In recent years, the world of cryptocurrencies has gained great attention from the media and the public. While Bitcoin and Ethereum are well-established names in the market, a number of new digital currencies and tokens have emerged to offer better and more profitable solutions. Unfortunately, many of these coins are simply scams, designed to trick gullible investors looking for a quick win. Some of these cryptocurrencies are known as “memecoins”, and they present serious risks for those who invest in them.

Early adopters of cryptocurrencies coined the term altcoins to refer to non-Bitcoin tokens. With the rise of Ethereum and smart contracts, several other tokens were created and there was a time when altcoins concentrated a huge share of the crypto market.

Most conscientious investors are eager to find the most promising project, with the best fundamentals and prospects for the future. However, the ball of the moment and what is most talked about in the week are the memecoins.

What are memecoins?

The name “memecoin” is commonly used in the cryptocurrency community to describe a virtual currency that does not have a legitimate use case, an innovative technology or a competent development team behind it. In addition, they make reference to internet memes that go viral because they are funny. It may even happen, although it is extremely rare, that something of real value is created around a meme currency.

It is also important to note that the project may be born as a meme, but a utility for it will be created in the future. We'll talk more about that later.

Main features

In the vast majority of cases, they eventually go to zero or do not deliver what users expected in the long run. Its main features are:

• Absence of a clear roadmap or development plan: Most of the time these coins don't make big promises to investors. Those who buy them can only hope they go viral to make a profit.
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• Have a meme-based community: This type of token needs an engaged community to go viral. To do this, they create a community around a known and admired meme.
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• Huge supply of tokens: It is common for investors to have billions or trillions of coins in their wallets. Quantities like this are usually bought for a few tens of dollars.
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• Very high volatility: another big sign that the token is a memecoin. When the rise is too fast, the fall is very likely to be too fast. When investing in this type of currency, it is extremely important to follow the charts closely so as not to have losses or miss the opportunity to make a profit when the time is right.

Although memecoins can offer opportunities for those with a more aggressive profile (like a lottery ticket, where the vast majority lose), this is almost always linked to a very high risk.

The most famous memecoins

When we are in a Bull Run market, it is common for dozens of new tokens and coins to appear daily, with a good part of them being shitcoins. But in a Bear Market, like the one we are experiencing, the volume of this type of token is usually much lower, and they are not usually highlighted.

In recent years, some memecoins have managed to gather a legion of investors. Some of them have a super fierce community (sometimes resembling football fans), which propagate the dream that their coins will be worth fortunes at some point. We will recall two of the best known.

DOGECOIN

Dogecoin is a cryptocurrency created in 2013 as a joke inspired by the “Doge” meme, which features a Shiba Inu dog. Despite being created as a joke, Dogecoin has gained popularity and a community of dedicated fans.

In recent years, she has gained even more prominence after being mentioned by businessman Elon Musk and other celebrities on social media.

After Musk tweeted about it, Dogecoin saw a significant price increase, causing many people to invest in the cryptocurrency purely on speculation. Dogecoin is currently traded on multiple cryptocurrency exchanges and has a market capitalization of around $36 billion.

SHIBA INU

Created in August 2020 to become an “Internet Currency”. The coin was inspired by the Shiba Inu dog breed, popularized by the “Doge” meme, and the Dogecoin cryptocurrency.

Its aim was to offer a cheaper alternative to Dogecoin, allowing more people to buy and invest in cryptocurrencies. Since its launch, it has seen an explosive growth in popularity. In May 2021, it gained great attention from the media and investors after it was also mentioned by the founder of Tesla, in a tweet.

This caused the value of the coin to increase significantly. Shiba Inu is currently traded on multiple cryptocurrency exchanges and with a market capitalization of around $4.4 billion.

Context analysis

Do you realize we had a pattern here?

Both memecoins were boosted by Tweets from an influential person, in this case Elon Musk, who often with practically empty publications fed the hope of many investors.

Both tokens benefited from a context that involved a lot of money being traded in cryptocurrencies and surfed the wave of optimism that the last big cycle of market growth created. After their rapid rise, they lost ground to the NFTs, which became the big bet. Recently, we saw the emergence of a phenomenon that integrated memecoins and NFTs.

The recent fever of $PEPE

PEPE is a token launched on Ethereum in March 2023. The project was created as an homage to the internet meme Pepe the Frog, created by Matt Furie, a character with a controversial and enduring history who gained popularity in the early 2000s and served as inspiration for thousands of NFT collections, with many of them making big money.

The PEPE token managed to bring together the tradition of memes and NFTs, leaving many impressed with the explosive potential of a memecoin.

Fundamentals

PEPE's creators, although anonymous, have endeavored to provide a minimum degree of reliability for their token. There is no need to pay any fees when buying and selling tokens, as is common in this type of project. Furthermore, 93.1% of the tokens were sent to a liquidity pool on Uniswap, a decentralized exchange.

The LP tokens were burned, and the contract was waived, which prevents changes from being made. These operations can be followed on Etherscan. The remaining 6.9% of tokens are held in a multi-sig wallet, and according to PEPE's founders will be used for future listings on centralized exchanges, bridges, and liquidity pools. This wallet can be monitored by following the ENS “pepecexwallet.eth”.

Meteoric rise and influence

Late April and early May 2023 saw the explosive rise of PEPE, which saw its market capitalization peak at US$1.6 billion a few days ago, making early holders millionaires and attracting a strong community of like-minded followers.

A notable example is the case of a cryptocurrency investor who bought $250 worth of PEPE tokens shortly after the platform launched. Look:

dimethyltryptamine.eth bought 5.4 trillion $PEPE for 0.125 ETH($250) in April.
He has since sold 1.5T for over 500 ETH and still has 3.9T PEPE, worth $4.15M at current prices.

PEPE's price started being tracked by Coinmarketcap on April 18, 2023. At the time, it was worth around $0.0000001, with a market capitalization of around $40 million. At the time of writing this Report (5/9/23), it is priced at $0.000002 with a trading volume of over $1 billion in the last 24 hours.

Such success may have been induced, or just be a reflection of the emergence of what some may call the "meme coin season", causing several other memecoins to have spectacular pumps and equally impressive drops, sometimes in a matter of hours.

Note in the chart below how high the volatility of this crypto is:

Memecoin season?

Countless other tokens with little or no foundation are popping up every day, making profits as well as losses for more and less fortunate investors. All the market's attention is on them at the moment, and everyone is speculating on what the next token to accumulate a billionaire market capitalization will be.

There are strategies and ways to reduce the risks of investing in memecoins, so that you expose yourself as little as possible and can have some profit when you hit a hunch.

We do not recommend that you place bets on memecoins, as the overwhelming majority of them tend to go to zero and to get good opportunities, you need to have analytical skills, preparation and constantly monitor the market.

If you still want to invest, do it with a minimum percentage of your capital, the one that won't be missed if you lose everything, after all, the probability of this happening is enormous.

Posted Using LeoFinance Alpha