Since Dogecoin’s unexpected success in December 2013, the memecoin industry has exploded with investment opportunities emerging for anyone who knows how to trade memecoins. This memecoin trading guide will show you how to trade memecoins and actually make money from them. You also find the best practices for memecoin trading; that way, you’ll deal with less risk on this venture.

Related: Memecoin Madness Explained

Memecoins are cryptocurrency that are generated as a result of online memes or internet jokes. They are digital coins that usually don’t serve much purpose besides drawing a chuckle from users.

In fact, the first memecoin, Dogecoin, was created as a joke to mock the fast growth of Bitcoin and Ethereum. This ‘joke’ spread virally like all good memes do, but somehow managed to become a commercial success in the process. After the success of Dogecoin, many copycats started to pop out of the woodwork, like Shiba Inu, Dogelon Mars, Floki Inu, etc.

These ‘joke’ coins are so popular because they were funny; after all, they came from internet memes and jokes. They are also popular because their online community advertised them well enough and because they racked up good prices. After all, memecoins are like regular cryptocurrency on steroids due to how fast their prices could rise (and drop).

How Do Memecoins Differ from Traditional Cryptocurrencies?

While memecoins and traditional cryptocurrencies are both digital currencies, there are ways in which these ‘joke’ coins stand out.

  • Most traditional digital coins were created with purpose—a desire to solve a problem in society. Contrastingly, memecoins are created to get a few laughs from friends. So, you can see memecoins as pure trading instruments instead of coins that you keep for a special purpose.
  • Memecoins usually have a very high or unlimited supply, which makes their individual prices low.
  • Even though traditional cryptocurrencies are known for their unpredictable volatility, memecoins take this to another level. Their values can rise really high in a short period of time or drop really low unexpectedly. An example is BODEN, which surged over 1000% in just 30 days, resulting in a 10x Return On Investment (ROI).
  • A typical blockchain project starts with multi-million dollar valuations from investors. Memecoins start much lower with valuations of less than $1 million.
  • Memecoins are also pretty straightforward, with little complexity in their design or economic models. Anyone can create a memecoin with the right software.

Can You Really Make Money from Memecoins?

Yes, you can get a lot of money out of memecoins. You just need to understand how to profit from memecoins by investing in a good project and reaping the benefits when the time comes.

The value of PEPE surged 350% within one short week, and people who invested as little as $3,000 became millionaires.

Despite understanding memecoin volatility, another trader bought 600 billion PEPE at a high price the past year, and they’re sitting on millions now. The PEPE bull rush isn’t the only memecoin success story, as Dogwifhat traders also have some cool stories to tell.

A humble trader sacrificed 5.288 SOL, which is approximately equal to $310, to purchase 2.58 million Dogwifhat tokens in November 2023. Although the investment is quite small by cryptocurrency standards, it was nonetheless a brave decision in 2023. That is because this trader made this decision at a time when the actions of the SEC had scared many people off cryptocurrency. This leap of faith would turn into a $5 million investment in little time.

How Can You Identify Promising Memecoin Projects?

Although the Dogecoin train has sailed, there are still many more innovative projects worth your investment; you just have to find them. We’ll show you a few tricks on how to sniff out a good memecoin.

  • Large social presence: A promising memecoin would always possess a large community and a viral online presence. Its social media community should be active with interactions that feel human and not robotic. A few celebrity endorsements wouldn’t hurt either.
  • Fun factor: While there are some memecoin trading tools and resources that can determine the potential of a memecoin, the fun factor is an easy one. So, a promising NFT should have something unique about it, something that makes them stand out.
  • Healthy supply: Some good memecoin research and due diligence will show you how common rug pools are in this industry. So, it's important for a memecoin to have its tokens distributed sustainably, with no single entity holding the bulk of the tokens.

5 Tips for Effective Memecoin Trading

Below we’ll be providing a few memecoin trading strategies that’ll allow you to benefit from this market.

1. Flip Memecoins after Presale

This is one of the memecoin trading tips that’s a no-brainer. All cryptocurrencies (including memecoins) are at their cheapest during presale. So you can purchase these coins during presale and sell them when they hit the market and experience the initial price surge.

2. Do Your Research

One of the most common memecoin trading mistakes to avoid is jumping on the latest memecoin bandwagon. Many people have fallen for scams and rug pulls because they were drawn in by the allure of money. So, always research a memecoin before investment by auditing its social media accounts and ensuring its liquidity is locked, so no developer runs away.

3. Risk What You Can Afford to Lose

One of the most important tips for successful memecoin trading is to risk what you wouldn’t mind losing. A rule of the thumb for most traders is to use no more than 10% of their trading portfolio.

4. Work with Low-Gas Networks

Popular blockchains like Ethereum come with high gas fees that can eat deep into your profits. So, a better choice is to go for sites like Polygon or Binance Smart Chain which demand lower gas fees.

5. Understand the Market Conditions

The memecoin market doesn’t forgive ignorance. So you need to ensure you’re up to date on all the price movements, possible entry points and exit points, and much more. This is one of the best memecoin investment strategies, as it’ll show you the right time to invest in a project.

How Can You Manage Risks When Trading Memecoins?

Risk management in memecoin trading is important when you don’t want to run a loss on your investment. Nonetheless, there are a few ways you could curb memecoin investment risks, as you’ll see below:

  • Research that memecoin project thoroughly
  • Stay true to your earning goals and never get carried away with profit
  • Never make investment decisions based on just your emotions
  • Diversify your memecoin investment portfolio; that way, you’ll get a higher chance of benefiting from one memecoin project

Is Memecoin Trading Right for You?

After a brief memecoin market analysis, you’ll understand that there’s money to be made in trading memecoins. Digital coins like PEPE, Dogwifhat, and PEPE have shown what the memecoin market is capable of.

More: The Rise of Meme Coins Amid Overall Market Decline

However, if you want to get your cut of this cake, you need to be open to taking risks. The memecoin market desires a risk-tolerant investor who’s willing to invest their funds for the chance of a small return on their investments. If you’re willing to take the risk, you can follow the guide in this article to find the most promising memecoins.

HODL FM Author | HODL FM
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