# CRYPTO 101

What Is Memecoin And Why Are They Popular?

Memecoin

KEYTAKEAWAYS

  • Community-Centric Value: Memecoins derive their value from community participation and viral trends.
  • High Volatility: These tokens experience significant price swings, offering high rewards but also high risks.
  • Investment Caution: Evaluate memecoin projects carefully to avoid rug pulls and manage investment risks.

CONTENT

Memecoins are humorous and satirical cryptocurrencies driven by community engagement and internet culture, featuring high volatility and significant investment risks.

 

WHAT IS MEMECOIN?

 

Memecoin, a type of cryptocurrency, originates from internet community culture and is created by tech enthusiasts using blockchain technology for the purpose of achieving humor, satire, or parody. In addition to possessing the humorous and satirical characteristics and community-driven nature of memes, as a coin, it differs from other cryptocurrencies in terms of issuance mechanisms, investment logic, and practical functions.

 

These tokens typically have a high level of community engagement and attract investors through humor or satire. Their value is primarily built on community recognition rather than technical strength. In short, memecoins are cryptocurrency projects built around the concept of jokes. Most popular memecoins are dog-themed, but many are also named after celebrities, politicians, foods, and popular movies, with content created around them. This year, the PEPE coin, themed around Pepe the Frog, quickly captured the market, sparking a wave of non-dog-themed memecoins.

 

The price of memecoins is usually highly volatile. Most memecoins are purely trading tools, unlike Ethereum and other utility tokens associated with specific blockchain functions, memecoins rely on community development and popularity rather than technical breakthroughs like larger tokens such as Bitcoin. However, they can also experience sudden popularity, resulting in significant price surges, sometimes by tens or even hundreds of times. Therefore, investing in memecoins carries a high level of risk and should be approached with caution.

 

  • Memecoin Features

 

  1. Community-Driven: The value of memecoins comes from community participation and support. Community members drive the development of memecoins by engaging, sharing, and creating memes.

 

  1. Low Cost: Compared to other cryptocurrencies, the purchase cost of memecoins is relatively low, making it accessible to more people.

 

  1. Rapid Spread: Due to the characteristics of memecoins and community involvement, they can quickly spread on the internet and attract widespread attention.

 

>>> More to read : Top Memecoins 2024- What You Need to Know


HOW MEMECOIN OPERATE

 

1. Strong Narrative and Hype Potential: For memecoins, narrative is life, and consensus is value. Entertainment and satirical culture have strong dissemination and penetration power on the internet. A photo of a cute dog gave birth to DOGE, the idea of surpassing DOGE created SHIB, and a crowdfunding event to bid for a copy of the US Constitution at Sotheby’s formed PEOPLE. Interesting, trendy, or satirical narratives can all become meme waves followed by the community.

 

2. Large Supply and Low Cost Economic Model: Memecoins often have a huge or unlimited supply. For example, DOGE currently has a supply of over 140 billion, PEPE has 391 trillion, and BabyDoge has 14 quadrillion. Therefore, their prices are very low, with most memecoins priced below $1. Compared to other cryptocurrencies, buying memecoins feels more cost-effective and rewarding psychologically.

 

3. Celebrity Influence and Community Maintenance: The price trends and popularity of memecoins are closely tied to community activity. Community members boost memecoins’ popularity through participation, communication, sharing, and trading. The power of the community, especially the opinions of well-known influencers, cannot be underestimated, as their views can quickly ignite trading enthusiasm. For instance, Elon Musk’s endorsements often cause DOGE’s price to fluctuate significantly with his posts on X (formerly Twitter).

 

Common community interaction tools in the crypto field include X, Reddit, Telegram, Discord, GitHub, Medium, Instagram, and Facebook. X is the main opinion tool, with DOGE and SHIB having over three million followers.

 

4. Empowerment by Major Exchanges: Listing on major exchanges saves new coins from the complex trading process on decentralized exchanges (DEX), increases their visibility, and brings in a large number of users and funds. For example, PEPE was listed on the MEXC Exchange in just six days and on Binance in 22 days, its value multiplying 70 times in half a month, and its market cap exceeding $1 billion in less than a month.

 

5. Wealth Effect and FOMO Sentiment: The price increases by tens or hundreds of times surprise investors, far exceeding the performance of other coins or traditional assets. Under the FOMO (Fear of Missing Out) sentiment, new memecoins constantly emerge, with investors continuously searching for the next coin with the potential to multiply.

 

6. Exploring Practical Value: Initially, most memecoins had no practical use cases or utility value. However, following the narrative effect, memecoins began expanding practical functions or ecosystems to support their market value. For example, DOGE can be used for payments and tipping, and SHIB launched the decentralized exchange ShibaSwap, an NFT art incubator, and the game Shiboshi Game.

 

 

 

WIF


 

PEPE


 

Dogecoin


 

Shiba Inu (SHIB)


 

FLOKI


 

BONK


 

BOOK OF MEME

 

INVESTMENT TIPS FOR MEMECOINS

 

Cryptocurrencies are inherently high-risk, especially memecoins, which rely on community strength and hype.

 

1. Evaluate Projects to Avoid Rug Pulls: Creating new cryptocurrencies is easier with standards like ERC-20 tokens. Even projects with compelling narratives might exit after a price spike, leading to a rug pull. Carefully evaluate new memecoins spreading online or listed only on DEXs, keeping in mind that available information might be scarce.

 

2. Understand Price Volatility: While memecoins can offer high returns, they also come with significant risks. Extreme price volatility is a hallmark of memecoins. Assess the risks carefully when investing in these high-risk assets.


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