What Makes Memecoins Such A Hit Among Crypto Crowd In 2022?
Meme coins have existed for quite some time, but they didn’t start gaining popularity and attention until 2021, when celebrities such as Elon Musk and Mark Cuban started promoting Dogecoin, the first meme coin, which was launched in 2013.
Dogecoin is a reference to a meme known as doge, which consists of a picture of an adorable Shiba Inu dog accompanied by words written in bad English and purported to reflect the dog’s inner thoughts. Dogecoin was named after the meme.
As a kind of virtual money, Dogecoin was never intended to be regarded as seriously as other cryptocurrencies. We’ll go into more detail regarding Dogecoin itself in the next sections, but for the time being, it’s sufficient to mention that.
And yet, at one point in time, it attained a market worth of $70 billion, which is greater than the market cap of firms like as FedEx, Marriott, Activision-Blizzard, BMW, and a number of other important organizations.
There are currently over 132.67 billion Dogecoin in circulation, which is more than any other cryptocurrency by a significant margin. This is one of the primary reasons why it has such an exceptional market valuation.
Even if its market valuation is presently somewhere around $10 billion as of the time this article was written, it is still quite a lot of money for something that is, in essence, a joke. What gives that currency and other meme coins their reputation for being so overvalued? And is there any basis for it?
First things first, we will get a grasp on what meme coins actually are.
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What Exactly Are These Meme Coins?
People frequently get meme coins and alternative cryptocurrencies mixed up. It is essential to note that not all alternative cryptocurrencies are also known as meme coins, although it is true that all meme coins are altcoins.
Any currency (or token) that is not Bitcoin is referred to as an Altcoin. This encompasses the vast majority of cryptocurrencies that do not include Bitcoin. For example, Ethereum is the most valuable alternative cryptocurrency and the second most valuable cryptocurrency as measured by market capitalization.
Meme coins, in contrast to Bitcoin or Ethereum, are intended to be a tribute to a meme, which may be defined as a concept that is entertaining or humorous and that is preserved in a picture, video, or other kind of media. In general, meme coins are intended to spread like wildfire and be passed about, much like the memes that serve as their inspiration.
Dogecoin was first developed as a joke to make fun of Bitcoin and other well-known cryptocurrencies. Today, it has grown to become the meme coin with the highest market valuation. The software programmers Billy Markus and Jackson Palmer who were responsible for developing it never intended for it to be of any practical use.
This is true for the majority of meme coins; they do not have a use case or usefulness that can be applied in economics or business, and their primary purpose is to be exchanged.
Since 2013, several meme coins have been produced, and as of March 2022, there are more than 200 such coins. The meme coins with the most market activity and popularity right now are Dogecoin (DOGE) and Shiba Inu (SHIB).
Why Is There So Much Enthusiasm About Meme Coins?
Meme companies such as GameStop (GME) and AMC Entertainment (AMC) got their prices pushed up by as much as 100-fold in only a few months around late 2020 by a Reddit group called WallStreetBets. This is what sparked the beginning of this phenomenon.
A group of users on Reddit made a joke in January 2021 about artificially inflating the price of Dogecoin in order to produce a cryptocurrency that is comparable to GME. Along with the effect that Tesla CEO Elon Musk’s tweets had, this concept gained traction, which resulted in a rise in the price of DOGE.
Dogecoin‘s value has skyrocketed to a new all-time high of $0.73, having climbed by a factor of 2,000 in only the space of five short days. The fluctuation of the price of Dogecoin appears to be dictated by Elon Musk. During an episode of Saturday Night Live that aired in May 2021; he made a joke about DOGE by openly declaring Dogecoin a scam.
As a direct result of this, the price of DOGE dropped by 40%. A lot of traders then moved their focus to other meme currencies on the market, such as Shiba Inu, which is commonly referred to as the Dogecoin killer.
Retail investors began purchasing meme coins in hopes of becoming millionaires overnight, resulting in another price increase. This fear of missing out (FOMO) on an opportunity influenced the behavior of investors.
Meme coins often only cost a few cents or even a fraction of a penny, which is another reason why retail investors, particularly younger ones, find them appealing. This is especially true for younger retail investors.
As a result, you won’t need to commit a substantial amount of money, and everyone may take part in the endeavour with the expectation that the return on investment will increase exponentially.
Due to the low cost of these currencies, it is possible to acquire hundreds, or even millions, of DOGE, SHIB, or Akita Inu (AKITA) tokens with just a few dollars worth of currency. For instance, as of the time that this article was written, the cost of SHIB was 0.00000011 USD.
This is why you may acquire one million SHIB for the low price of just 11 USD. Only about 0.006 of Ether or 0.0003 of a Bitcoin may be purchased with this amount of money (11 USD). It’s possible that possessing millions of a given meme coin, as opposed to a minute fraction of Ether or Bitcoin, will result in a different sensation.
Is There Any Value To The Meme Coins?
Meme coins are tokens that are highly driven by the meme community. As a result of the fact that they do not have any core economic or commercial use case, their prices are typically determined by the mood expressed on social media and online. This often carries with it a great deal of buzz but also fear of missing out and financial danger.
Bitcoin and Ethereum both have applications in the financial and business worlds. Both Bitcoin and Ethereum are examples of decentralized, peer-to-peer payment systems. Ethereum, on the other hand, is a platform for decentralized apps (dApps), which is comparable to Apple’s centralized iOS applications platform.
Despite the fact that Bitcoin and Ethereum do have a basic economic existence, their prices are far more volatile than those of traditional currencies. The value of meme coins, which have no true economic function other than trade, is mostly determined by the degree to which they have gone viral, contributing to a whole new level of market volatility.
After receiving support from Elon Musk and Mark Cuban, the price of Dogecoin skyrocketed. As soon as the excitement subsided, however, it fell precipitously. Due to the high amount of volatility, meme coins may make some traders incredibly wealthy while causing others to lose all of their money.
There have been efforts made in several nations to regulate meme coins. In the beginning of 2021, the Thailand Securities and Exchange Commission issued a ban on meme coins as part of a crackdown on digital goods that lacked a distinct objective or substantial foundation.
What Kind Of A Future Do Meme Coins Have Ahead Of Them?
For a good or service to have any kind of worth or economic value, it is necessary for there to be some sort of underlying economic substance and utilization, much like in any investment thesis.
It is very likely that the hype surrounding meme coins will eventually die down and that they will become worthless if they continue to be driven solely by the sentiment of social media platforms, despite the fact that they have no real economic use.
The future of some meme coins, on the other hand, maybe brighter as a result of a few factors. One benefit is that more establishments are beginning to acknowledge meme coins as a valid form of payment.
The owner of the Dallas Mavericks, Mark Cuban, revealed in March 2021 that the Mavericks had opted to accept Dogecoin as currency for Mavs tickets and goods for one very significant and earth-shattering reason: since they can and have chosen to do so.
It’s not just Mark Cuban in this boat. There are currently about ten businesses such as GameStop, Newegg, Nordstrom, Tesla, and AMC Entertainment that have started accepting meme coins such as Dogecoin and Shiba Inu as a form of payment and additional businesses may follow suit in the future.
In this scenario, the value of those meme coins will be determined by how widely adopted and used they are as a medium of exchange; the more widely adopted and used they are, the higher their value will be.
A new wave of utility meme coins is emerging, which is another trend that has been spotted recently. One such organization is Pawthereum, which contributes a small portion of the proceeds from each transaction to various animal welfare organizations in order to generate hundreds of thousands of dollars.
Another illustration of this would be Floki Inu (FLOKI), which functions as a Metaverse game, a marketplace for non-fungible tokens, and an educational platform for cryptocurrency.
Since they combine the humorous meme culture that drives their appeal with the kind of genuine economic rewards that cryptocurrencies may bring, it is quite probable that these types of meme coins will be the ones that survive as they integrate the two elements together.
If you are thinking of investing in meme coins, you need to look past the hype and make a sober assessment of whether or not there is an economic use to support the future of the currency.
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If it does not have any economic function other than trading, then you should be aware that its value may decrease once the hoopla around it has died down.
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