What is a Meme Coin?

A meme coin is a cryptocurrency term for popular currencies, sometimes depicted with comical or animated memes, that are supported by enthusiastic online traders and followers. While meme coins may be fun, they are also highly risky investments and may hold little or no intrinsic value.

Dogecoin, Shiba Inu, and other currencies that may offer more entertainment than usability fall into this category. When buying or trading meme coins, it’s critical to understand the risks to help you avoid unexpected volatility and losses.

YOU MUST KNOW:

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 make or lose a large amount of money quickly when trading meme coins and other virtual currencies.
All meme coins are cryptocurrencies, but not all cryptocurrencies are meme coins.

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 character 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.

As with other cryptocurrencies, meme coins rely on blockchain technology, a type of distributed database used to track 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 are just as real as any other cryptocurrency, they are typically built on popular layer-one networks such as Ethereum, Solana, and Polygon. However, some of them, like Dogecoin – have their very own networks designed for them.

Common Characteristics of Meme Coins

Albeit different by design and compared to other cryptocurrencies, meme coins share some similar characteristics.

A lot of them are built on top of a layer-one network.
All of them are based on a popular internet meme or humorous element.
Most of them focus heavily on the social side of growth.
The biggest meme coins have incredibly dedicated communities.
Their prices tend to be incredibly volatile.
These are just some of the common characteristics that most meme coins share.
Meme Coins Have High 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.

All are generally considered risky and volatile trading assets.

While ether is required to perform transactions on the Ethereum blockchain, most meme coins don’t offer additional value beyond collecting and trading.
Other meme coins are not truly coins, but tokens operating on another blockchain. For example, Shiba Inu is an ERC-20 token operating on the Ethereum blockchain.

Some in the media and investing world characterize meme coins as elaborate pump-and-dump schemes.

This accusation should make investors wary of meme coins and should 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
• May be 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 to 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 terms of market capitalization are Dogecoin, Shiba Inu, Baby Doge Coin, and Dogelon Mars. Others include Shiba Floki Inu, Doge Killer, Kishu Inu, Samoyedcoin, Shiba Predator, and many others.1

The Bottom Line

Meme coins are an interesting cryptocurrency asset, but they 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 very small 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 with caution.