We hate them, and we love them in equal measure because when it comes to meme cryptocurrencies, the line between hate and love is thin, so most fans have developed a love-hate relationship with Memecoins. Most were originally considered a running joke in the crypto market, and they have often been, as some were represented by faces only a mother could love; meme cryptocurrencies have come of age and are now an inseparable part of the crypto space.
While someone said, common sense is like deodorant, in the world of crypto that doesn’t yet have regulation; those who need it most never use it. As a result, before you can begin “aping” into the next meme coin, this guide tells you everything you need to understand about them and how to analyze them.
Read more: The Best Meme Coins That Could Explode in 2023!
What are Memecoins?
A casual look-up of the word “meme” in your dictionary conjures up the picture of a comical image, video, or text that internet users will copy, vary slightly, and spread like a bushfire on social media. Memecoins, also called meme coins, are almost similar to the dictionary meaning of a meme—these cryptocurrencies whose origin and production are inspired by memes and lighthearted internet jokes.
Meme cryptocurrencies resemble your regular digital assets like Bitcoin, Ether, XRP, etc., and you can trade them in various cryptocurrency exchanges. However, unlike your standard cryptocurrency, most of them don’t serve any particular purpose apart from the fact that you can share them. In most cases, the supply of these coins is uncapped, and their virality makes them appealing to many traders.
Once a meme coin becomes popular and its value balloons to a multi-billion dollar market cap due to celebrity endorsements, you’ll have an avalanche of retail investors flocking in and further boosting its value. A good example is Dogecoin, whose popularity soared due to Elon Musk’s endorsement, followed by its fork, Floki Inu, based on Musk’s pet dog. Dogecoin’s success must have inspired several other developers to create similar cryptocurrencies.
Popular Memecoins like Dogecoin, Shiba Inu, Floki Inu, and Safemoon have significantly shaped the crypto market volatility. Their sudden metamorphosis from jokes to market dominance fueled by viral trends and social media hype has led to noticeable market fluctuations and highlighted the risks associated with investing in community-driven cryptocurrencies. Moreover, they play the important role of stimulating emotional resonance that establishes a shared narrative framework of collective identity and community participation associated with meme coins.
Read more: What is Pepe Coin (PEPE) and why Ethereum Jumps to $2K
Understanding Memecoin Investments
Remarkable tales about life-changing moments, when traders turn modest investments into millions of dollars, are common in crypto. One of the most prominent examples involves the 2023 breakout meme con star Pepe coin ($PEPE) involving a Czechoslovakian trader going by the name IB_JUNIOR. According to a post on Binance Feed, this trader who discovered $PEPE on 17th April, just before the coin’s Bull Run, invested “a small sum,” which multiplied over 1,000x within 24 hours. There’s also the story of an anonymous trader’s investment of $250 that ballooned to $1.02 million.
While some people invest in meme cryptocurrencies to offer support or out of love for the messages they send, others, like those two examples above, believe they’re a promising investment idea. If the meme coin investment bug bites you and you feel like getting into the action, do your due diligence and research a coin’s price history before investing. Whereas some highly volatile Memecoins may appear silly on paper, several have become extremely popular, garnering massive trading volumes and market caps to become serious investment vehicles.
Most importantly, remember that, unlike Roulette, the odds surrounding meme coins aren’t set in concrete, and investing in them is a fluid and dynamic process. You must stay updated on the latest market trends and the latest news so you can identify and not miss opportunities. Moreover, carefully researching individual coins before deciding for or against them is the best way to try and tip the odds in your favor. As a result, you want to learn the habit of looking beyond the hype and avoid scams by examining important factors in a coin’s use case and development team.
Factors to Consider When Choosing a Memecoin
While most people believe that investing in meme coins is purely a game of chance, it differs greatly from Roulette, where the hoe house always has a 5.26% advantage, no matter what. The best thing about investing in Memecoins is that you can learn practical strategies to help you spot the next big coin. These factors include the following:
- Track a Coin’s Performance
Take the time to survey the market and monitor the performance of different coins, especially by using tracking tools that provide real-time data on gainers and losers. Keeping regular tabs ensures that you can identify tokens with promising signs of growth and get an edge investing in meme coins.
- Consider the Community’s Vitality
You want to verify whether a token has a strong culture since having a strong community contributes to success in the world of meme cryptocurrencies. Use social platform metrics to interrogate a token’s performance and get valuable insights. Take the time to check platforms like Telegram, Twitter, Discord, and other online communities to discover how a coin is being discussed on social media.
- Thoroughly Analyze the Fundamentals
Ask important questions about the coin’s development team, whether they have any previous success stories, and the coin’s tokenomics or economic structure. Doing your homework well is the only way to eliminate risk and gain a competitive edge.
- Track Whales
The best way to manage such a volatile and speculative market is to follow smart money to identify fresh opportunities. Visit Etherscan to track and follow the moves of successful traders and cryptocurrency whales who have learned the tricks of making early purchases into potentially profitable projects.
Memecoin Risks
Investing in meme coins may look like a walk in the park. However, they also come with high uncertainty and risk, especially because they’re mostly driven by social media influence, hype, and speculation. This makes them unpredictable and volatile, meaning they can gain or lose value rapidly. Among the risks and challenges you need to look out for as a prospective investor includes the following:
- Lack of Fundamentals
Unlike traditional cryptocurrencies, Memecoins have fewer fundamental drivers like innovation, technology, and adoption. Moreover, others don’t offer any clear purpose, value, or utility, while others lack developmental or governance support: these factors make them susceptible to dilution or abandonment.
- Market volatility
Meme cryptocurrencies, mostly driven by hype, social medial influence, or FOMO (fear of missing out), are susceptible to extreme price swings, both up and down. These factors can multiply or wipe out your investments in a matter of minutes or hours since external news or events can trigger changes in demand and sentiment.
- Fraud and Scams
Like other cryptocurrencies, meme coins have also attracted their fair share of fraudsters who take every chance to exploit the greed or naivety of investors. Among the most common scams in the Memecoin space include:
- Rug Pulls: Rug pulls involve a creator or liquidity provider withdrawing their funds from the market and leaving investors holding worthless assets they can’t sell.
- Pump and dump: Pump and dump refer to a situation where people connive and buy large amounts of a coin to artificially raise the price of a Memecoin before duping unsuspecting investors into buying it at an even higher price because of the hype.
- Phishing and malware: involves hackers tricking investors into revealing seed phrases or private keys, creating fake websites, or installing malicious software to steal funds.
Research Tools and Resources
With over 10,000 digital assets, over 400 cryptocurrency exchanges, and at least 340 Memecoins and more being added daily, scouting, reading, and learning about meme coins is comparable to looking for a needle in a haystack. While it’s possible to search for updates on social media, it could take you ages to locate a meme coin gem. However, using crypto research tools can deliver results in just a matter of seconds. Among the most prominent crypto and meme coin research tools are CoinMarketCal, Altcoin season index, Coin Dance, CryptoQuant, GlassNode, and LunarCrush.
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While there’s no doubt that you can make easy money investing in Memecoins, it’s never guaranteed because of its volatile nature compared to mainstream cryptocurrencies. It would help if you did your research, especially about a coin’s background, by carefully picking through their whitepaper with a fine tooth comb.
In a world where privacy is dead and social media holds the smoking gun, take the time to get sound financial advice, and be careful you don’t get swayed by influencers promoting Memecoins. Tread and trade carefully because most Memecoins don’t hold real-world value or utility, as you could lose money.
Remember that this doesn’t mean you can come across some solid Memecoin projects with great moneymaking opportunities. You need to study different projects and practice excellent risk management carefully, and you’re good to go. If you want your children to have all the things you couldn’t afford, and then you move in with them, you may want to try investing in meme coins for a chance to strike it rich.
Disclaimer: All materials on this site are for informational purposes only. None of the material should be interpreted as investment advice. Please note that despite the nature of much of the material created and hosted on this website, HODL FM is not a financial reference resource and the opinions of authors and other contributors are their own and should not be taken as financial advice. If you require advice of this sort, HODL FM strongly recommends contacting a qualified industry professional.
