Memecoins: more than just a trend, they’re a phenomenon

The memecoin phenomenon.

Memecoins have long attracted users with their simplicity in technical and financial aspects. Without carrying fundamental components, they can telegraph public opinion in the form of a meme.

But often they have only a funny picture, name and that's it. Nevertheless, memecoins demonstrated their market opportunities and became a serious investment tool.

The main factor in its promotion is its community and famous personalities. Thanks to such support, the project attracts a large audience, increasing the capitalisation of the entire crypto market and of the token itself.

This spring, two top meme coins Floki Inu and Pepe made several X's, breaking historical highs. Floki Inu soared from $0.00003502 to $0.000303 (about 760%). But after a few days, the price fell to $0.00016.

The price of Pepe on 1st January 2024, was at $0.000001313. At the end of February, it began to move up and by mid-March reached $0.00001062 (708% growth).

Such a positive price movement attracted major market players to this segment. The whales concentrated in their hands a substantial share of the turnover of the Dogecoin, Shiba Inu, Floki, Baby Doge Coin, and more.

Investing whales in memecoins is becoming an increasingly prominent phenomenon in the market.

This raises both optimism and concerns among participants since the concentration of a large amount of working capital in the hands of a relatively small number of participants can increase the risk of manipulation and influence on asset prices.

At the same time, the active participation of institutional investors in this market segment can give it additional legitimacy and stimulate the growth of interest in memecoins as an investment tool.

The history of memecoins

The most famous example of memecoins is the first meme cryptocurrency Dogecoin, inspired by Elon Musk's favourite meme with a Shiba Inu dog and created as a parody of Bitcoin.

The project was launched in December 2013, taking technical inspiration from Litecoin. The coin experienced significant growth during its 2017 bull run, driven by the ICO craze, but it faced a downturn in 2018.

Despite these hesitations and the humorous image, Dogecoin maintains a devoted community significantly influenced by Elon Musk. The Tesla CEO has backed Dogecoin as an expected payment method because of its low transaction costs. With each mention of the coin in his account the price has risen.

The Dogecoin case inspired other creators to develop cryptocurrencies with a similar "dog" brand like Shiba Inu. Released in 2020, the "Dogecoin killer" has risen quickly to become the second most popular largest meme coin, with a market capitalisation of about $6.5 billion, making it the 14th largest cryptocurrency overall.

In the wave of the bull run in 2021, named memecoins kept up with traditional cryptocurrencies and also showed an increase in its price and capitalisation. This caused a lot of new meme projects. Thanks to the communities’ promotion on social networks, tokens quickly gained popularity.

The meme coin price escalation mode, based on community and celebrity support, continues to move assets to the top. Dogecoin, for example, gained media attention as Elon Musk briefly replaced the X logo with the Dogecoin mascot. Guess what happened to the coin next?

KITTY meme coin, named after streamer Keith Gill known as Roaring Kitty, soared in value more than 100 times after Gill made his first social media appearance in three years. Gill's X post was the first post on his account since June 2021 and garnered more than eight million views in a few hours.

What sets the memecoins apart?

So what distinguishes meme cryptocurrencies from the rest, let's summarise and highlight the main features:

1. Community and culture movement: memecoins are often inspired by internet memes and are known for their enthusiastic and active online communities. These communities play a crucial role in promoting and introducing coins, even increasing their market value.

2. High volatility and speculation. Due to their nature, community driven memecoins can experience extreme volatility. Their prices can skyrocket thanks to celebrity endorsements or thanks to viral internet campaigns, but they can also collapse just as quickly. That makes them a high risk investment.

3. Limited utility outside of trade: Unlike more established cryptocurrencies, many memecoins have no intrinsic utility or wider application beyond use as a vehicle for speculative trading.

4. Influence of prominent figures: The value and popularity of meme coins can be strongly influenced by public figures and celebrities. For example, tokens such as Dogelon Mars and Floki Inu have benefited from associations with Elon Musk.

Risk and rewards of investing in memecoins

Investing in meme coins can be performing but also extremely risky. The success of such investments largely depends on the time of entry and exit from the market:

●      Short-term speculation: Some traders try to capitalise on the volatility of meme coins by buying them at a low price and selling them when values spike thanks to the hype.

●      Long-term investments: Long-term storage carries great risks, as many of such coins may lose their value or become completely useless over time.

Meme coins are highly volatile and sometimes rise sharply in price, however, it's often not for long. Traditionally, assets feel good in a bull market, when small investors are positively disposed in principle towards any crypto assets.

And given that the initial capitalisation of memecoins, especially new coins, is relatively small, it can be "pumped" endlessly.

Notable memecoins in the market

FLOKI (Floki Inu)

The token joins the memecoin line, directly referencing the broader Dogecoin phenomenon and its most famous defender, Elon Musk. This coin was named after his dog, Floki. It quickly became popular with investors looking for the next big memecoin after Dogecoin's success.

Emerging from memes, Floki has become a comprehensive Web3 enterprise, expanding its reach to decentralised finance (DeFi), non-interchangeable tokens (NFT), and most recently creating its metaverse Valhalla.

This breadth of application earned him the nickname "People's Cryptocurrency" among his adherents.

Bonk (BONK)

Bonk is the first "dog" memecoin created on Solana. Exactly half of the initial emission in the form of an airdrop was transferred to the community of this ecosystem.

This was done to support the Solana ecosystem after the sharp collapse of SOL. Indeed, the emergence of BONK provoked activity in the ecosystem: the release of new meme tokens, shares with burning coins, the creation of NFT collections, and so on.

Over the past six months, the price of this cryptocurrency has grown by thousands of percent, largely due to the integration of the token into the Saga smartphone from the Solana developers, whose owners could qualify for free distribution of BONK tokens.

dogwifhat (WIF)

A Shiba Inu dog again. The creators never claimed serious status as a coin and even insisted that the name of this cryptocurrency should always be written with a small letter. WIF became one of the best altcoins in terms of growth in March, having risen in price by almost 400%.

The growth was largely facilitated by the addition of a token to the leading American brokerage platform Robinhood. The project capitalisation is $2.7 billion (as of March 2024);

At the end of February, the analytical platform Lokonchain reported a trader who earned almost $1 million on WIF. Back in November 2023, he bought 2.58 million WIF for $310 in the Solana cryptocurrency.

On 27th February, the WIF price rose to $0.57, and the value of the trader's coins reached about $1.4 million. Thus, its return on investment in the WIF token was 4500%.

PEPE

Not dogs united:) This memecoin is based on the popular internet meme "Pepe the Frog." Like most memecoins, PEPE is designed primarily to entertain and express cultural trends.

Today at the largest crypto exchange, Pepe is wearing a red cap, guess who this is a reference to? Hint: starts at T, and ends at the ramp. Therefore, the price of Pepe could potentially fly up on the news, if suddenly Trump becomes President of the United States.

Conclusion

To sum up, we can say that memecoins are an integral part of the crypto market, a "positive" phenomenon. Yes, there is no serious concept or technology, but this risky asset undoubtedly contributes to the adoption of cryptocurrencies.