Disclaimer: This is not financial advice. This article is based on my own research and analysis, so please consult with your own financial advisor and do your own research before making important financial or investment decisions.
Let’s face facts; most people see the cryptocurrency market as being synonymous with Bitcoin (BTC), which remains the market-leading token and one that continues to blaze a trail for others to follow.
However, while BTC attracts most of the attention in the marketplace, we’ve recently seen a number of new and increasingly innovative coins and assets emerge, including so-called “meme coins.
But what exactly are meme coins, and do they represent a viable investment asset in the digital age? Let’s find out!
What are Meme Coins?
OK, we hear you ask, but what exactly are meme coins? Well, this term refers to cryptocurrencies that have managed to gain popularity within a relatively short period of time, usually as a result of influencers and retail investors promoting them aggressively online.
One of the best examples is provided by Dogecoin, which forked from Litecoin in December 2013 and is based on the popular “Doge” Internet meme and features a Shiba Inu on its logo. This is widely considered to be the prototype meme coin, albeit one that has evolved to boast a total market capitalisation value of $27,631,446,006.75 as of September 20th, 2021.
Shortly after its launch (which was created as little more than a joke and tribute to the aforementioned meme), Tesla CEO Elon Musk began tweeting positively about the asset, causing retail investors to start buying the token in their droves.
Subsequently, a slew of meme coins launched on the market, many of which are spin-offs of the Dogecoin or have at least been inspired by the Shiba Inu.
According to some sources, there are now more than 5,000 meme coins in the marketplace, while this number could well grow further in the near and medium-term.
How Do Meme Coins Differ From Other Tokens?
While there are a number of subtle differences that exist between meme coins and alternative crypto assets such as BTC, one of the most striking is the concept of utility.
More specifically, platforms such as BTC and Ethereum were developed to solve real-world issues and provide accessible exchange and transfer services. Conversely, meme coins offer no practical purpose or core utility, although they are capable of generating short-term gains for savvy and knowledgeable investors.
This is particularly true in the case of prominent and highly influential meme coins like Dogecoin, which earned extended notoriety thanks largely to the promotional efforts of celebrities and entrepreneurs alike.
This has encouraged retail investors to jump on-board early and plow huge sums of money into specific meme coins, causing explosive and exponential growth that creates a further cycle of expenditure.
However, the undeniably shaky fundamentals and lack of utility that underpins meme coins (along with their pronounced volatility) usually mean that their price declines quickly and ultimately settles at a much lower level.
So, Should You Invest in Meme Coins?
There’s no doubt that meme coins offer value to some investors, particularly those who are particularly knowledgeable about this asset class and understand just how lucrative meme coins can be over a short period of time.
However, for general currency investors and those who like to engage in forex trading, meme coins offer a highly volatile and risky proposition that has more in common with gambling than a sensible, level-heading investment.
More specifically, unless you’re able to buy and sell meme coins at precise points in time, you’re more likely to lose your investment and see your capital holdings take a hit as a result.
In general terms, a far better strategy is to focus on crypto investments that are likely to appreciate markedly over time, with third-generation networks like Polkadot and Cardano especially accessible in the current marketplace.
