Meme coins: Is it a good idea to invest in them?

According to the dictionary, the word meme refers to a humorous image, piece of text, or video copied and used by many Internet users, only with slight variations. Well, meme coins aren’t really very different from this definition – they are essentially cryptocurrencies inspired by Internet jokes. However, some have substantially increased in value, gaining market caps worth multi billion dollars and garnering celebrity attention. While their features suggest that meme coins provide some value and utility, that’s not always the case, as they don’t have unique use cases.

In fact, crypto investors are generally attracted to meme coins for their entertainment value or because they want to be part of a community. While meme coins are designed just like Bitcoin or other cryptocurrencies out there, the difference is that they are centered around a funny idea, and their value depends on the momentum that they can generate at a certain point. Below, we dive deeper into the topic of meme coins, how they work, and whether you should buy them, so read on to learn more!

The Meme Coin Craze Started with Dogecoin

The original and most popular meme coin is Dogecoin, introduced in 2013 by Billy Markus and Jackson Palmer (software engineers), with the DOGE coin being branded around the “doge” Shiba Inu dog meme, which was very popular at that time. According to the founders, Dogecoin was created as a way to make fun of Bitcoin, and the word doge is a misspelling of dog, which was done deliberately to make the crypto “as ridiculous as possible”. However, things didn’t go according to plan, and Dogecoin made a name for itself, amassing a community of users who were fascinated with the cryptocurrency – in fact, even at the time of writing, people are still keeping an eye on dogecoin prediction to see what the future will bring for this crypto.

Interestingly, when the Jamaican bobsleigh team made it to the 2014 Winter Olympics in Sochi, but couldn’t fund the trip, the Dogecoin community succeeded to raise about $30,000 for the cause, showcasing its power. Mainstream media outlets immediately picked up the story, which only attracted more investors to the Dogecoin community.

However, the price of the cryptocurrency skyrocketed when Elon Musk started to advocate for it continuously on his social media, even referring to himself as the “ Dogefather” when he appeared on Saturday Night Live. In fact, Musk’s endorsement resulted in a market cap of $88 billion for Dogecoin in May 2021, turning it into a pop culture phenomenon. Dogecoin has inspired other meme coins, and since its launch, over 200 such coins have been introduced in the crypto landscape.

Understanding How Meme Coins Work and Whether You Should Invest in Them

When it comes to meme coins, barriers to entry are extremely low, and the open-source nature of the blockchain enables creators to “fork” current cryptos, which essentially is about copying and pasting the blockchain while tweaking the logo or name and launching online. Generally, creators promote meme coins on social media channels in order to create buzz and increase the price, and after that, the price may continue to increase if the coin attracts a strong community of users.

There’s no straightforward answer to whether you should invest in meme coins. Although Dogecoin may have brought gains to investors, other meme coins have left many investors underwater. Unlike Bitcoin, that has a limited supply of 21 million coins, meme coins have an unlimited supply oftentimes; for example, when it comes to DOGE, there are over 135.5 billion coins in circulation, and every minute, a miner acquires around 10,000 DOGE, which translates into $660 – this is a staggering contrast compared to Bitcoin, where there are around 6.25 BTC mined every minute—worth about $143,000.

Overall, investing in meme coins requires a measured approach, as their future is yet to be determined. While some coins could carve out a niche in the financial landscape, others could simply fade away over time. As always, thorough research is paramount when investing in meme coins because you need to understand the project’s underlying technology, the distribution and use of the coins, and the plans of the project’s team for the future. It can be tempting to invest based on celebrity endorsements and hype, but it will only get you so far. Instead, our recommendation is to seek meme coins with a clear roadmap, a dedicated development team, and a strong community.

Given that meme coins are risky by nature, you should invest only the amount of money you are comfortable losing and definitely not the money you need for living expenses or essential needs. Also, meme coins shouldn’t take up a major portion of your crypto portfolio. Rather, it’s wise to protect your crypto funds by mixing meme coins with established cryptocurrencies with a solid track record and clear uses, which will help you reduce risk and take a more balanced approach to investing. When investing in cryptocurrencies, many people let FOMO get in their way of making sound decisions, so beware of this, and make sure to stick to your investment plan ( don’t overlook creating one), and don’t let the hype and sudden price surges cloud your judgment. Protecting your crypto wallet is also paramount, because often, beginner investors have lost their funds due to fraudulent exchanges or phishing attacks.

The Bottom Line

The meme coins landscape is a wild ride, full of uncertainty and excitement at the same time. Although these cryptos have potential for returns, they also come with risks, so it’s essential to understand how they work and protect your investments by making informed decisions that align with your risk tolerance and financial goals. Keep in mind that the crypto industry is still evolving, and it’s unknown what the future will bring for meme coins – they could either experience an increase in price or a major decline. Whatever the scenario, it’s essential to approach them with a healthy dose of skepticism and come up with a strategic plan that will allow you to navigate this corner of the crypto universe effectively.