Meme coin meaning is cryptocurrencies who are inspired by memes or jokes on the Internet and social media. The first meme coin created was Dogecoin (DOGE), and this coin was launched as a parody of the popular Doge meme of a Japanese Shiba Inu Dog.
Meme coins are usually highly volatile. They are mainly community-driven and can gain popularity overnight due to online community endorsements and Fear of Missing Out (FOMO). Still, their price can also drop greatly once traders turn their attention to another meme coin.
Another characteristic of meme coins is that they often have a huge or unlimited supply. For example, Shiba Inu (SHIB) has a total supply of 1 quadrillion tokens, while DOGE has no maximum supply, and over 100 billion tokens are already in circulation. Because meme tokens generally do not have a coin-burning mechanism, the huge supply explains their relatively low prices. You can buy millions of meme tokens with just USD$1.
Why are meme coins popular?
Now that you know meme coin meaning, let us explore why meme coins are so popular. Some say that during the COVID-19 pandemic, the crypto market grew as retail investors wanted to hedge against inflation. Meme coins also increased in value amidst the hype, growing both in market capitalization and variety.
The “meme stock” saga of GameStop (GME) and AMC Entertainment (AMC) in late 2020 was the catalyst for all this, where the Reddit community pumped up the prices of these shares to as much as 100 times in a few months. In January 2021, a Reddit group joked about pumping up the price of DOGE to create a crypto equivalent of GME. The trend caught on, and along with the influence of Tesla CEO Elon Musk’s tweets, DOGE prices increased tremendously. Dogecoin reached a new all-time high of $0.73 USD, with an increase of over 2,000% in five days.
However, in May 2021, Elon Musk joked about DOGE publicly on TV, and many think that it was the cause of the following price drop. Several traders then turned to other meme coins on the market, such as SHIB. At the same time, retail investors were FOMOing into meme coins hoping to become millionaires overnight, sparking yet another meme coin rally.
Another reason as to why retail investors invest in meme coins is that they typically only cost a few cents or even a fraction of a cent. Although the low price doesn’t mean much because these coins have huge supplies, holding millions of a certain meme coin feels different than holding a fraction of ETH or BTC. This is because traders can obtain thousands or even millions of meme coin tokens with a few dollars.
Risks of investing in meme coins
First of all, the tokenomics of meme coins can be concerning. Take Bitcoin as an example. It has its blockchain, a well-written whitepaper, an established ecosystem, and a deflationary nature. Bitcoin has been adopted in some institutions as of recent years. Compared to BTC, most meme coins are inflationary with no maximum supply. Their ecosystem, use cases, and fundamentals are often defined by the collective jokes of the community. Only a few meme coins were built on the technology of major cryptocurrencies. For example, DOGE’s technology was derived from Litecoin (LTC), and SHIB was built on the ETHereum blockchain.
Furthermore, meme coins are heavily community-driven and more speculative than larger market capitalization cryptocurrencies. This volatility constantly results in unexpected pump and dump, and the lifecycle of meme coins is generally short-lived.
Lastly, there might be projects taking advantage of the hype to scam traders. For example, Squid Game (SQUID), a meme coin inspired by the popular Netflix show of the same name, surged over 86,000% in a week. However, the development team rug-pulled suddenly and caused the price to plummet by 99%. Even worse, holders were not allowed to sell their SQUID tokens. Therefore, you should always be careful and DYOR before trading or investing in meme coins.
In Conclusion
Meme coin meaning is cryptocurrencies that are inspired by memes and jokes on the Internet and social media. While they seem fun to invest in, do take note of their inherently large volatility and possibility of scam.
