Why are Memecoins?
What are memecoins & how do they work?
Memecoins seem to have been making rounds lately.
Within just the first half of 2024, there have been a series of Memecoins launched in the ecosystem — Davido launched the $DAVIDO memecoin, Iggy Azalea the artist launched $MOTHER, Sabinus the Nigerian comedian launched $SABICOIN, Andrew Tate launched $DADDY, and so on.
All of which begs the question — what are Memecoins & why is everyone (most) getting into them?
What are Memecoins 🎃
Memecoins are the ‘unserious’ type of cryptocurrencies.
They originate from internet memes, jokes, or pop culture references.
Unlike traditional cryptos like Bitcoin and Ethereum, which aim to actually solve real-world problems or provide specific tech innovations, $memecoins are more for humor or satire.
But then, despite their origins, some memecoins have gained significant popularity and market value, driven largely by social media and community hype.
Which is why celebrities are the ones who launch them the most. They have the audience base to help push the hype where necessary.
Fun fact 🎭
The first ever memecoin created is Dogecoin ($DOGE) & it was launched in 2013. It started as a joke & gained a large following after its release.
Despite its humorous beginnings, Dogecoin has grown into a widely recognized cryptocurrency, often used for tipping online content creators and raising funds for charitable causes.
Even Elon Musk accepts $DOGE as payment for certain Tesla merchandise on its online store.
Why are memecoins popular? 🎪
- For Entertainment and Community:
Memecoins are known to provide a fun and engaging way for people to participate in the cryptocurrency market. Since it’s a low-commitment-not-that-serious form of crypto, it provides an avenue for the owner & their audience to get involved in the blockchain ecosystem & have fun while at it.
2. Potential for High Returns:
Crypto in general is volatile & so are memecoins. Some people invest in them in hopes that the volatility and speculative nature of the ecosystem would favor certain memecoins which could lead to high returns if the coin gains popularity & hype (just like $DOGE)
3. Celebrity Endorsements:
Memecoins have received endorsements from high-profile celebrities and influencers which further drive their popularity. Therefore a mention from a high-profile celebrity could highly impact the value of the memecoin.
Elon Musk’s tweets for example heavily impacted the price & value of Dogecoin.
So imagine someone like Beyoncé backing a memecoin? it would go boom!💥
Risks involved ✖
- High Volatility:
Although already synonymous with the crypto industry, the prices of memecoins can be extra volatile leading to substantial financial losses for investors who are not careful.
2. Lack of Fundamental Value:
Unlike traditional crypto (BTC, ETH, & the likes) that offer technological or practical value, memecoins often lack underlying utility, making their long-term value uncertain. They aren’t well planned & developed due to the “unserious nature” which could cause problems in the long term.
3. Market Manipulation:
The hype & excitement-driven nature of memecoins makes them susceptible to market manipulation, where coordinated buying & selling can significantly impact prices.
Wrapping it up 💤
Personally, I don’t know what the intent of celebrities — Davido, Caitlyn Jenner, Andrew Tate, Iggy Azalea, etc. are for launching personalized memecoins/tokens.
I can draw a common reason, however, which is to engage with their dedicated audience. A form of community bond, etc. Some could even be offering discounts to shows, merch, etc.
But while they can offer substantial rewards & community fun & humor, they also have their risks and so, investors are advised to approach memecoins with caution & DYOR.
Sidebar: incase you’re interested, here’s a list of several memecoins that exist & their value — Memecoins on Coinmarketcap
Thanks for reading :)
PS: I write similar crypto-related articles and have made them into a Medium “playlist” called #Web3Wednesdays.
If you’d like to go through previous ones, they’re neatly packed for you in a List.
PPS: Feel free to clap on this article more than once, or drop a comment. Anything.
Until next time, Ciao & WAGMI 🚀
