What are meme cryptocurrencies
What are meme cryptocurrencies and should you buy them?
Select looks at meme cryptocurrencies which have become a staple of the broader crypto ecosystem.
Updated Mon, Mar 7 2022Bailey ReutzelSHAREShare Article via FacebookShare Article via TwitterShare Article via LinkedInShare Article via EmailYuriko Nakao | Getty Images News | Getty ImagesSelect’s editorial team works independently to review financial products and write articles we think our readers will find useful. We earn a commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.
The cryptocurrency community loves memes and one of the industry’s favorites is Doge, which pairs the Shiba Inu dog Kabusu, with colorful fonts and childlike language along the lines of “such wow” and “very concern.”
With the introduction of Dogecoin, which was created as a joke in December 2013, a whole new crypto category was spawned — the meme coin, cryptocurrencies that associate themselves with an internet joke or pop culture reference.
Following the creation of the Doge meme, Dogecoin brought forth an explosion of cryptocurrencies bearing the likeness of the cute pooch, making it the most commonly used meme for these types of cryptocurrencies.
As a result, within the category of meme coins, a more specific group has emerged: dog-themed coins. Most retail investors will be familiar with these, as 2021 saw significant amounts of speculation on the new subset of meme coin, which includes Dogecoin and its derivatives, Shiba Inu and Dogelon Mars. Tesla founder Elon Musk was a key reason why these cryptocurrencies pumped and expanded last year after he tweeted about his interest and support of Dogecoin.
Other meme coins beyond the dog-themed coins niche include Pepe Cash, based on the Pepe the Frog character, and “HODL” (hold on for dear life), from the crypto rallying cry to hold onto your coins at all cost, even during a market downturn
A brief history of Dogecoin
Dogecoin is considered to be the first meme coin, and while it was initially designed to poke fun at the wild speculation that thrives in cryptocurrency markets, a community all its own quickly developed around it. Crypto enthusiasts saw Dogecoin as a way for new investors to learn about and experiment with the technology without having to worry about the higher stakes that came with Bitcoin, which, at the time, had just broken $1,000 per coin.
As a result, Dogecoin was promoted as a “fun and friendly internet currency.” Compared to the Bitcoin community, the Dogecoin community was less concerned about the cryptocurrency’s price and more interested in seeing the coin utilized in the use cases being touted as key for cryptocurrency broadly.
For instance, a number of Dogecoin-tipping bots launched on social media platforms, which allowed people to send small amounts of it to someone if they liked their post. The community also used Dogecoins to fundraise for several worthy causes, including helping Charity: Water build a well in Kenya and sending the Jamaican Bobsled Team to the Sochi Olympics when they qualified but were unable to afford the trip.
While Dogecoin may seem like a light-hearted project, investing in this type of cryptocurrency or other meme coins like it carries some amount of risk.
Some meme coins have reached high market capitalization, while in other cases, the price per coin skyrockets thousands of percent within a few days, making some investors rich, essentially signaling others that they might be able to do the same.
It’s also worth noting that these meme-based cryptocurrencies are generally not serious, substantive projects, as they’re typically created by copying and pasting code from another type of cryptocurrency. They also tend to lack significant developer communities, which help to keep them secure and technologically up to date. Dogecoin development, for instance, has nearly come to a standstill at different moments throughout its history.
Additionally, many meme coins are owned by small groups of people who hold large, market-moving quantities of it, along with thin liquidity pools. As such, their prices tend to be highly volatile, influenced significantly by social media sentiments and “FOMO” (fear of missing out). Because of this, meme coins are particularly susceptible to pump-and-dump schemes, whereby an individual or group of large coin holders hypes up the coin, getting others to buy and inflate the price before dumping all their holdings on the market.
While that particular individual or group will end up making significant returns, that type of quick sale can swing the market to the red, leaving everyone else, as they say in crypto, “holding the bag.” Unknowing investors who thought the price of their coins would rise end up with tokens that are worth far less than what they initially paid.
Above is the one-day price chart for meme coin Elon’s Marvin (MARVIN), named after one of Elon Musk’s dogs. This chart displays what a typical pump-and-dump looks like, with a run-up in prices until a big sell that plunges the price off a cliff (see vertical line right after 4 a.m.).Image courtesy of CoinMarketCap.
While memecoin markets can be particularly volatile, some investors choose to invest in them anyway. Whether they’re interested in timing the market pumps to make money or just want to participate in a silly, crypto-insider market, investors can purchase meme coins on many of the same platforms they’d use to purchase more serious cryptocurrencies like Bitcoin and Ethereum.
As the oldest and most well-known meme coin, Dogecoin can be bought, sold and traded on top crypto exchanges like Coinbase, Gemini and Binance. Traditional stock investing and trading platforms such as Robinhood, WeBull and SoFi have begun allowing their users to invest in crypto, including Dogecoin, as well.