Cryptocurrency memes: prospects and risks of investing in meme coins

The success of Dogecoin has spawned a wave of new memecoins – projects based on Internet memes or just for fun. They all try to replicate the success of Dogecoin, and some even succeed.

For example, some investors in the Shiba Inu token have already become paper billionaires – the value of their assets has exceeded a billion dollars. True, they will not be able to withdraw their fortunes into fiat – for this, the meme-coin does not have enough liquidity.

What is the reason for the popularity of such digital assets? Should you invest in meme coins? And what are the chances of getting rich on such investments?

The popular data aggregator CoinMarketCap classifies over 90 projects as memecoins. Most of them are clones of the first Dogecoin meme, or are dedicated to Elon Musk and popular memes. At the same time, many of them were launched just a few months ago – they appeared on the wave of Dogecoin’s success.

Features of meme coins

Let’s take a look at what makes meme coins different from other cryptocurrency projects:

Sheer uselessness. Generally, meme coins have no intrinsic value. None of these projects are technically unique, and most of them are just tokens launched on the basis of other blockchain networks. So, for example, Dogecoin is a fork of Litecoin, and its imitator Shiba Inu is an ERC-20 token based on Ethereum.

Frequent pump and dump schemes.  Due to the low price and low liquidity, the price of memecoins is easy to manipulate. As part of pump and dump schemes, traders massively buy an asset, artificially raising its value (pump). After other crypto market players start investing in it, the participants in the scheme sell their coins at an inflated price (dump). Earlier, we described in detail how pump and dump schemes work on the example of Dogecoin, when in January the price of an asset increased 10 times per day – investors pumped a coin from the WallStreetBets subreddit.

At the same time, the pump of a coin is not always planned in advance. So, in May 2021, the head of Facebook, Mark Zuckerberg, published a photo of his domestic goats with the caption: «My goats: Max and Bitcoin» («My goats: Max and Bitcoin»). As a result, over the next few days, the value of the Aqua Goat.Finance meme token, which was launched a month before publication, increased several times.

Influence on the price by celebrities.  Many memecoins only become popular after a celebrity mentions them. For example, Dogecoin was talked about not only in the crypto world, but also outside it – among popular musicians and even actors.

Elon Musk is perhaps the most famous Dogecoin fan who often tweets about the coin. His ability to influence the crypto market through his social networks has even been called the «Mask effect». However, Musk promotes other projects in his posts. For example, on June 1, he mentioned the popular children’s song «Baby Shark», as a result of which the token of the same name soared in price several times.

At the same time, many memecoins are created in honor of Musk. When he wrote in March that if some scandalous event happened to him, he would like it to be called Elongate ( by analogy with the Watergate scandal that ended with the resignation of US President Richard Nixon ). Within an hour after the publication of this post, the eponymous ElonGate token appeared on the crypto market. This project is still alive and since its launch, it has even donated more than $ 3 million in profits to charity.

Low liquidity. Dogecoin is available on all major crypto exchanges including Binance and Coinbase. However, the rest of the memecoins, as a rule, can only be bought on a few trading platforms. Shiba Inu, for example, is traded on Binance, Crypto.com, KuCoin, and Uniswap decentralized marketplace. SafeMoon is listed on both Binance and Binance Smart Chain powered DEX platforms such as PancakeSwap. Low-cap meme tokens are only available on DEX exchanges like PancakeSwap and can only be purchased using other cryptocurrencies. At the same time, meme assets, as a rule, have a huge emission – for example, the developer Shiba Inu issued a quadrillion (15 zeros) coins.

Consider the largest meme coins by capitalization after Dogecoin:

10 largest meme coins by capitalization according to СoinMarketCap

Shiba Inu -Dogecoin Killer

Shiba Inu (SHIB, Shiba Token) is an ERC-20 token on the Ethereum blockchain, launched in August 2020 by an anonymous developer Ryoshi and his team. The project is positioned as a «Dogecoin killer» and «an experiment in decentralized spontaneous community creation.»

The coin is named after the Shiba Inu dog breed, whose image is the Dogecoin logo. The community of the coin, which calls itself the «Shib Army», has over 120,000 people.

Shiba Inu logo

The Shiba Inu developers set themselves the goal of surpassing Dogecoin in capitalization without raising the SHIB value above $ 0.01 per coin. Now the capitalization of DOGE is $ 30.6 billion, and SHIB is $ 3.5 billion.

From a technical point of view, the Shiba Inu token is not an interesting project. There are no smart contracts or any other useful functionality in its network. At the same time, the options for using SHIB are very limited – these tokens can only be sent to each other.

However, the project team says that it is actively working to create an entire ecosystem, the center of which will be its own decentralized exchange. Its users will be able to earn by providing liquidity. In addition to SHIB, the key coins on the new DEX will be LEASH and BONE tokens. LEASH has already been issued in the amount of 100,000 tokens, and BONE will be issued after the launch of DEX. Also, the Shiba Inu team is planning to launch various NFT tokens.

A total of a quadrillion Shiba Inu tokens have been issued. 50% of this amount is locked in the Uniswap liquidity pool. The remaining 50% were transferred to Ethereum co-founder Vitalik Buterin. Thus, Buterin had the opportunity to single-handedly control the value of SHIB, which would collapse to zero if the co-founder of ETH decided to sell his coins. But instead, Vitalik sent 50 trillion SHIB (at that time they were worth over $ 1 billion) to the fund to fight Covid-19 in India, he burned 410 trillion SHIB, and kept 70 trillion for himself.

SHIB is now one of the fastest growing tokens among the top 100 digital assets in terms of capitalization. Until spring, the token rate was below $ 0.00000001, but in March, against the background of the growth in the value of DOGE, SHIB also began to grow, reaching its maximum of $ 0.000034 on May 11.

This jump in the value of SHIB was facilitated by Elon Musk’s tweet that he was looking for a Shiba Inu puppy, as well as listings of the token on Binance, Crypto.com, OKex and Huobi. The hype around this meme coin was so intense that Binance ran out of ETH deposit addresses for the first time, and Ethereum fees hit a new high of $ 60.

SHIB rate chart since launch according to СoinMarketCap data

Since then, the token has dropped in value due to the general collapse of the crypto market – now it is trading at about $ 0.000008825 per coin. However, at the peak of SHIB’s value, some of its holders became paper millionaires and billionaires.

For example, brothers Tommy and James from New York State, having invested $ 7,900 in SHIB, reached a fortune of $ 9 million. Another anonymous user acquired 15.3 trillion SHIB for $ 3,790. Now they are worth $ 139 million. Another unknown investor owns 70 trillion SHIB. having invested only $ 15,000 in the token – now it is about $ 635 million, and at the peak of the price it was $ 2.4 billion.

At the same time, SHIB whales continue to own a large number of coins, selling their savings only in parts. And the reason, most likely, is not at all that they sincerely believe in the prospects of this project and do not want to become real billionaires. And the fact is that there are not so many opportunities for selling SHIB – there is not enough liquidity on the exchanges to carry out such large transactions.

SafeMoon – Lunar Token

SafeMoon also refers to meme coins. The reason for the name – «Safe Moon» – refers to the famous meme «To The Moon!» («To the moon!»). At the same time, SafeMoon is actively supported by bloggers on TikTok.

SafeMoon was launched in March this year by developer John Caroney. It is an ERC-20 DeFi token on the Binance Smart Chain. During this time, the project attracted hundreds of thousands of fans, more than 2 million users and reached $ 1.7 billion in capitalization ($ 6 billion at the maximum).

SafeMoon developers are trying to improve Dogecoin tokenomics using a deflationary emission model. The total volume of SAFEMOON tokens is 1 quadrillion. But every time a SAFEMOON transaction occurs, 5% of it is burned and another 5% is redistributed among the remaining holders of the asset, depending on the number of tokens they own. At the same time, exchanges should distribute this 5% among users. Therefore, so far the token is traded on only three platforms: PancakeSwap, Bibipom and BitMart.

Such a tokenomics model should reduce SafeMoon’s volatility and encourage holders to keep the token, not just trade it. However, this model is often criticized. For example, the famous investor and blogger Lark Davis compared the project to the Ponzi scheme.

Nonetheless, SafeMoon’s price has shown impressive growth. Starting in early March with less than $ 0.00000001, by April 20, the token peaked at $ 0.00001375. This is an increase of 1,375 times.

The spike in prices was facilitated by the mention of the token by celebrities: for example, rapper Lil Yachty, bloggers Paul Logan and Dave Portnoy. Now the cost of SafeMoon has fallen three times, and the token costs about $ 0.000003001.

SAFEMOON price chart since launch according to СoinMarketCap data

The SafeMoon team is actively developing the project. Now they are preparing to launch their own wallet, with plans to integrate the token into video games, including the legendary Minecraft.

“My announcement about shitcoin. Invest at your own risk. I have no idea how it works, « Dave Portnoy, an investor and founder of Barstool Sports, tweeted in May. Its audience on the social network is 2.5 million people.

Dave Tailor

“I like the word“ Moon ”because that’s where I want to go,” he added in the comments.

MonaCoin – Japanese DOGE

MonaCoin (MONA) is the Japanese counterpart of Dogecoin. The project was launched after Dogecoin in 2013 by an anonymous developer Watanabe. The name is given in honor of the popular Japanese cat meme Mona. Unlike many other memecoins, MONA is an actively developing project that has been working for 8 years.

Technically MONA is a fork of Litecoin. 90% of MONA users are Japanese, so the coin is sold on Japanese exchanges and accepted for payment in several online and offline stores in the country. Moreover, the project was approved by the Japan Financial Services Agency.

The number of coins issued is only 105 million. MONA reached its price peak at $ 16 back in December 2017. The coin has been growing over the past year, reaching a local high of $ 4 in April.

MONA rate chart since launch according to СoinMarketCap data

During the correction, MONA lost all of its annual growth and now costs about $ 1.36 per coin with a capitalization of $ 89.7 million.

Hoge Finance – Dogecoin in the DeFi sector

Hoge Finance (HOGE) is a DeFi clone of Dogecoin on Ethereum that combines Yield Farming with the world of memes. The project develops precisely through the connection with memes. The image of a bulldog was chosen as the logo, the developers themselves create memes with it, promote their own merchandise store, and promote the community of Hoge Army fans.

At the same time, the project team is betting on the use of the token in video games: they plan to create their own browser games and platforms to support indie game developers.

The maximum supply of HOGE is 1 trillion tokens. The token has a deflationary emission mechanism. At the start, for each transaction, 1% of it is burned, and 1% is distributed among the holders. So far, the token is only listed on the Uniswap decentralized exchange and the WhiteBIT centralized exchange.

HOGE started trading in February with $ 0.00000167, now the token costs $ 0.0001446 – an increase of 88 times. Project capitalization – $ 58.9 million

On March 15, the token peaked at $ 0.0008981, and on May 15, it almost repeated the result, reaching the price of $ 0.0008183. The maximum capitalization of the project in May was $ 336 million.

CumRocket – Adult Meme Token

CumRocket (CUMMIES) is an 18+ NFT project on Binance Smart Chain launched in April 2021. Its essence is simple – users buy NFTs with adult content, and can also tip content creators and communicate with each other. The project team plans to add the ability to subscribe to content creators for CumRocket. The developers are confident that the project will change the entire porn industry.

CumRocket also has a deflationary emission model: for each transaction, 2.5% of it is burned, 2.5% is distributed among holders in proportion to the number of their assets.

In a little over two months of trading, the price of the CUMMIES token increased from $ 0.001788 to $ 0.03317 – 18.5 times. Capitalization – $ 44.8 million

At the peaks in early May and June, the price reached $ 0.28, and the capitalization – almost $ 400 million.

Risks of investing in meme coins

We have considered only the largest meme coins by capitalization after Dogecoin. Most of the rest are of the same type – they are clones of DOGE or play on some kind of meme.

Looking at the impressive growth rates of memecoins, one might think that investing in one of them will make investors rich. But it’s important to understand that investing in memecoins is a lottery, not an investment. Nobody knows if a particular project will shoot, and if so, when it will happen and how quickly the pump will end. If Elon Musk wants to pump a coin, his investors will be lucky. But if there is no hype, there will be no fuel for the flight to the Moon.

If you did not go to the minimum, then there is a great chance of losing your investment. Prices for such projects largely depend on the hype in social networks and community support: when they end, the course falls.

If you want to try your luck in this lottery, then you should look for new projects and invest insignificant amounts for you at the very start. If you’re lucky, the win will pay off. And if the project does not work, you will not lose much. But remember that even if you become a paper millionaire, you will hardly be able to withdraw all the money due to limited liquidity.

Despite all the risks of investing in memecoins, we believe that this sector will expand – users love this game. According to Larry Cermak, an analyst with The Block, 5 of the top 10 trading pairs on Uniswap are meme coins. Now the capitalization of memecoins is over $ 35 billion, excluding DOGE – about $ 5 billion. This definitely does not sound like simple jokes.

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