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). Launched in 2013 as a parody, the coin was inspired by the popular Doge meme of a Japanese Shiba Inu dog named Kabosu.
Meme coins tend to be very volatile. They are mostly community-driven, and can gain popularity overnight due to online community endorsements and FOMO (fear of missing out). But their prices can also drop unexpectedly when traders turn their attention to a new meme coin.
Another typical characteristic of meme coins is their large or unlimited supply. For example, Shiba Inu (SHIB) has a total supply of one quadrillion tokens, while DOGE has no cap. Since meme tokens do not have a coin burning mechanism, their large supply explains their relatively low prices.
Why are meme coins so popular?
During the COVID-19 pandemic, the cryptocurrency market has seen a surge as retail investors look for ways to hedge against inflation. In light of this demand, meme coins have boomed, increasing their market value and diversification. This phenomenon gained popularity after the “meme stock” saga involving GameStop (GME) and AMC Entertainment (AMC), where the Reddit community drove the prices of these assets up significantly.
This inspired people to joke about raising the price of Dogecoin (DOGE) in order to create a cryptocurrency equivalent to GameStop (GME) stock. This, coupled with the endorsement of prominent figures like Tesla CEO Elon Musk, led to a huge surge in the price of DOGE$.
The excitement around meme coins has increased as traders have begun exploring other meme coins like Shiba Inu (SHIB), hoping to replicate the success of DOGE. Retail investors have been drawn to meme coins because they are typically affordable, costing just a few cents or less than a penny. This allows traders to hold thousands or even millions of tokens, unlike holding a few major cryptocurrencies like ETH or BTC.
The meme coin craze is also driven by societal and market trends. Meme coins are inspired by popular memes online and are meant to entertain; they are often “well-known jokes” among the community in which they appear. Therefore, buying meme coins can be seen as a way to show support for these communities.
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