Meme coins: What’s all the rage?
The Past and Present of Meme Coins
TL;DR
Meme coins, digital currencies inspired by viral online content, prioritize humor over practical use or inherent value. Consequently, assessing their intrinsic worth compared to traditional cryptocurrencies is a technical challenge.
Their rapid popularity typically results from 1) influencer endorsements, 2) community involvement, 3) generous airdrops, and 4) fashionable naming.
Meme coins are projects that often exploit investors' fear, uncertainty, and doubt (FUD) to induce rapid price increases, with a high possibility of disappearing afterwards. They can potentially attract negative criticism towards the entire cryptocurrency industry. However, they also have the effect of lowering people's entry barrier cryptocurrencies, making it difficult to say they are a net negative to the industry.
Introduction
Undeniably, meme coins are dominating the cryptocurrency conversation at the moment. Recently, Pepe Coin ($PEPE) has caught investors' eyes with a staggering surge of over +310,000% in its value. On May 18, $PEPE made its appearance on Bithumb, the second-largest domestic crypto exchange in Korea, underscoring the worldwide reach of this trend. Clearly, this meme coin mania is a global storm sweeping across the world of cryptocurrency.
Meme coins are digital currencies spawned from memes - internet-shared images and videos known for their humor. These coins prioritize amusement over practical aspects such as ecosystem development or utility. Technically, finding an "intrinsic" value in meme coins is quite challenging. Nevertheless, these humorous tokens are currently stirring more excitement among cryptocurrency investors than their conventional counterparts..
So what ARE meme coins and whats the hype about?
A meme coin is essentially a digital currency named after and represented by entertaining images or videos, commonly known as memes, shared widely within online communities. In contrast to cryptocurrencies like Ethereum, meme coins typically lack specific utility beyond serving as a medium of exchange, with their primary focus being on price performance. Leveraging popular memes gives these coins an advantage as they tap into an existing fan base, enabling their rapid spread across various communities.
The meteoric rise of meme coins isn't a recent phenomenon. The prior price spikes of such coins have arguably amplified the present excitement. Dogecoin ($DOGE), represented by the frequently used Shiba Inu dog meme in online communities, could be deemed as the pioneer of meme coins, heralding this unique digital currency trend.
Meme coins experienced their pinnacle periods of performance in 2021 and 2023. The high-flying journey began with Dogecoin reaching an all-time high in 2021, succeeded by Dogecoin spin-offs such as Doge Killer and Baby Doge Coin. While Shiba Inu Coin extended the fervor of the meme coin mania, the enthusiasm dampened due to the economic downturn in 2022 and incidents like the Terra-Luna event.
4 drivers behind meme coins
1. Shilling by Influencers
One cannot talk about Dogecoin's success without talking about the biggest of influencers, Elon Musk. A single tweet about Doge from Elon resulted in dramatic price fluctuations, as can be seen in the trading data. After acquiring Twitter, Musk even changed the Twitter logo to a Shiba Inu dog, thereby further contributing to the popularity of meme coins.
Shiba Inu Coin also leveraged influencers through a clever marketing ploy by sending 50% of its total supply to Ethereum creator Vitalik Buterin's wallet and creating an illusion of affiliation. As this marketing tactic became popular, attempts were made to buy follower accounts from industry leaders like CZ and convert them into meme coin accounts.
2. Active communities
In a similar vein to Shiba Inu capitalizing on the established Dogecoin community, newer entrants in the meme coin sphere have also been known to leverage their forerunners. One such example is Milady Meme Coin. This project successfully attracted early adopters and spurred its growth by tying itself to the already thriving Milady NFT community. However, there appears to be no actual association between the coin and the Milady NFT; it seems to be simply a strategy to drive community engagement.
3. Airdrops
AIDOGE successfully sparked curiosity by executing airdrops to recipients of the earlier Arbitrum airdrops. Given the significance of the Arbitrum event in the blockchain industry, this move naturally amplified interest in AIDOGE, aiding in its swift popularity surge. Amidst the excitement surrounding the Arbitrum airdrop, AIDOGE experienced a remarkable 400% increase within a mere five-day span.
4. OG Familiarity
Naming trends within the meme coin universe have certainly caught attention. Recently, the term 'AI' has gained popularity, leading to the advent of AI-themed meme coins. Following Dogecoin's success, trends incorporating 'Doge' or 'Elon Musk' into coin names have become a fashionable practice. Interestingly, on the Solana blockchain, there's been a trend of naming coins after different types of food.
Fun-centric roadmap of meme coins
Dogecoin's creators were initially surprised by the unexpected appeal their coin attracted in the market. However, they are now diligently striving to establish a functional ecosystem around the coin. Comparable endeavors can be observed across many of the first-generation meme coins, including Shiba Inu, signifying a movement towards ensuring ecosystem longevity.
In contrast, second-generation meme coins mainly focus on creating and spreading memes. Pepe Coin's roadmap serves as a fitting example, best described as being 'memetastic.' Although first-generation meme coins began with a playful approach, they're now concentrating on constructing sustainable ecosystems. Second-generation meme coins, however, accentuate their distinctiveness and stay true to the essence of memes by strongly emphasizing the element of amusement.
Conclusion
The amusement-centric strategy of meme coins carries its own merits. Many within the blockchain realm likely initiated their journey as investors before immersing themselves in the technical aspects. Meme coins persist as a key catalyst in drawing market interest and have been instrumental in igniting active debates on token regulations and advocating for technical advancements.
However, unlike in the past, today's meme coins need to outgrow their speculative reputation and manifest tangible changes. With many meme coins prone to "rug pulls" – situations where developers desert the project after making hefty profits – the potential risk to investors is palpable. If a substantial number of investors suffer, this could intensify negative perceptions even before blockchain technology achieves its full potential, pushing the goal of widespread adoption further into the future.