life-changing money. This could be partly the reason for so many pouring in their hard-earned money into seemingly worthless meme tokens.
While most meme coins end up worthless (or were scams from the very beginning), some have managed to escape the joke aspect of their existence and provide a use. For example, Dogecoin is one such token that has transcended meme hood and shows promise for various applications. You now have Dogecoin gambling sites where you can use it in place of fiat currency to gamble with. However, outside this use, Elon Musk (yes, him again!) implied that Dogecoin would be accepted as a viable currency to purchase Tesla merchandise with (although not the actual vehicles).
With Facebook changing their name to Meta and spending billions on hyping this idea up, it looks like some memes coins could have a place in the emerging Metaverse (s). It is unclear what utility they might serve at this point, but that doesn’t stop people from speculating and hoarding millions of meme-based tokens. For instance, the developers of SHIB have indicated that holders of the coin will be able to purchase real estate in their Metaverse named Shiba Lands. It remains unclear what this ecosystem will entail, but it will most certainly involve games, virtual land, and possibly some kind of connection with the world of NFTs.
Most people have an innate enjoyment of speculation. You could call it gambling, but it is more than that. Many regular people simply enjoy being part of some kind of community, hoping that their investment will accrue in value and free them from the burden of work. While this is unlikely to pay off for most people, it doesn’t stop this inherent urge to accumulate and hold.
Despite the exponential growth of meme coins in 2021, trading and investing in meme coins carry a significant level of risk.
While all cryptocurrencies carry significant risk, most well-respected tokens have underlying technologies that make them valuable. For instance, you can look at Bitcoin. While it fluctuates far more violently than traditional investments, it periodically resets itself. Moreover, tokens like Bitcoin and Ethereum can be used for transactions and complex smart contracts, respectively.
One of the most famous scams in recent history was from the developers of SQUID. Riding high on the cocktails of the massively popular Squid Game TV show, the developers ran what is known as a pump and dump. They hyped up the token to a level they wanted, sold their entire stake, and let the remaining tokens plummet to zero. There are others, but the point is that unless you really understand the world, it is extremely easy to fall victim to a scam like this.
There are numerous reasons for the popularity of meme coins, including their potential to create millionaires overnight. However, with this (minimal) potential for wealth comes many downsides, including their inherent volatility along with the possibility of being scammed.