In 2021, the market for so-called “Meme coins” experienced exponential growth, particularly dog-themed “meme” coins. Since November 2021, two of the most popular breeds of “meme coins” have been DOGE and its competitor Shiba Inu (SHIB).
Meme coins are essentially cryptocurrencies inspired by memes. Compared to major cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH), they are typically highly volatile. This is likely because meme coins are tokens that are heavily driven by their community and, in the vast majority of cases, have no serious utility. Their prices are usually influenced by social media and the emotions of the online community. This often brings a great deal of excitement, as well as FOMO and enormous financial risks. While it is true that some people have become wealthy almost overnight through meme coins, many have lost their funds due to market volatility.
FOMO – Fear of missing out
What are meme coins
Meme coins are all cryptocurrencies inspired by memes or jokes on the internet and social media. The first meme coin ever created was Dogecoin (DOGE). Dogecoin, which was introduced in 2013 as a parody, inspired the still-popular meme coin featuring the Japanese dog Shiba Inu.
Meme coins are typically highly volatile. They are mainly driven by their community through social media, Discord/Telegram groups, and can gain enormous popularity overnight due to online community support and the FOMO (Fear of missing out) feeling. Nevertheless, their price can also drop unexpectedly when crypto traders shift their attention and funds to another crypto project.
Another characteristic of meme coins is that they often have a massive or even unlimited supply of their tokens. For example, Shiba Inu (SHIB) has a total supply of as many as 1 quadrillion tokens, while Dogecoin has no maximum supply, with more than 100 billion tokens already in circulation. Since meme tokens generally have no coin-burning mechanism, the enormous supply explains their exceptionally low prices, as you can purchase huge quantities of meme coins with just 1 euro.
Why are meme coins so popular
Although it is difficult to pinpoint specific reasons, some say that during the COVID-19 pandemic the crypto market grew as retail investors sought to hedge against inflation. Amid the excitement, meme coins also flourished, growing both in market capitalization and diversity.
It all started after the meme stock saga of GameStop (GME) and AMC Entertainment (AMC) at the end of 2020, where the Reddit community drove the prices of these stocks up by as much as 100 times in just a few months. In January 2021, a Reddit group joked about pumping the price of DOGE to create a crypto equivalent of GME. The trend caught on and, combined with the influence of tweets from Tesla CEO Elon Musk, the price of DOGE surged dramatically. Dogecoin reached a new all-time high of $0.73, with an increase of more than 2,000% in five days, which made a huge number of people who had invested their funds in the project wealthy overnight.
However, in May 2021, Elon Musk publicly joked about DOGE on television, and many say this was the cause of the subsequent price drop. Several traders then turned to other meme coins on the market, such as the “Dogecoin killer” SHIB. At the same time, retail investors, driven by FOMO, poured money into meme coins in hopes of becoming millionaires overnight, triggering yet another surge in meme coins.
Another reason why retail investors find meme coins attractive is that they typically cost only a few cents or even a fraction of a cent. A technically low price does not mean much, because these coins have enormous supplies. Nevertheless, owning millions of certain meme coins feels different from owning a fraction of ETH or BTC. Traders can get thousands or even millions of DOGE, SHIB, or Akita Inu (AKITA) tokens for just a few euros.
Beyond potential profits, meme coins are also driven by the emotions of their community. As already mentioned, meme coins are modeled after popular internet memes, which are meant to be fun and are sometimes considered an inside joke of the community. Buying meme coins is in some way an expression of support for their community. Following the GME stock saga, meme coin traders inspired by the Reddit group SatoshiStreetBets began a battle to bet against major cryptocurrencies. As a result, the crypto market in 2021 was flooded with community-driven meme coins.
Potential risks of investing in meme coins
Meme coins may have experienced exponential growth in 2021, but just like all cryptocurrencies, trading and investing in meme coins carries high financial risk.
First, the tokenomics of meme coins can be extremely concerning. Take Bitcoin as an example. It has its own blockchain, a well-written whitepaper, an established ecosystem, and a deflationary nature. In recent years, we have also seen more institutional adoption of Bitcoin. Compared to BTC, most meme coins are inflationary, with no maximum supply. Their ecosystem, use cases, and fundamentals are often defined by collective community jokes. Only a few meme coins have been built on the technology of major cryptocurrencies. For example, DOGE’s technology is derived from Litecoin (LTC), while SHIB was built on the Ethereum (ETH) blockchain.
Another potential risk is that meme coins are heavily community-driven and more speculative than cryptocurrencies with higher market capitalizations. This volatility constantly leads to unexpected pump and dumps. The lifecycle of meme coins is generally short-lived. Their prices can skyrocket thousands of times due to people with large amounts of money, FOMO, or they can unexpectedly crash when the community decides to move on to the next meme coin.
As the meme coin market continues to grow, you should be aware that there may be projects exploiting the hype to scam traders. For example, Squid Game (SQUID), a meme coin inspired by the popular Netflix series of the same name, surged by more than 86,000 percent in one week. However, the development team of this cryptocurrency executed a rug pull, causing the price to drop by 99%. Even worse, holders were not allowed to sell their SQUID tokens. Therefore, you should always be cautious and do your own research before trading or investing in meme coins.
Rug pull – when the development team of a particular crypto project suddenly abandons the project, sells it, or removes all of its liquidity.
Overview of Popular Meme Coins
The leading meme coin market with the highest market capitalization is dominated by Dogecoin (DOGE) and Shiba Inu (SHIB). Following the success of DOGE and SHIB, a large number of dog-themed meme coins entered the market in the second half of 2021 and gained traction.
- Dogecoin (DOGE)
Dogecoin (DOGE) is an open-source cryptocurrency derived from a fork of the Litecoin codebase. As the name suggests, it is largely based on the Doge meme that took the internet by storm in 2013. The original image features a Shiba Inu dog. Billy Markus, a programmer from Oregon, initially came up with the idea of a kind of cryptocurrency “joke.” He argued that a more lighthearted coin would have a better chance of attracting mainstream attention than Bitcoin. With some encouragement, Palmer went ahead and created dogecoin.com. When Markus stumbled upon the website shortly after its launch, he reached out to Palmer to bring it to life and began working on what is now known as Dogecoin. After its launch, the cryptocurrency quickly spread across social media. Within a few months, it reached a multi-million dollar market capitalization.
- Shiba Inu (SHIB)
Shiba Inu (SHIB) is Dogecoin’s biggest competitor in the world of meme coins and is often referred to as the “Dogecoin killer.” SHIB is also named after the Japanese dog breed. It was created by an anonymous developer named Ryoshi in August 2020. The main difference between DOGE and SHIB is that the latter has a limited supply of 1 quadrillion tokens, of which 50% have been burned and donated to charitable causes. The SHIB ecosystem also includes a decentralized crypto exchange, an NFT art incubator, NFTs, and an NFT game.
- Dogelon Mars (ELON)
Dogelon Mars (ELON) closely follows the canine duo in popularity. As the name suggests, ELON is named after Tesla’s CEO, Elon Musk, and his passion for his company SpaceX. ELON is very similar in principle to Dogecoin and has 557 billion tokens in circulation. In November 2021, ELON had grown by more than 3,780% since its launch in April 2021.
- Akita Inu (AKITA)
There are many other meme coins that use Japanese dog breeds as their mascots, such as Akita Inu (AKITA), Kishu Inu (KISHU), and Floki Inu (FLOKI). AKITA was heavily inspired by Dogecoin. It was introduced on Uniswap as an ERC-20 token in February 2021. Its tokenomics are very similar to SHIB. Just like SHIB’s developer Ryoshi, the AKITA team locked 50% of its total supply on Uniswap, while sending the remaining 50% to Ethereum co-founder Vitalik Buterin. However, AKITA has a total supply of only 100 billion tokens, which is 10 percent of SHIB’s total supply. AKITA became popular in May 2021 alongside its meme counterparts, or dog coins, and some community members see it as yet another “Dogecoin killer.”
- Samoyedcoin (SAMO)
Samoyedcoin (SAMO) is a project that was created based on the Samoyed dog breed and is built on the Solana (SOL) blockchain. At launch, 13 percent of the total supply was distributed to members of their community. According to their website, Samoyedcoin’s roadmap includes numerous events, various Airdrops, a decentralized exchange (DEX), and the ability to create NFTs. Samoyedcoin recently gained popularity due to a sudden price surge. Samoyedcoin grew by more than 4,300 percent in one month. In October 2021, the price rose from $0.005 to more than $0.22 in approximately 30 days.
Air drop – an unsolicited distribution of cryptocurrency coins or tokens, which is usually free, to a large number of wallet addresses.
- Kishu Inu (KISHU)
Kishu Inu (KISHU), another dog-themed meme coin, has grown exponentially since it was introduced in April 2021. KISHU includes participation rewards for active users, non-fungible tokens (NFTs), and a decentralized exchange (DEX) called Kishu Swap. Its popularity has been growing rapidly, and within one month of launch it recorded more than 100,000 holders and $2 billion in market capitalization.
- SafeMoon (SAFEMOON)
SafeMoon is yet another among the abundance of meme coins that capitalized on the hype surrounding meme coins. It is a BEP-20 token that was introduced on the Binance Smart Chain (BSC) in March 2021. SafeMoon rewards certain holders by penalizing those who sell their token with a 10 percent fee, of which half of the paid fee upon sale is distributed among existing users who hold SafeMoon in their crypto wallet, while the other half of the tokens will be “burned.” SafeMoon gained enormous attention with its rapid growth, which led a large number of people who had no prior experience with cryptocurrencies to decide to invest in their project. In November 2021, SafeMoon had a 9,418.54 percent return on investment according to data on CoinMarketCap.
Should you invest in meme coins
A large number of people became wealthy overnight precisely because of meme coins. On the other hand, a large number of people have also lost their life savings, houses, apartments… by investing in such projects. A very poor characteristic of meme coins is that they often have enormous coin supplies or even an unlimited supply. Unlike Bitcoin (BTC), which is limited to 21 million coins. We must also be aware that meme coins typically lack mechanisms such as “burning,” which removes coins from circulation. The most important thing you need to be aware of before investing in meme coins is to do your own research and only invest funds that you would not miss in the event of a loss.
Final thoughts
With new meme coins entering the market almost every day, cryptocurrency traders hope to gain enormous sums of money in this way, as has happened to people in the past, which is why it is extremely important that you do your own research before making any investments in meme coins. Keep in mind that meme coins are highly volatile compared to other digital currencies. Trading or investing in cryptocurrencies involves high risk. Meme coins are largely community-driven and can collapse unexpectedly, so never invest funds that you cannot afford to lose.
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