The Secret of Meme Coins

When I advise on investing in crypto, the first I do is say: “Check whether a project delivers value, has some utility, and if not - don’t invest.” But then, I am observing once more the rise of the next Pepe or the success of DOGE, and I understand that in some cases, my advice wouldn’t work.

So, what are meme coins?

Meme coins are cryptocurrencies, just like any other cryptocurrency. But their main difference from other coins and tokens is the absence of this “value” that I’ve mentioned. They are created as a joke, for fun, to make laugh like Pepe, or to evoke nostalgic feelings like NOOT.

What is the secret of the success of some of them? There are no secrets, there are reasons why people buy one coin and ignore another coin.

What about checking some examples?

DOGE: the Support of Influential People

The coin was created as a mere joke. Even the word “dog” is misspelled as “doge” to show that the coin is created for fun and nothing else. However, Elon starts posting about it, and the coin surges in value. Then, Elon says that at some point, you may be able to buy Tesla with Dogecoin, and it sends the coin to heights again.

Elon has weight in the industry in general and in crypto specifically, so other influential people start following him, online stores start accepting DOGE along with Bitcoin and Ethereum as a payment method, and the meme coin strengthens its position.

Here, Dogecoin acquires utility as a coin accepted as a payment method along with major cryptocurrencies. However, just like any meme coin, it stays highly volatile and dependent on its supporters or haters.

SHIBA INU: Creating Utility

Here, the story is somehow different. After a surge in price in 2021, the meme coin became an official DOGE rival, but its value dropped soon. Shiba Inu is building its own ecosystem with three tokens: SHIB, LEASH, and BONE. Each of them performs a distinctive role in the Shiba Inu ecosystem and has distinctive characteristics. The Shiba Inu ecosystem now consists of a decentralized exchange, an incubator for artists, a collection of NFTs, the Shibarium blockchain, and soon, the Shib metaverse is coming.

The utility of SHIB, the main token of the ecosystem, and the number of its use cases are growing thanks to the growth of the number of products in the ecosystem and Shiba Inu charitable activities. Even though SHIB is a meme coin, I believe that we are observing its transformation into a fully functional cryptocurrency. And thus, if the products are actively used, the token will eventually start growing in value.

PEPE: From Rags to Riches and Back

**Pepe **took the web by storm earlier this year by promising the end of the Doge-themed coins era. No specific plans for the future project development, just intensive shilling on Twitter and angry declarations with provocative memes - these are the features that brought the coin to the top within a couple of days.

But without getting any tangible value, people get bored even with the most intensive hype. Pepe is still alive, but it doesn’t make headlines now.

To me, it is a typical meme coin that has risen to fame thanks to hype and has dropped as soon as its fans switched to something else.

BALD: Trust Issues

BALD is another meme coin that has emerged recently, and soon after the price increase, the BALD developer withdrew liquidity worth over $20 mln from the pool, causing the coin to drop to almost 0.

This is not the end of the story yet, because the developer has started adding liquidity. Trading activities have pushed the coin value up. Some people speculate that the BALD developer is Sam Bankman-Fried. Others, including Sam himself, argue it, but one thing is clear: after a breathtaking surge, BALD’s value is plummeting, and it, in turn, leads to drops in trading volume and market capitalization.

BALD could have created some millionaires, but trust issues undermined any probability of its success. In all other regards, this is just another meme coin, and I am sure that even if no trust alerts emerged, BALD would demise soon.

So, What Is the Secret of Meme Coins?

There is no specific secret. Meme coins play on people’s emotions.

• A nice meme from our childhood? - Let’s buy it!

• A cool fun image? - Let’s buy it and ask our friends to join!

• A coin developer is talking about our most burning problems? - The guy is one of us, let’s buy his coin!

  
  

The list can be long, but the principle is the same: if a meme “talks” to us, we want it.

Another reason why people buy meme coins is their low price. Meme coins algorithms flood the market with trillions of coins worth almost nothing. At the current price of PEPE, you can buy almost 800,000 PEPE coins for $1. While for the same $1, you can afford to purchase only 0.000034 BTC. Being a holder of 800,000 coins sounds more impressive than being a holder of 0.000034 coins. This is another reason why many people, especially the representatives of a younger generation, buy meme coins.

When more people join, the trading volumes start growing, and the coin value starts increasing, and bigger actors join the game. Traders start speculating on coin price fluctuations. Trading volumes continue growing when the new meme volatility starts delivering profit. But over time, meme coins tend to lose momentum due to the lack of some practical attributes that enable them to become a medium of exchange, their price drops, and eventually, the coin is forgotten.

Is there a way to survive in the highly competitive market where hundreds of meme coins emerge constantly?

Yes, of course. Just have a look at Dogecoin: with the support of the right people, it got its utility as an exchange means and a coin accepted as a payment method. Or take the example of Shiba Inu which eventually started creating utility by developing products, getting engaged in charity, and similar. Even though it doesn’t make the coin surge in price but it ensures its survival and, probably, development.

Other than that, meme coins manipulate people’s emotions and capitalize on their anxieties. Once the hype is over, meme coins are destined to demise.