What Is a Meme Coin?
A meme coin is a cryptocurrency term for popular currencies, sometimes depicted with comical or animated “memes” supported by enthusiastic online traders and followers. But while meme coins may be fun, they are also hazardous investments and may hold little or no intrinsic value.
DOGECoin, Shiba Inu, and other currencies that may offer more entertainment than usability falls into this category. When buying or trading meme coins, it’s critical to understand the risks to help you avoid unexpected volatility and losses.
KEY TAKEAWAYS
- Meme coins are a type of cryptocurrency that’s highly speculative and supported by certain enthusiastic online trading communities.
- Examples of meme coins include blockchain-based coins and tokens such as Dogecoin and Shiba Inu.
- It’s possible to quickly make or lose a large amount of money when trading meme coins and other virtual currencies.
Understanding Meme Coins
Meme coins are a cryptocurrency genre loosely defined as having an exuberant online community supporting the currency’s growth. They are sometimes identified with animated characters or animal meme images. During the recent cryptocurrency boom, top currencies to gain meme-coin status included Dogecoin and Shiba Inu. The category extends to lesser-known currencies such as Baby Doge and Dogelon Mars. While Baby Doge and Dogelon Mars earn fewer headlines, they still maintain nine-figure market capitalizations.
Watch Now: What Is Cryptocurrency?
As with other cryptocurrencies, meme coins rely on blockchain technology, a distributed database that tracks virtual assets, including cryptocurrencies and non-fungible tokens (NFTs).
Most meme coins are purely trading instruments, unlike Ethereum and other utility currencies tied to specific blockchain features. Major cryptocurrencies such as Bitcoin, Ethereum, USD Coin, XRP, Cardano, Solana, Polygon, and Polkadot generally are not considered meme coins.
Meme Coins Have Highly Volatility
Cryptocurrency website CoinMarketCap lists more than 300 currencies in its Meme Coin section. However, many are not actively traded and are effectively worthless. Dogecoin, Shiba Inu, Dogelon Mars, and Baby Dogecoin are the only currencies in the meme category with more than $1 million in daily trading volume.1 All are generally considered risky and volatile trading assets.
While the Ether is required to perform transactions on the Ethereum blockchain, most meme coins don’t offer additional value beyond collecting and trading.3 Other meme coins are not indeed coins but tokens operating on another blockchain. For example, Shiba Inu is an ERC-20 token used on the Ethereum blockchain.
Some in the media and investing world characterize meme coins as elaborate pump-and-dump schemes.5 This accusation should make investors wary of meme coins and lead people to enter these markets with extreme caution.
Pros & Cons of Meme Coins
Pros
- Fun asset type to use to learn about cryptocurrency and blockchain technology
- Possibility of earning a profit when values rise
- Potential participation in an active investing and trading community
Cons
- High risk and volatility
- Accusations of being a pump-and-dump scam
- Maybe technologically complex for some users
How Can You Buy Meme Coins?
You can buy meme coins using a cryptocurrency exchange. Centralized cryptocurrency exchanges such as Coinbase, Gemini, Binance, FTX, and Kraken enable you to buy and sell directly with other users through their online marketplaces. Decentralized exchanges like PancakeSwap require using a cryptocurrency wallet that lets you maintain custody of the currency outside an exchange.
Can You Create Meme Coins?
Anyone with the necessary technical knowledge is easily able to create a cryptocurrency. However, turning a coin or token into a popular meme coin is extremely difficult and has only been successfully achieved a few dozen times.
What Are the Most Popular Meme Coins?
According to CoinMarketCap, the top four meme coins in the market cap are Dogecoin, Shiba Inu, Baby Doge Coin, and Dogelon Mars. Others include Floki Inu, Doge Killer, Kishui Inu, Samoyedcoin, Shiba Predator, and many others.1
The Bottom Line
Meme coins are an exciting cryptocurrency asset but come with many risks for losses. For most investors, it’s best to avoid putting in more than you can afford to lose. But there’s a minimal chance that if you pick the next big coin before online fans send it “to the moon,” you could become the next crypto millionaire. When it comes to risky meme coins, it’s best to proceed cautiously.
