What Are Meme Coins and Tokens?

What Are Meme Coins and Tokens?

Robert McDougall

April 3, 2024

Cryptocurrency

Just as the name suggests, meme coins derive their inspiration from online memes and social media humour.

The pioneer of meme coins, Dogecoin (DOGE), took its cue from the popular Doge meme featuring a Shibu Inu dog. Since its introduction in 2013, this very first meme coin has swiftly risen in popularity, securing a spot among the top ten cryptocurrencies available today.

Following the groundbreaking success of DOGE, countless new meme currencies flooded the cryptocurrency market, some gaining substantial traction.

While the appeal of meme coin investment continues to date, it's no secret that these tokens come with significant volatility. Therefore, we suggest you understand their characteristics, risks, and investment considerations before diving into the meme coin market. 

This article will serve as your guide to exploring the world of meme coins, helping you navigate the online trends to make informed decisions.

The Origin of Meme Coins 

Now that we’ve answered, what are meme coins, let’s explore their origins in more detail. What made a cryptocurrency that lacks utility become a popular investment trend? 

You see, today's cryptocurrency market boasts hundreds of meme coins, with new tokens launching regularly. However, the beginning of the meme coin trend lies with DOGE, the very first meme coin crafted by software programmers Billy Markus and Jackson Palmer. 

This token initiated the meme craze, adopting the well-known Shiba Inu dog meme as its brand.

While Dogecoin's creators stated that the token was designed to mock Bitcoin (BTC), DOGE quickly shaped its own identity. Beyond kickstarting the meme coin trend, DOGE fostered a dedicated community that evolved into something similar to a cult following.

The surge in Dogecoin's value occurred prominently when celebrities began endorsing the cryptocurrency. Elon Musk, Tesla's CEO and the most vocal supporter, played a key role here. Other notable endorsements came from former professional bodybuilder Kai Greene and American rapper Snoop Dogg, among many others.

So, it’s safe to say that Musk's consistent backing substantially boosted Dogecoin's market capitalisation over time. An example of this influence that we can consider here is the rapid 4% increase in DOGE's value only a few minutes after one of Musk's tweets about the token.

Shiba Inu, the second-largest meme coin today, also experienced a brief surge in value following Musk's tweet. However, as is often the case, the impact was short-lived. The temporary nature of these endorsements highlights the volatility in the value of meme coins determined by the ever-changing market sentiment.

Characteristics of Meme Coins and Tokens 

Curious about what sets meme coins apart from traditional cryptocurrencies like Bitcoin? While both are part of the crypto world, meme coins boast distinctive characteristics. Below, we will delve into some key aspects that define meme coins and tokens.

  • Lack of Intrinsic Value and Utility: Meme coins lack intrinsic value and often serve no practical purpose. Their foundation lies in 'communalism,' generating considerable attention and initial excitement. However, this communal focus alone isn't enough to sustain a token's long-term value.
  • Tied to Social Media Trends: The future of meme coins heavily relies on social media trends. Creators actively promote these tokens on platforms to spark early enthusiasm and drive up prices. The success of the meme tokens revolves around building a robust community, pushing the currency's value upward. Failure to do so, however, often results in the fall of these tokens.
  • High Circulation and No Burning Mechanism: Unlike Bitcoin's limited supply, most meme coins circulate in the billions. Additionally, these tokens lack a mechanism to 'burn' or permanently remove them from circulation. Consequently, their numbers continue to rise, contributing to an exceptionally low per-unit value compared to other cryptocurrencies.

Popular Meme Coins and Their Impact

Despite the endless meme coins available today, Dogecoin (DOGE) and Shiba Inu (SHIB) dominate the market capitalisation, with Pepe (PEPE) emerging as the third most popular meme coin today

But how are each of these top meme tokens different from one another? Let’s go ahead and explore that below.

Dogecoin (DOGE)

Sitting at the top, Dogecoin (DOGE) traces its roots back to 2013, drawing inspiration from the Shiba Inu dog meme. Originally created as a joke coin, DOGE now boasts a market cap exceeding $26 billion

As a Litecoin (LTC) fork, it operates on the same Proof of Work (POW) algorithm. The appeal of DOGE lies in its limitless supply, allowing enthusiasts to acquire tokens without constraints.

Shiba Inu (SHIB)

A popular rival to DOGE, Shiba Inu (SHIB) has earned the label "Dogecoin killer." Crafted by the anonymous developer Ryoshi in August 2020, SHIB's market cap currently surpasses $24 billion

What sets it apart is the finite quantity of 1 quadrillion tokens, with around 50% intentionally burned, a move attributed to Vitalik Buterin. But that’s not all! SHIB's ecosystem further extends beyond the token, consisting of a decentralised exchange, NFTs, an NFT game, and an NFT art incubator.

Pepe (PEPE)

Seizing the third meme coin spot on Coinmarketcap, Pepe (PEPE) boasts a market cap exceeding $3 billion since its debut in April 2023. Inspired by the popular frog memes of the early 2000s and developed by Matt Furie, PEPE aspires to be the best meme-based cryptocurrency. 

Setting itself apart from other meme tokens, Pepe encourages the development of a crypto community with a no-tax policy. It further employs a burning mechanism for sustainability. The meme token also adopts a redistributive structure, ensuring a close and strong connection with its long-term stakeholders.

Risks and Challenges

Beneath the fun appearance of meme coins lie several risks that require careful consideration before investing. Here's a rundown of some common risks linked to meme coin investments:

Volatility and Speculative Nature

The most significant risk associated with meme coins is their high volatility. 

Swings in market mood, appreciation, and social media trends can trigger substantial price fluctuations in meme tokens like DOGE and Shiba Inu over short periods. This speculative nature attracts investors seeking quick returns but exposes them to significant potential losses.

Lack of Regulation

The meme coins industry predominantly operates without strict regulations. While this autonomy and decentralisation are appealing, they open the door to potential fraudulent schemes, increasing investors' risk of substantial losses.

Potential for Scams and Rug Pulls

A persistent threat is the possibility of "rug pulls," where meme coin creators amass a significant number of coins, attracting investors to buy in before directing to a mass sell-off. This manipulative tactic leads to a market drop while the creators run away with unfairly earned money.

As an example, even seasoned investors like Mark Cuban fell victim to the rug pull of the TITAN coin in June 2021, portraying the widespread nature of such scams.

Lack of Fundamental Value

Unlike established cryptocurrencies such as BTC and ETH, most meme coins lack clear inherent value. Their prices often drift from conventional financial metrics, relying significantly on the interest and sentiment of the community. 

This heavy dependence on community dynamics makes it challenging to determine the true value of meme coins, contributing to their heightened volatility compared to other cryptocurrencies.

Investing in Meme Coins: What You Need to Know

Given the substantial risks tied to meme coin investments, it's wise to consider key investment tips before proceeding further. Here are some valuable insights:

Always Conduct Thorough Research

Before opting for a meme coin investment, delving into its background, team, and community is crucial. 

Make sure to examine the token's use case, technology, and long-term growth potential for a comprehensive evaluation. Understanding meme tokens' distribution, supply, and inflation methods is also crucial for determining whether a meme coin has long-term growth potential or not.

Be Wary of Hype

Meme coins often ride on waves of viral phenomena or celebrity endorsements. Therefore, we suggest that you avoid falling for FOMO (Fear of Missing Out) in your financial decisions. Keep in mind that the buzz surrounding meme coins can vanish as quickly as it emerges.

Invest with Reputable Exchanges

Whether you're considering how to buy DOGE, how to buy PEPE, or navigating the options of where to buy SHIB, utilising a crypto exchange is inevitable. 

Hence, we suggest that you opt for a well-established platform with a proven track record and robust security measures before moving ahead. CoinSpot is the #1 spot to buy meme coins in Australia. Many investors like to buy DOGE, SHIB and PEPE as they are the most popular meme coins, but CoinSpot also offers a way to invest in multiple meme coins at once, with a single click. They offer a meme coin bundle, which includes 9 meme coins: DOGE, SHIB, PEPE, FLOKI, MEME, BONK, MYRO, WIF & COQ. Simply enter the amount you wish to purchase, and CoinSpot will automatically invest in all 9 meme coins at once.

Avoid Larger Investments 

Given the extreme speculative nature of meme coins, we suggest avoiding investing more than you can afford to lose. Allocate only a small percentage of your wealth to meme coin investments. 

Other than that, we recommend diversifying your portfolio by investing in more stable cryptocurrencies. This way, you can ensure a consistent flow of returns even in the face of potential market declines of meme coins.

Conclusion 

Meme coins have truly created a unique space in the crypto industry for themselves. They bring a blend of exciting opportunities as well as considerable risks, all while promoting vibrant online communities. These special digital assets, emerging from memes and driven by passionate online communities, ideally grab the attention of both traders and investors.

If you are also exploring meme coin investments, we suggest you conduct your due diligence. This ensures that your investment aligns with your preferences, allowing you to tap into potential benefits while effectively managing and navigating the associated risks of holding meme coins.


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What Are Meme Coins and Tokens?

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