There is a unique phenomenon that occurred in the crypto industry back in the 2021, that is the meme coins craze. The most valuable meme coins of all, the Doge coin reached a spectacular 1.600% increase in value on a year-to-date basis. Another meme coin such as Shiba Inu has even more spectacular price upward momentum, increasing more than 100.000% in 2021. Another meme coin named Pepe coin which launched early in 2023 already has more than 400% increase in price in just three months after its launch.

However, a common question pops out regarding the meme coins. What makes them so special that makes them experience a significant price increase? Do these meme coins being used by numerous users which make it valuable? Or is there any other reason why meme coins became so popular among the crypto community?

In this article we will explain what meme coins are and what makes them so special among the crypto communities.

Introduction

In 2021, meme coins became a hot discussion in the entire world, whether from the crypto enthusiasts or not, whether from the investors or not. The topic of the discussion is how the meme coins, such as Dogecoin and Shiba Inu tokens continuously rise in price and whoever bought them will earn sweet profits. The phenomena looks realistic at the time, Dogecoin market cap rose from $1,2 billion to a total of $22,5 billion value. Whoever invests as low as $10 (Rp150.000) at the beginning of 2021, may end up with $170 (Rp2.550.000). An $160 return of investment.

However, the term ‘meme coin’ itself has important meaning and warning. It is a meme you should not take too seriously. Although sound promising and easy-to-do investment at first, meme coins have higher risks of investment.

The very strong aspect regarding meme coins is its solid support from the community. Either from its creators or from within the community itself. Since the majority of meme coins lack technological advantages, the community’s strong support contributes to meme coin popularity. Take example of Dogecoin, although this project was abandoned by its creators and lack of innovations, the community still shows support and uses Dogecoin to maintain its value. This strong community is even capable of rebooting the Doge Foundation that was long abandoned in which blows a new life into Dogecoin development.

What Is Meme Coin?

To give the context regarding what is meme coins, the creator of Dogecoin, Billy Markus first created Dogecoin to show the community about how easy it is to create a cryptocurrency project. The purpose of Doge creation is to show a fun and approachable alternative to the complex and technical nature of existing cryptocurrencies at the time.

In contrast to other cryptocurrencies that were gaining attention for their potential financial gains or technological breakthroughs. Dogecoin was designed to be a fun and community-driven digital currency, which offered a fresh and light-hearted approach to the crypto space, and gave a more approachable entry point into the world of cryptocurrency. This approach is mainly the purpose of all meme coins creation.

In simple words, meme coins are cryptocurrencies created for fun, jokes, and memes purposes.

While meme coins lack of technological or utility aspects, it is still supported by numerous community members. This makes meme coins popular and shares a portion in the crypto industry, not by its idea or technology concept, but by its strong supporters.

Meme Coins Characteristics

There are several factors that influences meme coins popularity among the community:

1. Low Entry Barrier and Easy Access

The first thing that makes meme coin popular is its low price tag. For example, a single Shiba Inu Token only costs $0,0000075. Now compare this price tag with the likes of Bitcoin or Ethereum, the meme coin prices are extremely low and considered cheap by most of the investors.

This affordability makes meme coins accessible to a wider audience, especially to those wishing to enter the crypto market without risking a substantial amount of investment.

2. Community

Meme coins offer a unique form of entertainment to the financial market. They tap into internet culture and humor, incorporating funny names, logos, and references to popular memes. Take Elon Musk and Snoop Dogg’s Twitter account for their support to meme coins, it is drive another investors perspective to meme coin. This fun approach then attracts more investors who enjoy the amusement and shared experiences that come with being part of a meme coin community.

3. Profit Potentials

Meme coins can experience rapid price fluctuations, and some investors are attracted to the potential for quick profits. Due to their viral nature and the influence of online communities, meme coins can experience sudden surges in demand, causing the prices to spike. This speculative aspect can lead to significant gains for early investors since they buy at a low price. There are also no technological or concept fundamentals that influence the meme coin’s price. The only thing that is able to drive the meme coin price is supply and demand and the virality of meme coins itself.

Example of Meme Coins

1. Dogecoin

Dogecoin is a cryptocurrency created as a meme in 2013. It features the Shiba Inu dog from the Doge meme as its logo. Dogecoin gained popularity for its fun and lighthearted nature. It has a dedicated online community and became known for its distinctive ‘to the moon’ rallying cry.

2. Shiba Inu

Shiba Inu is a cryptocurrency inspired by the Shiba Inu dog breed. Introduced in 2020, it gained attention as the ‘DogeCoin killer’ due to its similarities and aspirations to surpass Dogecoin. Shiba Inu aims to create a decentralized ecosystem and community around its meme-inspired token.

3. Pepe

Pepe coin is a cryptocurrency named after the popular internet meme character Pepe the Frog. Introduced in 2023, it gained popularity within the meme community. Pepe Coin aims to provide a fun and engaging platform for users, with a focus on supporting meme-based projects.

Meme Coins Risks

Although it is unique and has strong support from the community, does not mean that meme coins are completely safe, in fact the risks of investing in meme coins is much higher since they were created for the sole purpose of fun and entertainment.

Here are some of the risks surrounding meme coins:

1. High Volatility

All crypto assets incorporated high price volatility, however as meme coins were intended for fun and jokes, it is not a suitable long term investment, which makes investors enter the meme coin market mostly to make quick profit. This means meme coin value can fluctuate within short periods. While rapid price increases can lead to significant gains, the opposite is also true.

Meme coin prices can drop just as quickly, resulting in financial losses. This volatility makes meme coins a risky investment, as their prices are often influenced by social media trends, online communities, and speculative trading rather than fundamental value or market stability.

2. Lack of Utility

Other than as a means of agreed payment among the communities, the meme coins in fact have no other utility. Meme coins typically lack a clear purpose or underlying technology, which can make their long-term viability questionable. Meme coins may not have real-world applications or provide tangible value beyond their entertainment aspect.

3. Limited Market Liquidity

Meme coins, especially those with smaller market cap, may have limited liquidity. This means that buying or selling may not be available on reputable and well-established cryptocurrency exchanges, limiting market access and increasing the difficulty of trading or converting them into other cryptocurrencies or fiat currencies. Limited liquidity and market access can make it harder to execute transactions at desired prices and potentially trap investors in illiquid positions.

How To Safely Investing Meme Coins?

In order to invest safely in Meme coins, it is important to do thorough research and stay up to date with market trends and news. Furthermore, here are tips on investing in meme coins:

1. Do Your Own Research Carefully

Before investing in any meme coin, conduct thorough research to understand its viral background, purpose, and potential risks. Review the coin’s community, and its social media engagement. This research will help you make an informed decision and avoid potential scams from bad meme coins.

2. Be Wary of FOMO

Stay updated on news, market trends, and developments within the meme coin space. However, be cautious of succumbing to FOMO (Fear Of Missing Out) and making impulsive investment decisions based solely on hype or social media trends. Take the time to analyze the information critically.

3. Set A Realistic Expectations

It’s important to approach meme coin investments with realistic expectations. Setting realistic expectations will help you make rational decisions and avoid emotional reactions to price movements. Understand that the market sentiment for meme coins can change rapidly, and prices can fluctuate dramatically. Do not invest more than you can afford to lose, and be mentally prepared for potential losses.

4. Diversify Your Portfolio

Diversification is a key strategy in any investment. Instead of putting all your funds into a single meme coin, consider spreading your investments across multiple established and well-known cryptocurrencies. By this, even if the meme coin performs poorly, gains from other cryptocurrencies can hedge the losses.

5. Use Reputable Exchanges

When buying and selling meme coins, use reputable cryptocurrency exchanges. Stick to well-established platforms that have a strong track record of security, reliability, and liquidity. These exchanges are more likely to list legitimate meme coins and offer safeguards against fraudulent activities.

Closing

Given the constant creation of new meme coins and the desire of traders to replicate the profits seen in DOGE and SHIBA, it is important to do your own research (DYOR) before committing to any meme coins. It is also important to keep in mind that meme coins exhibit significant volatility compared to other digital currencies. Meme coins heavily depend on community-driven efforts and can crash in price unexpectedly, so it is wise to refrain from investing funds that you cannot afford to lose.