WTF are Meme Coins?

2023-04-28
WTF are Meme Coins? image 0
What is a Meme Coin?

Meme coins, also known as meme coins, are a type of cryptocurrency that are backed by passionate online trading communities and are highly speculative. These coins can be created on blockchain networks and often gain popularity through social media platforms. Dogecoin and Arbinu are examples of such meme coins.

While trading meme coins and other virtual currencies, it's important to be aware of their volatile nature, as they can result in significant profits or losses in a short period of time.

Meme Coin Definition

Meme coins/coins are a type of cryptocurrency that leverages the popularity of internet memes to attract investors. These coins are typically created on blockchain networks, such as Ethereum, and use social media platforms to generate hype and increase their value.

Unlike traditional cryptocurrencies, meme coins are not necessarily linked to a specific project or product. Instead, their value is largely based on their perceived popularity and cultural relevance. As a result, meme coins can be highly volatile and unpredictable in terms of their market value.

Meme coins have gained popularity in recent years due to the success of coins such as Dogecoin and Shiba Inu. However, investors should exercise caution when investing in meme coins, as their value can be easily manipulated and they often lack fundamental value.

How are Meme Coins different from other coins?

Meme coins are characterized by their enthusiastic online community and often feature animated character or animal meme images. Examples of popular meme coins during the recent cryptocurrency boom include Dogecoin and Shiba Inu. However, the meme coin category extends beyond these well-known coins to include lesser-known currencies like Baby Doge. Dogelon Mars, and the list goes on. Despite the attention-grabbing headlines surrounding some meme coins, it's important to remember that all meme coins can be highly speculative and carry significant risks for investors.

Meme coins, in contrast to major cryptocurrencies such as Bitcoin, Ethereum, USD Coin, XRP, Cardano, Solana, Polygon, and Polkadot, are primarily trading instruments and not tied to specific blockchain features. Unlike utility currencies, such as Ethereum, which have real-world applications, meme coins are often purely speculative in nature. Although meme coins can be highly volatile and are often associated with rapid price fluctuations, they typically lack the fundamental value of utility coins.

How do Meme Coins work?

These coins are often not meant to be taken seriously but can gain momentum when members of the community buy into the newest one to be a part of the joke. As the popularity of a meme coin grows, retail investors may also jump in, further boosting the coin's value. Prominent online figures and celebrities like Elon Musk have also played a significant role in driving the popularity of certain meme coins, including a Dogecoin fork called Floki Inu based on Musk's pet dog.

While some meme coins are created as a snub, others trace their origins back to the meme stock war of late 2020 when the Reddit community WallStreetBets inflated the value of GameStop's stock. Following that, another group of Redditors joked about pumping up the value of Dogecoin in a similar way, and the trend caught on. In 2021, the Reddit community SatoshiStreetBets initiated a similar stock war against mainstream cryptocurrencies like Bitcoin and Ethereum. This, coupled with the support of internet celebrities, led to the creation of more meme coins.

It's essential to understand that meme coins are often highly speculative and can be volatile in terms of their market value. As with any investment, it's important to conduct thorough research and exercise caution before investing in meme coins.

Know your Meme(Coin)

Meme coins, unlike Bitcoin and other cryptocurrencies, often have a high or unlimited supply. While Bitcoin was programmed to have a finite number of units, meme coins may have billions of units in circulation. Additionally, meme coins typically lack a mechanism that "burns" coins, removing them from circulation permanently. As a result, the number of units in circulation keeps increasing, causing the value per unit to be low. For instance, at the time of writing, one dollar could purchase approximately twelve Dogecoin, while other meme coins like SafeMoon are worth even less, currently at $0.0000014 USD. The low price per unit is a contributing factor to the popularity of meme coins since it enables anyone to buy a large amount quickly.

The creation of meme coins has been made easier thanks to software that simplifies the process. This simplicity lends itself to the meme-like quality of these coins since they can be created quickly to fit whatever topic is trending. It's important to note that meme coins are highly speculative and volatile, and investors should exercise caution and conduct thorough research before investing in them.

What are the risks associated with Meme Coins?

Meme coins have been criticized by some in the media and investing world as elaborate pump-and-dump schemes, and have gradually led investors to grow more wary and careful when approaching meme coins. While meme coins can generate significant returns, they are also highly speculative and volatile. As a result, investing in meme coins requires thorough research and careful consideration. It's crucial to remember that investing in meme coins comes with high risk, and investors should be prepared to lose their entire investment.

Hype Scams

The recent rise of meme coins has attracted scammers seeking to exploit the hype and popularity of viral trends to trick people into investing in fraudulent cryptocurrencies. One such example is the Squid Game-based coin, which experienced a sudden surge in value, rising millions of percentage points in just a few days. At its peak, the Squid Game coin reached a value of over $2,000 USD per coin before the creators sold off their units and disappeared, leaving investors with worthless coins.

This incident highlights the importance of doing due diligence before investing in meme coins or any other cryptocurrencies. Investors should be wary of projects that seem too good to be true or promise unrealistic returns. It's crucial to research the team behind the project, understand the coin's technology and use case, and check the coin's liquidity and trading volume before investing.

Infrastructural Depth

In contrast to established cryptocurrencies, many meme coins lack the same technological foundation and support system as with the likes of Bitcoin and Ethereum. Most meme coins are essentially trading instruments, with little real-world value outside of the cryptocurrency market. For instance, while some merchants accept Dogecoin as payment, most meme coins, such as SafeMoon, do not have any practical use case yet.

Further, the majority of meme coins have no well-established blockchain infrastructure to support them, and many lack any kind of established ecosystem. Only a few meme coins, such as Dogecoin and Shiba Inu, have protocols that are built on tested blockchains - but those are often in the extreme minority. Additionally, due to their topical and meme-like nature, it is unlikely that many of these cryptocurrencies will still be around in the long run. Even if they persist, their worth may decline to negligible amounts, which again lands further credence to their stereotype as being instruments for "pump-and-dump" schemes, no matter how creative their marketing strategies may be.

Closing

As with any investment, it's crucial to carefully weigh the risks and potential rewards before putting your money into meme coins. While they may seem like a fun and easy way to get rich quick, investors should be aware that meme coins lack the foundation and practical value of established cryptocurrencies like Bitcoin and Ethereum.

However, for those who are willing to take the risk, meme coins can offer opportunities for quick and easy gains. It's important to remember, though, that their value can be highly volatile and unpredictable, and that investors should never spend more than they can afford to lose.

Bitget Wallet (Previously Bitget Wallet (Previously BitKeep)) takes into careful consideration the types of meme coins that we promote, such as their volatility, liquidity, and underlying infrastructure. Nevertheless, investors should be prepared for the possibility of losing their investments entirely, and should always approach meme coins with caution and a realistic understanding of the risks involved.

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