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main ideas 

  • Tokens are digital currencies inspired by memes and are usually more volatile than major cryptocurrencies, such as Bitcoin (BTC) and Ethereum (ETH). 

  • Meme coins are gaining popularity due to their low prices, community-based nature, active marketing through social media, and endorsements from prominent figures.

  • Memes carry significant risks due to their often inflationary token economies, high levels of volatility, and increased likelihood of being subject to rollbacks.

the introduction

Memes are a unique part of the cryptocurrency market, known for their fast and unpredictable price movements. They are often inspired by Internet memes and jokes, and gain popularity through social media and online communities. In this article, we will explore what meme currencies are, why they have gained such popularity, and what the potential risks associated with them are.

What are meme coins?

Meme coins are digital currencies inspired by memes or jokes on the internet and social media. The first meme coin to appear was Dogecoin (DOGE). This coin, which was launched in 2013 as a parody, is inspired by the famous Doge meme of a Japanese Shiba Inu dog called “Kapusu”.

MIM currencies tend to be very volatile. They are mostly community based, and can gain popularity overnight due to online community endorsements and fear of missing out. But their prices may also fall unexpectedly when traders turn their attention to a new meme coin.

Another typical characteristic of meme coins is their huge or unlimited supply. For example, Shiba Inu (SHIB) has a total stock of quadrillion tokens, while DOGE has no cap. Since meme tokens have no mechanism to burn currency, their huge supply explains their relatively low prices.

During the COVID-19 pandemic, the cryptocurrency market has seen growth as retail investors look for ways to hedge against inflation. In light of this demand, meme currencies flourished, and their market value and diversity increased. The phenomenon gained popularity after the “meme stock” saga involving GameStop (GME) and AMC Entertainment (AMC), where the Reddit community dramatically raised the prices of these assets. 

This inspired people to joke about raising the price of Dogecoin (DOGE) in order to create a digital currency equivalent to GameStop stock (GME). This trend, in addition to the support of prominent figures such as Elon Musk, CEO of Tesla, led to a significant rise in the price of DOGE. 

Enthusiasm for meme coins increased when traders began exploring other meme coins such as Shiba Inu (SHIB), hoping to replicate the success of DOGE. Retail investors were drawn to meme coins because they are usually affordable, typically costing a few cents or less. From one cent, this allows traders to hold thousands or even millions of tokens, which is different from holding a few major cryptocurrencies like ETH or BTC. 

The meme craze is also driven by societal and market trends. Meme coins are inspired by popular memes online and are intended for entertainment; They often represent “known jokes” among members of the community in which they appear. Therefore, purchasing meme coins can be seen as a way to show support for these communities.

The institutionalization of meme coins has significantly boosted their popularity in 2024. A key development in this regard is VanEck's launch of a meme index that tracks the six largest meme coins according to their market cap (DOGE, SHIB, PEPE, WIF, FLOKI, and BONK as of May 2024). 

The VanEck Meme Index has increased the popularity of memes, is a benchmark in the asset management industry, and encourages funds to try to outperform it. Additionally, adding meme tokens to channels like Bloomberg has helped spread information about meme tokens and attract more trading activity.

What do memes mean for the cryptocurrency community?

Many meme coins, such as Dogecoin (DOGE), were launched with an equitable distribution model, meaning they were made available to the public without initial mining or large early allocations to project founders. This aligns with the views of many cryptocurrency enthusiasts who value open access and community-driven growth. The decentralized nature of meme launches fosters a sense of ownership and participation among community members.

However, not all projects follow the same principles. Some memes are seed mined and a significant amount of tokens are allocated to creators or early investors before public distribution. This often leads to concerns about transparency and fairness; This may allow a small number of individuals or groups to control a large portion of the currency stock. For example, coins like the Shiba Inu have seen mixed reactions due to the customization strategies of their creators.

Decentralized meme currencies are typically viewed by the community in a more positive light because they embody the principles of decentralization and community participation that are fundamental to the cryptocurrency movement. On the other hand, centralized meme currencies often face criticism due to potential risks of manipulation and unfair practices.

Potential risks of investing in meme coins

Token economics

First, the token economics of meme coins may be something to worry about. For example, Bitcoin has its own blockchain, a well-crafted technical manual, a stable ecosystem, and its deflationary nature. 

In contrast, most memes are inflationary with no maximum inventory. Its system, use cases, and basics are usually determined by the community's collective jokes.

Volatility 

Memes are highly community-based, and are generally more volatile compared to cryptocurrencies with higher market caps. Its prices can rise randomly due to celebrity promotion or out of fear of missing out, or fall unexpectedly when the community decides to move to a new meme currency.

Rug pulls

Rug rolls are a major risk in the meme market as developers abandon the project and disappear after grabbing investors' money. Unfortunately, this type of scam is very common and has occurred frequently over the years.

Examples of rug pulls in the field of memes

Here are some examples of rug pulls in the meme space.

  • SQUID: A meme coin released in 2021, inspired by the popular Netflix series of the same name, and gained sudden popularity due to the popularity of the series. But the development team of this currency withdrew the project, causing users to lose their money.

  • BALD: In July 2023, the BALD meme experienced a rug pull when the developer withdrew all liquidity from the coin on BASE, Coinbase's second layer network, causing the value of the token to drop to zero​.

  • MetaSwap: In early 2024, the MetaSwap token experienced a rug pull that resulted in investors suffering huge losses. Developers suddenly withdrew liquidity, leaving investors with worthless tokens.

  • URF: In March 2024, the team behind the URF meme disappeared after an initial sale of $450,000, leaving investors with worthless tokens. The team, promoted by boxer and social media influencer Bryce Hall, disappeared 24 hours after the coin was launched.

How can you reduce risks when investing in meme coins?

Investing in meme coins can involve speculation and risk due to the volatility of these currencies and their dependence on society. But there are strategies you can follow to reduce these risks:

  1. Do your own research: Before investing in meme coins, it is important to research the project well. Whenever possible, check the project team and its goals, technical manual, roadmap, and direction of the community as a whole.

  2. Understand token economics: Pay close attention to the dynamics of the meme coin supply. Currencies with unlimited or very high stocks can face inflationary pressures, which may cause their value to decline. Understanding token distribution and any mechanisms such as burning or staking can provide insights into the long-term viability of the coin.

  3. Distribute the assets in your investment portfolio: Avoid putting all your money in one meme. Asset allocation can help spread risk across several different assets. Therefore, you should consider balancing your portfolio with the most popular cryptocurrencies, such as Bitcoin (BTC), Ethereum (ETH), SOL, and BNB.

  4. Stay up to date: Memes are heavily influenced by social media and news trends. So, stay updated with the latest developments and updates related to your investments. You can use tools like Google Alerts, join relevant groups on social media, and follow cryptocurrency influencers.

  5. Set stop-loss orders: Try using stop-loss orders to automatically sell memes if the price drops below a certain level. These orders can protect you from huge losses.

  6. Avoid rash decisions: Only invest in what you can afford to lose, and avoid rash decisions driven by emotions such as fear of missing out. The hype surrounding meme coins can lead to impulsive purchasing decisions. But take your time and evaluate whether the investment makes sense based on your research, and don't get carried away with over-enthusiasm.

How to avoid rug pulls in the meme space?

  1. Check Liquidity: A good liquidity pool is essential for the stability of any cryptocurrency. So, make sure that the meme coin you are interested in has reserved liquidity, which means developers cannot easily withdraw funds. Services such as Unicrypt can be used to check the status of liquidity holds.

  2. Check the smart contract: If you have the necessary technical expertise, review the project's smart contract. Look for red flags, such as functionality that allows developers to mint unlimited tokens or transfer large amounts of funds. You can also hire external audits from reputable security companies, such as CertiK or Hacken.

  3. Check the team: An unidentified team can be a red flag. Although anonymity is common in the world of digital currencies, scammers can exploit this to disappear without a trace. So, look for projects whose staff is transparent, credible, and has a verifiable track record in the field.

  4. Assess community involvement: A strong and active community can be a sign of a project's legitimacy. Interact with the community on platforms like Discord, Telegram, or Twitter to gauge their trends and activity. Be wary of projects that have fake followers or receive a lot of unusual promotion.

  5. Check the project roadmap: Real projects usually have a detailed roadmap outlining their development goals and timelines. You should compare the roadmap with the actual progress of the project to see whether it delivers on its promises. Projects that make unrealistic promises or frequently delay milestones may be called into question.

  6. Look for red flags: Beware of projects that rely heavily on hype and celebrity endorsements without providing substantive information about the technology or its use case. High pressure tactics, such as limited-time offers or guaranteed returns, are usually signs of fraud.

By following these guidelines and maintaining a healthy level of skepticism, you can better navigate the meme scene and avoid potential scams like rug sweeps. Always remember that investing in cryptocurrencies, especially memes, involves significant risks, and it is essential to only invest money that you can afford to lose.

In June 2024, the total market value of memes was approximately $63 billion. The six most valuable meme coins are DOGE, SHIB, PEPE, WIF, BONK, and FLOKI – according to CoinMarketCap data.

Dogecoin (DOGE)

Dogecoin (DOGE) was created in 2013 by software engineers Billy Marcus and Jackson Palmer. It is inspired by a Shiba Inu dog meme and designed to become a comedic digital currency in order to attract public attention. Since DOGE is forked from Litecoin (LTC), it adopts the same Proof of Work (PoW) mechanism, and its supply has no cap. 

For a more comprehensive overview of DOGE, see the What is Dogecoin?

Shiba Inu (SHIB)

Shiba Inu (SHIB) competes with DOGE, and is often described as “the coin that swept Dogecoin.” The SHIB coin also bears the name of a Japanese dog breed. It was created by an anonymous developer called Ryoshi in August 2020. The main difference between DOGE and SHIB is that SHIB has a limited supply of quadrillion tokens of which 50% has been burned and donated to charities. The SHIB ecosystem also includes a decentralized trading platform, an NFT tech incubator, NFT tokens, and an NFT game.

To learn more about SHIB and its ecosystem, see What is Shiba Inu (SHIB)?

Pepper (PEPPER)

Pepe (PEPE) is a meme coin inspired by the popular internet meme character, Pepe the Frog. After its release in April 2023, it quickly gained popularity due to its appeal to internet culture fans in terms of humor and nostalgia. The available PEPE market stock is 420 trillion tokens.

Dogwifhat (WIF)

Dogwifhat (WIF) is a meme coin that has received a lot of attention since its launch in late 2023. Unlike some utility-focused meme coins, Dogwifhat remains a meme-centric token only.

FLOKI (FLOKI)

FLOKI (FLOKI) is a meme coin inspired by Elon Musk's dog, a Shiba Inu dog. The vision adopted when launching this currency was to integrate memes with uses in the physical world, and FLOKI has evolved into a project with an integrated system that includes NFT markets, NFT token pools, and storage.

Bonk (BONK)

Bonk (BONK) is a dog-themed meme coin on the Solana blockchain. BONK, which launched in 2022, attracted attention after free distribution of 50% of its total stock to the Solana community.

Milady (LADYS) meme coin

Milday (LADYS) was launched in May 2023. Inspired by the Milady family of non-tradable tokens, LADYS aims to combine memes with the growing popularity of non-tradable tokens. The total stock of LADYS is 888 trillion tokens.

How to buy meme coins

You can buy the most popular memes, such as DOGE, SHIB, PEPE, and WIF, on cryptocurrency exchanges like Binance. For less popular meme currencies, you can turn to decentralized trading platforms. Let's take DOGE as an example.

1. Log in to your Binance account. After that, go to [Trading] on the top bar to choose the spot market page.

2. On the right side of the screen, type “DOGE” in the search bar, and you will see a list of available trading pairs. In this example, we will use the DOGE/FDUSD trading pair. Click on “DOGE/FDUSD” to open the trading page for this pair.

3. Scroll down to the [Instant] box and select the order type you prefer. We will use market order in this example. Enter the amount of DOGE coins you want to buy and click [Buy DOGE] to confirm the order. When the order is executed, you will see the DOGE coins you purchased in your Binance spot wallet.

Concluding thoughts

With new memes entering the market every day and traders looking forward to the profits posted by DOGE and SHIB, it is essential to do your own research before choosing any meme to trade. It must be taken into account that memes are highly volatile compared to other digital currencies. Trading or investing in digital currencies involves a lot of risks. Memes are highly community dependent and their value may decline unexpectedly, so you should never invest more than you can afford to lose.

  • What is Dogecoin?

  • What is a Shiba Inu (SHIB)?

  • What is coin burning?

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