Memecoins, or cryptocurrencies based on popular Internet memes and jokes, have a prominent place in the world of digital assets. Against the odds, what started as a joke has turned into an investment frenzy that has attracted investors and speculators from all over the world!
In today’s lesson, we will look at the history of memecoin, its phenomenon, and whether it is likely to be an investment success, or whether it is just a short-lived fad!
What are memecoins?
Exactly what the name suggests – cryptocurrencies, based on memes. These coins are so controversial that they were even banned by the Thai government in 2021!
Many experts define memecoins as a joke and a fad. There are even claims that memecoins demean cryptocurrencies as a whole. On the other hand, we have memecoin enthusiasts who claim that it is thanks to memecoins that cryptocurrencies have become less scary and more friendly to humanity.
One of the first memecoin was Dogecoin. And it is with it that the whole story begins. Dogecoin appeared on the crypto market in 2013. It is based on an internet meme featuring an image of a Shiba Inu breed dog, commonly known as Doge. The purpose of Dogecoin was to make fun of other cryptocurrencies and their creators. However, the goal was not intended, as the cryptocurrency quickly grew in popularity and became one of the major players in the cryptocurrency market.
Dogecoin, a cryptocurrency initially created for fun, has actually gone through a lot. It gained its popularity mainly in 2021, thanks to the support of well-known figures, including Elon Musk, who regularly mentioned it on X (formerly known as Twitter). It was a tweet along the lines of “DOGE to the moon!” that caused the price of Dogecoin to skyrocket.
With the success of Dogecoin on the market, memecoins have started to spring up like mushrooms. Further examples of this type of cryptocurrency will be Shiba Inu (SHIB), SafeMoon, Floki Inu or Akita Inu (AKITA). All of these have their own following of supporters and investors. Each of them also promises potential huge profits. However, practice shows us something quite different.
How do memecoins work?
In the case of memecoin, you must remember that they do not have the same limitations as, for example, Bitcoin. For example, the Dogecoin discussed earlier is an unlimited resource with a supply of billions, while the supply of BTC is 21 million coins.
What does this mean? In practice, that memecoins are available at a fraction of the price of more popular and stable cryptocurrencies. They are also more accessible to many more people who like to buy large amounts of coins at once.
Investment risks with memecoin
Investing in memecoins involves a number of risks. Firstly, these coins often have no fundamental value or real use. Their prices are largely determined by investors’ emotions and speculation, leading to huge price volatility.
Secondly, the memecoin market is full of scams and fraudsters who try to take advantage of naive investors. The lack of regulation makes investments in these coins even more vulnerable to market manipulation.
So the decision to invest in memecoins depends on personal preferences and your level of risk. For some investors, they can represent an interesting opportunity for quick profits, but at the same time they carry an even higher risk of losing funds than with classic and stable digital assets. So before you decide to invest in memecoins, it is important to understand the risks associated with this sector of cryptocurrencies and be aware that memecoins are highly speculative.
The impact of memecoin on cryptocurrency communities
Interestingly, memcoins are not just about the financial aspect. The idea ofmemecoins affects wider online communities. Ba, very often each memecoin has its own community! It is essential to recognise that, despite their price volatility, they have played a key role in discussions about and approaches to brand new financial knowledge.
Memecoins thrive on community. They gather their online users around common interests, investment goals or…memes! We have an example of this from Dogecoin and PEPE, where it is the dedicated memecoin cryptocurrency communities that have led to significant price increases.
The media hype that is typically created around memecoin also fuels their popularity and promotes a sense of community among their holders. It is worth knowing that these communities are not only about investment, but also promote camaraderie, humour, and even collective action. Thus, we can conclude that memecoins are not only about investment, but also about fully fledged communities.
What impact does this have on finance and cryptocurrencies? We can say that it makes investments in cryptocurrencies and mainly memecoins more accessible, precisely through humour, memes and social groups. These are what encourage others to take an interest in finance and digital assets. In all of this, however, it is important to remember that this high level of engagement and sense of community can contribute to market volatility. Decisions influenced by the emotion generated by a community can lead to huge price fluctuations for a given cryptocurrency. The effect? The highly unpredictable nature of memecoin.
Summary
The story of memecoin is a tale of how internet culture and jokes can influence the world of finance. Although some of these cryptocurrencies have been temporarily successful, investing in them involves a lot of risk and is not suitable for everyone.
Those interested in this market should thoroughly research each memecoin, consider the risks, and only invest funds that they are prepared to lose. Memecoins is a fascinating phenomenon, but also a cautionary tale about jumping in at the deep end of the cryptocurrency world.