Memecoins are a currency idea whose time has come. Memes have long been part of crypto culture. So when memes started to transform into financial assets backed by blockchain, it was inevitable. Memecoins are notoriously volatile and influenced by social media influencers and real-time news. While some investors see memecoins as opportunities for huge returns, others remain undecided or critical.
Memes are ideas or jokes that rapidly spread online, mostly for entertainment. Most notable memecoins include Dogecoin, Shiba Inu (SHIB), Pepe (PEPE), and Dogwifhat (WIF).
Memecoin Origins
Dogecoin (DOGE), created in 2013 by Billy Markus and Jackson Palmer, has become the most prominent meme coin, centered around the popular “doge” Shiba Inu meme. The founders say they created Dogecoin to make fun of Bitcoin (BTC). The name “doge” is a play on words, and the founders chose the name to ensure crypto was lighthearted and humorous. Dogecoin quickly gained a dedicated community. 
A notable example of its positive impact was when the Dogecoin community raised around $30,000 to help fund the Jamaican bobsleigh team’s participation in the 2014 Winter Olympics in Sochi, which not only showcased the community’s generosity but also helped Dogecoin gain more mainstream media coverage and attract new investors.
Dogecoin’s price took off when celebrities began endorsing it. The token’s most high-profile backer is Elon Musk. Musk has repeatedly promoted Dogecoin. He even showed up on a Saturday Night Live skit where he called himself the “Dogefather.” His endorsement ballooned Dogecoin to a market cap of around $88 billion in May 2021.
How do Memecoins Work?
Oftentimes, memecoins are designed in such a way that the barriers to entry are exceedingly low. Many of the tokens are low priced, so it is easy for anyone to participate in these memecoins. Again, the underlying blockchain is open source. As such, individuals can simply fork existing repositories and make a few changes to create a new token.
Typically, a memecoin is a crypto that can be created with a few lines of code. The community can create its own blockchain or use an existing blockchain.
Typically, memecoins get promoted by their creators on social media platforms and gain hype. However, sustainability depends on how well the token creates a strong community. Oftentimes, at the height of a bull run, many memecoins spring up, leveraging the money that’s in the market. But when the bear market arrives, and there is no free money in the system, most memecoins die naturally.
Doing Your Own Research: Is it Obsolete?
In the world of crypto, the mantra “do your own reseach” is common. It echoes through Twitter threads, Reddit forums, Instagram, Discord, and other platforms. It is both a warning and advice for those involved in the volatile crypto market in which moonshot projects, claims of exponential returns, and the fear of missing out are common.
Yet there is a question on the minds of many crypto enthusiasts- Is DYOR still effective?
In a market landscape where viral memes can influence markets and influential individuals can shill projects to their followers and move the price significantly, research is important. The art of doing your own research is not obsolete.
In a situation where hype takes over, and facts are left on the sidelines, it is essential to do your own research. Investors who win in the long run are often those who can distinguish signal from noise and invest with conviction.
How to Separate Signal from Noise
The memecoin segment of the crypto market is unique. For every successful memecoin, several others fail due to different reasons. For some, it is poor marketing or positioning; for others, it is a visible lack of utility; for others, it is a lack of research and bad tokenomics.
Even the most successful memecoins are volatile. Unlike Bitcoin, which is capped in supply, memecoins often have an unlimited supply.
The number of DOGE tokens in circulation is over 135.5 billion tokens. Miners receive approximately 10,000 DOGE every minute. This availability of tokens is in stark contrast to Bitcoin, where 6 BTC worth about $140,000 is mined every 10 minutes.
Most memecoins lack mechanisms to remove tokens from circulation. This results in a perpetual increase in supply. For instance, Shiba Inu currently has over 500 trillion tokens in circulation. Dogecoin and Shiba Inu are standout success stories as far as memecoins are concerned.
The odds are stacked against Dogecoin or Shiba Inu, staging the kinds of growth they made in the past. Other gems are springing up to fill the gap.
Wrapping Up
The volatility of the crypto market offers investors opportunities to make a profit. However, there are also risks involved. The memecoin segment is particularly known for its unpredictability. Consequently, exercising caution and taking a leaf from traditional finance is essential. Before making investments, seek guidance from your financial adviser. Today, there are avenues to invest in crypto while reducing your risks.
